On October 9, 2019, the BVI International Tax Authority published the final version of their ‘Rules and Explanatory Notes’ (the “Rules”) on Economic Substance. The Rules replace the draft BVI Economic Substance Code (the “Code”). The Rules provide very important guidance and explanatory notes to assist with the interpretation of the Economic Substance (Companies and Limited Partnerships) Act 2018 (“ESA”) that was passed into law on December 2018. The Rules contain limited material changes from the draft Code, with the majority of the guidance provided within the draft Code remaining consistent in the Rules.
Now that the ‘Rules and Explanatory Notes’ are issued, we strongly recommend that all companies take immediate steps to ensure their entities are correctly classified.
As a reminder, the reporting periods as they relate to existing and newly registered BVI companies are now in effect.
It should be noted however that whilst the Rules are now finalised, they will not become effective until a further amendment to the BVI’s Beneficial Ownership Secure System Act comes into effect. This amendment, which is already anticipated by the Rules, is expected to be passed and become effective very shortly.