As part of the British Virgin Islands' ("BVI") ongoing commitment to international tax transparency pursuant to the Common Reporting Standard ("CRS"), the BVI Mutual Legal Assistance (Tax Matters) Act, 2003 has been amended by the BVI Mutual Legal Assistance (Tax Matters) (Amendment) Act, 2018 (the "Amendment Act").  The Amendment Act came into force on 18 September 2018 save for the parts relating to country-by-country reporting ("CbCR") which were deemed to have come into force on 1 January 2018. 

The key changes include: 

(a)   All BVI Financial Institutions ("FIs") are required to establish, implement and maintain written policies and procedures for the purposes of complying with their CRS obligations.

(b)   All FIs are required to register with the BVI International Tax Authority ("ITA") by 30 April 2019 (or by 30 April of the year following it becoming an FI).

(c)   All FIs now have reporting obligations.  FIs are required to file nil returns if they have no Reportable Accounts in respect of the previous calendar year.

(d)   CbCR has been implemented through the Amendment Act, which essentially implements in the BVI the model legislation published pursuant to the OECD's Base Erosion and Profit Shifting Action 13 Report (Transfer Pricing Documentation and Country-by-Country Reporting). 

The changes are set out in more detail below. 

Policies and Procedures

All FIs must now establish, implement and maintain written policies and procedures addressing its obligations under CRS.  Such policies and procedures should provide for how the FI intends to: (i) identify each jurisdiction in which an account holder or controlling person is resident for income or corporation tax purposes (or the equivalent tax in the relevant jurisdiction); (ii) apply due diligence procedures set out under CRS; and (iii) ensure than any information obtained or records of steps taken in respect of a financial account are kept for six years from the end of the year to which the information relates or during which the steps were taken. 

An FI that fails to establish and maintain policies and procedures is liable on conviction to a fine not exceeding US$100,000. 

The Maples group can assist with preparing a comprehensive manual that meets this requirement and any ancillary documentation (i.e. board resolutions). 

Registration with the ITA

Whereas previously only Reporting FIs ("RFIs") were required to register with the ITA, pursuant to the Amendment Act, all FIs must now register with the ITA.  Existing FIs must register by 30 April 2019 (to the extent that they have not done so already) and all FIs established after 18 September 2018 must register by 30 April of the first calendar year following the year they became an FI. 

An FI that fails to register within the applicable timeframe is liable on conviction to a fine not exceeding US$100,000. 

MaplesFS can assist with the registration process, including liaising with the ITA as applicable. 

Reporting Obligation

There was previously no obligation to file a nil return under CRS where an RFI did not maintain a Reportable Account (although an RFI could elect to do so).  The Amendment Act introduces a nil return requirement for all FIs where no Reportable Accounts are maintained. 

The annual reporting submission deadline is on or before 31 May of the year following the year to which the return relates. 

An FI that fails to file a return with the ITA within the applicable timeframe is liable on conviction to a fine not exceeding US$100,000. 

MaplesFS can assist with the preparation and filing of reports, including nil reports, that are compliant with applicable legal requirements through the BVI Financial Account Reporting System. 

Country-by-Country Reporting

The Amendment Act also introduces CbCR which essentially implements in the BVI the model legislation published pursuant to the OECD's Base Erosion and Profit Shifting Action 13 Report (Transfer Pricing Documentation and Country-by-Country Reporting). 

Pursuant to this initiative, qualifying multinational enterprises ("MNEs") are required to report annually certain financial information for each tax jurisdiction in which the MNE operates.  This is intended to promote greater transparency for tax authorities by providing them with relevant and reliable information to conduct high-level transfer pricing risk assessments. 

Accordingly, the ITA will automatically exchange country-by-country reports ("CbC Reports") prepared by a qualifying MNE in the BVI with other participating jurisdictions. 

The information reported will be subject to confidentiality restrictions compliant with the requirements of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. 

Pursuant to the Amendment Act, any business unit or permanent establishment of an MNE Group resident for tax purposes in the BVI which are "Constituent Entities" will have registration and/or reporting requirements in the BVI.  An "MNE Group" means, broadly, with respect to any fiscal year of the group, a group that has two or more enterprises for which the tax residence is in different jurisdictions or that has an enterprise that is resident for tax purposes in one jurisdiction and is subject to tax through a permanent establishment in another jurisdiction and, in both cases, that has a total consolidated group revenue of equal to or more than €750 million during its preceding fiscal year. 

Each Constituent Entity of a MNE Group that is resident for tax purposes in the BVI is required to register its status as such with the ITA, and if it is the "Ultimate Parent Entity" or "Surrogate Parent Entity" of the relevant MNE Group it will also have reporting requirements.  Registration must take place no later than the last day of the reporting fiscal year of the MNE Group on or after 1 January 2018.  Therefore, for example, a Constituent Entity of an MNE group with a fiscal year end of 31 December must register by 31 December 2018.  A Constituent Entity of an MNE which fails to register with the ITA within the applicable timeframe is liable on conviction to a fine not exceeding US$100,000. 

Reporting must be made within 12 months after the last day of the reporting fiscal year of the MNE Group. 

Broadly, the Ultimate Parent Entity of an MNE is the entity in an MNE Group that owns directly or indirectly a sufficient interest in one or more Constituent Entities of the MNE Group such that it is required to prepare consolidated financial statements for the group (or would be so required if it were listed on a public stock exchange in its jurisdiction of tax residence).  A Surrogate Parent Entity is a Constituent Entity that, subject to certain conditions, has been appointed by the MNE Group as the sole substitute for the Ultimate Parent Entity to file CbC reports. 

The ITA has not yet published draft CbCR Guidance ("Guidance").  If Guidance is provided by the ITA we will issue a more comprehensive client update.