The Stamps (Amendment) Act 2023 (the Act) is now in force, having been granted assent by the Governor on 20 March 2023 and extends the stamp duty exemption available to Belongers who are first time property owners until 20 March 2024.

Download a PDF of our Legal Guide – Stamp Duty in the BVI – The Stamps (Amendment) Act 2023

The exemption

Stamp duty is a documentary tax that is levied in connection with certain specified legal documents. The primary legislation governing the assessment of stamp duty in the BVI is the Stamp Act. The Act further amends the Schedule to the Stamp Act by exempting certain Instruments effecting the sale or transfer of BVI property from the obligation to pay stamp duty.

The exemption applies only in respect of the sale or transfer of BVI property:

• to a Belonger who is a first-time property owner; and
• for a period of one year from the coming into force of the Act.

The exemption under the Act is expressed to apply to Instruments effecting both the sale and the transfer of BVI property to Belongers. The exemption under the Act therefore captures transfers of property in consideration of natural love and affection, notwithstanding only nominal stamp duty is typically payable in connection with such transfers.

In the context of BVI property transactions, stamp duty is typically paid by the purchaser.

Belongers and Non-Belongers

In broad terms, Belonger status is a legal classification that is associated with a number of British Overseas Territories, though the requirements to attain this status and the rights that such status confers, vary from territory to territory.

As far as the BVI is concerned, a Belonger is a person deemed to belong to the BVI according to the Virgin Islands Constitution Order 2007.

The Stamp Act

Where the exemption under the Act does not apply, the stamp duty payable in connection with the sale of BVI property to a Belonger shall be calculated at a rate of 4% of the higher of the purchase price and the market value of the property in question.

The Non-Belongers Land Holding Regulation Act

In general terms, the rate of stamp duty payable in respect of Instruments effecting the sale or transfer of BVI property to Non-Belongers is higher compared with that payable by Belongers.  For example, the Non-Belongers Land Holding Regulation Act (the NBLHR Act) provides that the stamp duty payable in connection with the sale of BVI property to a Non-Belonger is calculated at a rate of 12% of the higher of the purchase price and the market value of the property in question.

The Act does not apply to Instruments effecting the sale or transfer of BVI property to Non-Belongers and the provisions of the Stamp Act in conjunction with the NBLHR Act will continue to govern the stamp duty regime in respect of such Instruments.

First time property owners

The Act does not include a definition of a first-time property owner and it remains unclear what verification will be undertaken to determine whether a person is indeed a first-time property owner.

Conclusion

The Act provides for significant stamp duty savings for Belongers in a position to take advantage of the exemption.

Belonger purchasers wishing to take advantage of the exemption should bear in mind that the Act provides that where a Belonger benefits from the exemption under the Act and subsequently sells or transfers the property to a Non-Belonger within a period of seven years, the stamp duty waived by way of the exemption shall become due.

For more information or if you require any assistance with your BVI property transaction, please feel free to email us or reach out to your usual GHP contact.

The OECD’s Global Forum on Transparency and the Exchange of Information for Tax Purposes (the Global Forum) published the ‘Peer Review of the Automatic Exchange of Financial Account Information 2022’ on 9 November 2022. The full publication is accessible HERE.

Download a PDF copy of our legal guide – British Virgin Islands: Peer Review of the Automatic Exchange of Financial Account Information 2022.

The Global Forum monitors and peer reviews the implementation of the global Standard for Automatic Exchange of Financial Account Information in Tax Matters (the AEOI Standard). In pursuance of its mandate, the Global Forum reviewed each participating jurisdiction’s internal legal frameworks to ensure they are complete and that the AEOI Standard is effectively implemented in practice.

AEOI legal framework

The Global Forum concluded that the British Virgin Islands’ domestic and international legal frameworks implementing the AEOI Standard are in place and are consistent with the core requirements of the AEOI Terms of Reference.

Effectiveness in practice of AEOI

The Global Forum found that the British Virgin Islands’ implementation of the AEOI Standard is only partially compliant with the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice.

