The economic substance annual reporting form is due for filing with the BVI registered agent by 14 December 2020. This is a new reporting requirement for BVI business companies, initiated by the EU, to minimize unfair tax avoidance practices. If a business seeks to take advantage of a jurisdiction’s zero or low tax regimes such as the BVI, it needs to ensure that the substance of its activities is carried on within that jurisdiction.
By incorporation, a BVI business company is automatically tax resident in the BVI unless it is a tax resident in another jurisdiction, as supported by tax residence certificate (such as the Hong Kong business registration certificate) or tax assessment etc by tax authority of that other jurisdiction.
If the activities of a BVI business company are classified as a holding business (see note below), this means that it holds equity interests in other entities as a passive investor, earning dividends and capital gains only. The BVI business company is considered to have adequate commercial substance in the BVI if it:
complies with its statutory obligations, e.g. annual renewal of licences;
has, in the Virgin Islands, retained a Registered Agent (to perform the minimal services) may be sufficient to demonstrate substance.
However, if the investments holding requires active management on the part of BVI business company, it should have adequate and suitably qualified employees, and appropriate premises, in the BVI to carry out this function and to demonstrate commercial substance.
Please do not hesitate to discuss with us if you wish to clarify anything on the subject which certainly is new to all of us in the industry.
(Note: The Economic Substance (Companies and Limited Partnerships) Act 2018 and the subsequent detailed rules now require the status of being a BVI tax resident be backed up with economic substance, that is, the substance of the business (termed as “relevant activity”) is carried on in the BVI. The business is deemed to be carried on in the BVI if it is carried on by employees working in the BVI, or is outsourced to a person whose own employees work in the BVI.
The relevant activities are as follows:
1. banking business;
2. insurance business;
3. fund management business;
4. finance and leasing business;
5. headquarters business;
6. shipping business;
7. holding business;
8. intellectual property business; and
9. distribution and service centre business.
【中文譯本】
經濟實質報告為全新的年審規定，應歐盟要求，英屬維京群島等低稅率地區成立的離岸公司，必須每年提交經濟實質年度報告，證明其生意活動是實質的在該稅率區內進行， 以打擊不公平的避稅安排。
通過在英屬維京群島註冊成立，BVI 離岸公司已經自動成為英屬維京群島的稅務居民，假如日後需要改變稅務居民身份，則須向英屬維京群島政府提交相關國家、地區的稅務居民證明（例如香港商業登記證）或相關繳稅證明。
如BVI 離岸公司的活動被歸類為控股業務（見註釋），這意味著該公司以純投資者的身份持有其他實體的股權，僅賺取股息和資本收益。因是純投資者， 不含行政管理等，要證明其生意活動是實質的在英屬維京群島進行，只需辦妥以下程序， 就可以了：
a）遵守其法定年檢規定，例如每年在英屬維京群島續期；
b）在維京群島已聘請了註冊代理。
請注意，如果投資控股需要該BVI離岸公司的積極管理，則應在英屬維京群島擁有足夠和適當合格的員工以及適當的場所，以履行這一職能並證明其商業實質。
（ 註釋：《 2018年經濟實體（公司和有限合夥企業）法》和隨後的詳細規則，現在要求具有英屬維京群島稅收居民身份的經濟實體（稱為“相關行業”）須在英屬維京群島經營。如果該業務是由在英屬維京群島工作的僱員經營的，或者外發與在英屬維京群島工作的分包商，則該業務會視為在英屬維京群島進行。
相關行業如下：
1.銀行業務
2.保險業務；
3.資金管理業務；
4.融資與租賃業務；
5.總部業務；
6.航運業務；
7.控股業務；
8.智慧財產業務；
9.經銷與服務中心業務。
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