On 17 October 2023 the EU removed the British Virgin Islands from it’s list of non-cooperative jurisdictions for tax purposes – the EU Blacklist. This happened as a result of the BVI amending its framework on exchange of information with other tax jurisdictions.

The BVI remains a tax haven but increasing BVI companies have been used for legitimate commercial transactions as the BV requirement on publishing accounts and the lack of public disclosure creates potential anonymity for shareholders. This has meant many BVI companies are UK tax resident, fully declaring taxes on UK activities to HMRC but remaining substantially anonymous.

Many UK taxpaying BVI companies hold UK property. These all should have been added to the Register of Overseas Entities at Companies House which includes disclosure of ultimate beneficial owners. Failure to register and to file annual updates is a criminal offence in the UK.

Modernisation of the BVI Company Regime

In the last couple of years the BVI has updated its Company Law Regime to be more in line with the UK regime. We highlight some of the changes below: –

Requirement to File an Annual Return

Companies with a financial year ending on or after 31 December 2023 have to file an annual return within 9 months of the year end.

The Annual Return is a simple form balance sheet and profit and loss amount in a prescribed form. This information is not on the public record but is available to the BVI authorities.

Each Company’s BVI agent will have compliance responsibilities in relation to Annual Return and an obligation to report the failure to the BVI Financial Services Commission if the return is more than 30 days late.

It should be noted that BVI Companies have long been obliged to keep financial records and to produce them when required but this obligation is often overlooked.

Company Dissolution

Since 1 January 2023 BVI companies can be dissolved on striking off for non payment of fees. Previously companies stuck off were not dissolved for a period of seven years during which they could have been restored without a formal process.

Economic Substance

Since 2018 the BVI have had rules that require BVI companies to have economic substance, designed to prevent the existence of companies without real substance.

Again an annual return and declaration is required to be made to the BVI agent and the requirements include details of overseas tax references.

Register of Persons of Significant Control

Recent legislation changes have included the framework for a register of person of significant control. To date this has not gone live but it could do so in the near future.

Conclusion

The BVI regime has not moved anywhere near full transparency but has moved to a position where the BVI authorities can access information on companies and their ownership when required allowing compliance with international obligation and norms including provisions of information to authorities in other jurisdiction. The BVI has moved a long way in a short period and the direction of travel seems clear.

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