In broad summary, the Global Forum concluded that the British Virgin Islands’ implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information, most of the requirements in relation to correctly transmitting the information in a timely manner and providing corrections, amendments or additions to the information. However, it identified some issues relating to the British Virgin Islands’ administrative compliance framework and related procedures and the exchanging of information in a timely manner with all exchange partners.

In particular, the Global Forum noted that the British Virgin Islands is:

• partially meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. More specifically, significant issues were identified, including with respect to the extent of the implementation of the British Virgin Islands’ compliance strategy and verification activities, its monitoring of key information points such as Tax Identification Numbers and dates of birth and with respect to the enforcement procedures;
• fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the required due diligence and reporting procedures;
• meeting expectations in relation to sorting, preparing and validating final account information to be reported (the Information). It was also noted that there is room for improvement with respect to the processes to sorting, preparing and validating the Information;
• fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its exchange partners;
• meeting expectations in relation to exchanging the Information in a timely manner. It was also noted that there is room for improvement with respect to sending information in a timely manner;
• fully meeting expectations in relation to sending the Information in accordance with the agreed transmission methods and encryption standards; and
• appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information.

The Recommendations

The Global Forum made three recommendations relating to:

• monitoring and verifying compliance with the AEOI Standard including developing and implementing administrative procedures to enable effective enforcement and appropriate sanctions when non-compliance is detected;
• sorting, preparing and validating information to ensure they meet the AEOI Standard; and
• sending information to exchange partners in a timely manner,

(together, the Recommendations).

The British Virgin Islands’ response

In response to the Global Forum’s assessment, the British Virgin Islands has cited the significant progress it has made in implementing the AEOI Standard as an early adopter notwithstanding its challenges. It referred to the hindrances caused by Hurricanes Irma and Maria including damage to infrastructure and resulting loss of staff. It underscored its commitment to meeting its obligation and continuing the work toward the implementation of the AEOI Standard.

What does this mean for industry players?

Based on the British Virgin Islands’ response to the Global Forum’s assessment, we expect that the BVI International Tax Authority will implement the Recommendations in due course. Accordingly, Reporting Financial Institutions should expect progressively increased compliance monitoring, verification activities and enforcements by the International Tax Authority including the establishment of administrative penalties and sanctions to address non-compliance with the AEOI Standard.

Reporting Financial Institutions should take a closer look at their existing CRS policies and procedures. They should also ensure that they identify the Financial Accounts they maintain, the Reportable Accounts among those Financial Accounts (including their Account Holders, and where relevant Controlling Persons) by correctly conducting the due diligence procedures and collecting and reporting the Information with respect to each Reportable Account.

If you need any assistance with the classification and reporting obligations of any entity pursuant to the AEOI Standard, please feel free to contact us.

The Government of the Virgin Islands has issued a statement to the maritime industry indicating that the measure introduced in 2021 to require foreign based commercial recreational vessels conducting charter business in the British Virgin Islands to obtain yacht charter licences and  work permits for crew working on these vessels will be reversed as of Tuesday, 15 November 2022.

Download a PDF of our Legal Update – Foreign Based Commercial Recreational Vessels

The introduction of this measure in 2021 meant a sea (np) change in the regulatory regime governing the operation of foreign based commercial recreational vessels in BVI waters resulting in operators modifying their operational procedures and strategies to comply with the requirements.

With the reversal of this position, there will no doubt be questions as to precisely how the revised regime will work in practice and we anticipate that the authorities will publish updated guidance in this regard in due course. We will therefore continue to monitor this space and share any useful information and guidance as the new procedures are implemented.

For more information or if you require any assistance with BVI shipping matters, trade licences or work permits, please feel free to email us or reach out to one of our lawyers using the contact details below.

There is now an updated version of this guidance.  Click here for the March 2023 legal guide on the Stamp Duty exemption for first-time belonger home buyers.

The Stamps (Amendment) Act 2022 (the Act) is now in force, having been granted assent by the Governor on 21 March 2022 and is anticipated to have a positive impact on the number of property transactions taking place in the British Virgin Islands.

Download a PDF of our Legal Guide – Stamp Duty in the BVI – The Stamps (Amendment) Act 2022

The exemption

Stamp duty is a documentary tax that is levied in connection with certain specified legal documents. The primary legislation governing the assessment of stamp duty in the BVI is the Stamp Act. The Act amends the Schedule to the Stamp Act by exempting certain Instruments effecting the sale or transfer of BVI property from the obligation to pay stamp duty.

The exemption applies only in respect of the sale or transfer of BVI property:

• to a Belonger who is a first-time property owner; and
• for a period of one year from the coming into force of the Act.

The exemption under the Act is expressed to apply to Instruments effecting both the sale and the transfer of BVI property to Belongers. The exemption under the Act therefore captures transfers of property in consideration of natural love and affection, notwithstanding only nominal stamp duty is typically payable in connection with such transfers.

In the context of BVI property transactions, stamp duty is typically paid by the purchaser.

Belongers and Non-Belongers

In broad terms, Belonger status is a legal classification that is associated with a number of British Overseas Territories, though the requirements to attain this status and the rights that such status confers, vary from territory to territory.

As far as the BVI is concerned, a Belonger is a person deemed to belong to the BVI according to the Virgin Islands Constitution Order 2007.

The Stamp Act

Where the exemption under the Act does not apply, the stamp duty payable in connection with the sale of BVI property to a Belonger shall be calculated at a rate of 4% of the higher of the purchase price and the market value of the property in question.

The Non-Belongers Land Holding Regulation Act

In general terms, the rate of stamp duty payable in respect of Instruments effecting the sale or transfer of BVI property to Non-Belongers is higher compared with that payable by Belongers.  For example, the Non-Belongers Land Holding Regulation Act (the NBLHR Act) provides that the stamp duty payable in connection with the sale of BVI property to a Non-Belonger is calculated at a rate of 12% of the higher of the purchase price and the market value of the property in question.

The Act does not apply to Instruments effecting the sale or transfer of BVI property to Non-Belongers and the provisions of the Stamp Act in conjunction with the NBLHR Act will continue to govern the stamp duty regime in respect of such Instruments.

First time property owners

The Act does not include a definition of a first-time property owner and it is unclear at this stage what verification will be undertaken to determine whether a person is indeed a first-time property owner.

Conclusion

The Act provides for significant stamp duty savings for Belongers in a position to take advantage of the exemption.

Belonger purchasers wishing to take advantage of the exemption should bear in mind that the Act provides that where a Belonger benefits from the exemption under the Act and subsequently sells or transfers the property to a Non-Belonger within a period of seven years, the stamp duty waived by way of the exemption shall become due.

For more information or if you require any assistance with your BVI property transaction, please feel free to email us or reach out to one of our lawyers using the contact details below.

The British Virgin Islands (BVI) has introduced further changes to the economic substance (ES) regime by way of amendments to the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the Act). The amendments are introduced by the Economic Substance (Companies and Limited Partnerships) (Amendment) Act, 2021 (the Amendment Act) which came into force on 29 June 2021.

Download a PDF copy of our legal guide looking at the amendments introduced by the Economic Substance (Companies and Limited Partnerships) (Amendment) Act, 2021.

This legal guide considers the key changes to the economic substance regime. 

Distribution and service centre business and limited partnerships without legal personality  

Distribution and service centre business

Prior to the changes introduced by the Amendment Act, the provision of consulting or administrative services (CA Services) to foreign affiliates was not expressly included in the definition of “distribution and service centre business”. Nevertheless, the provision of CA Services to foreign affiliates was listed as one of the core income generating activities (CIGAs) relating to “distribution and service centre business” under the Act. As a matter of construction, some industry practitioners were of the view that any relevant entity providing CA Services would likely be providing “services to foreign affiliates in connection with the business” within the meaning of the previous definition. The Amendment Act now makes it clear that “distribution and service centre business” includes the provision of CA Services to foreign affiliates.

Limited partnerships without legal personality

Initially, the definition of “limited partnership” under the Act excluded limited partnerships without legal personality. The Amendment Act removes that exclusion such that every limited partnership, with or without legal personality, is now subject to the ES regime.

Financial periods for limited partnerships without legal personality 

Following the introduction of the Amendment Act, there is now a six-month transition period for limited partnerships without legal personality which were formed prior to 1 July 2021 (Pre-Existing LPs). Limited partnerships without legal personality formed on or after 1 July 2021 (New LPs) will be immediately subject to the Act upon formation as is already the case with other relevant entities. The “financial period” for Pre-Existing LPs and New LPs is:

• • Pre-Existing LPs: such period of one year commencing on a date no later than 1 January 2022 as the Pre-existing LP shall notify to the International Tax Authority (ITA) and thereafter each successive period of one year running from the end of that period;
  • New LPs: such period of not more than one year from the date of formation as the New LP shall notify to the ITA and thereafter each successive period of one year running from the end of that period.

Investment fund business

Prior to the introduction of the Amendment Act, only the Rules on Economic Substance in the Virgin Islands (the Rules) contained any express indication that the business of being an investment fund did not itself comprise a “relevant activity”. The ITA based its conclusion on the exhaustive list of “relevant activities” under the Act, which did not include investment fund business. The Amendment Act now expressly provides that investment fund business is not a “relevant activity”. Accordingly, an entity that only carries on investment fund business will not be required to comply with any of the ES requirements.

What is investment fund business?

The Amendment Act introduces a definition of “investment fund” as “…an entity whose principal business is the issuing of investment interests to raise funds or pool investor funds with the aim of enabling a holder of such an investment interest to benefit from the profits or gains from the entity’s acquisition, holding, management or disposal of investments and includes any entity through which an investment fund directly or indirectly invests or operates (but not an entity that is itself the ultimate investment held), but does not include a person licenced under the Banks and Trust Companies Act, 1990 or the Insurance Act, 2008, or a person registered under the Cooperatives Societies Act 1979 or the Friendly Societies Act 1928.”

The Amendment Act then defines “investment fund business” as “the business of operating an investment fund”.

The definition of “investment fund” does not make a distinction as between redeemable or non-redeemable interests. As such, it likely includes both open-ended and closed-end investment funds.

Based on our interpretation of the Amendment Act, the following entities might meet the definition of “investment fund”:

• Mutual funds recognised as such by the Financial Services Commission (including incubator and approved funds)
• Closed-end funds recognised under the private investment fund regime
• A master fund, being an entity through which an investment fund directly or indirectly invests

It is likely that that the ITA will provide guidance as to which entities or categories of entities might meet the definition of an “investment fund”. Until then, any relevant entity claiming not to be carrying on a “relevant activity” on the basis that it is an investment fund should consult with their BVI counsel to determine whether the entity is indeed carrying on the business of an investment fund in respect of any relevant financial period.

Core income generating activities and winding up

Core income generating activities (CIGAs)

The Act sets out a list of CIGAs for each “relevant activity”. Following the introduction of the Amendment Act, CIGA now also encompasses “all the activities that are of central importance to the relevant entity in terms of generating relevant income and must be carried on in the Virgin Islands”. The ITA had already indicated in the Rules that the specified CIGAs for each “relevant activity” are not confined to those specified activities and that what constitutes the CIGA of a particular activity requires a fact-sensitive analysis in each case. With the new gloss on the definition of CIGA, entities carrying on a relevant activity, other than holding business, might wish to conduct a more structured analysis to pinpoint all activities that generated relevant income for the entity for the financial period under consideration and then determine whether those activities were conducted in the BVI for that period as required by the Act.

Winding up

Given the pending changes to the strike off regime, instead of the ITA seeking for the entity to be struck off under the Act, the ITA will now be seeking for the entity to be wound up in cases where it determines that this is an appropriate enforcement action for any breach of the Act.

What should I be doing now?

Pre-Existing LPs should now be looking to undergo a classification exercise to determine whether the entity is within the scope of the ES requirements. Entities claiming to be conducting only investment fund business and which would accordingly not be required to comply with any of the ES requirements, should also seek legal advice to confirm their status.

If you need further information or any assistance with the classification of your entity for the purposes of the Act, particularly in light of the introduction of the Amendment Act, please feel free to contact us.

The Probates (Resealing) Act, 2021 (the Act) was Gazetted on 22 June 2021 and took effect from 9 July 2021.

Background

The Act repeals and replaces the Probates (Resealing) Act (Cap. 60) (the Original Act), which was enacted in 1937. The purpose of the Original Act was to provide for a simplified procedure to follow in which grants of probate or letters of administration issued by certain foreign courts may be resealed by the courts in the Virgin Islands.

Resealed grants under the Original Act had the same effect as if they were granted by the courts in the Virgin Islands.

Download a PDF of our Legal Update – Probates (Resealing) Act, 2021.

Limitation of the Original Act

The main limitation of the Original Act was that it only applied to grants issued by courts of probate in Her Majesty’s dominions as that term was defined in the Original Act. This included any British protectorate or protected state and any territory in respect of which a mandate or trusteeship was being exercised by Her Majesty’s Government in the United Kingdom or the Government of any part of Her Majesty’s dominions.

The result was that the range of jurisdictions whose court-issued grants of probate or letters of administration could be resealed in the Virgin Islands was necessarily limited.

New legislation

The Act maintains the essence of the Original Act but extends the number of jurisdictions whose grants of probate or letters of administration may be resealed by the Virgin Islands courts. The expanded list of jurisdictions includes all Commonwealth countries and territories and also includes Hong Kong and the United States of America. The Act allows the Governor, with the Agreement of Cabinet to extend the list of applicable jurisdictions, by publication of an Order in the Gazette to that effect. A full list of the current jurisdictions that are covered by the Act is included in the table at the end of this legal guide.

The Act applies to the grant of probate or letters of administration, whether issued before or after the coming into force of the Act.

Creditors

A further change introduced by the Act is that it empowers the High Court to require the giving of security in respect of the payment of debts due from the estate of a deceased person to persons residing in the Virgin Islands before resealing any grant of probate or letters of administration. 

Conclusion

The Act should greatly increase the number of estates that are able to benefit from the simplified procedure through which grants of probate or letters of administration issued by foreign courts may be resealed by the courts in the Virgin Islands. The availability of a simplified procedure in what is undoubtedly a difficult time will be of great benefit to many and shows that the BVI authorities remain conscious of the needs of the users of BVI companies.

If you would like any further information in relation to these changes, or any assistance or guidance in relation to matters relating to wills or probate, please email us or reach out to one of our lawyers using the contact details below.

Introduction

Except where a specific exemption applies, an entity holding a BVI financial services licence (each a licensee) is required under the Financial Services Commission Act 2001 (the Act) to appoint an individual approved by the Financial Services Commission (the Commission) as its compliance officer (the Compliance Officer).

As part of his or her core functions, as articulated in the Regulatory Code 2009 (as amended) (the Code), the Compliance Officer must prepare and submit to the Commission an annual Compliance Officer’s report (COR) detailing the level of the licensee’s compliance with the Code and any other applicable financial services legislation.

Download a PDF of our Legal Guide – Compliance Officer’s Reports

When are CORs due?

There was previously no express deadline for the submission of CORs. However, as a matter of convention, a licensee would have up to 12 months after the end of the year to which the report relates to submit its COR to the Commission. Following the amendments to the Code as contained in the Regulatory (Amendment) Code 2019, which came into force on 13 November 2019, a licensee is now required to prepare and submit its COR to the Commission within 3 months after the end of the year to which the report relates. Accordingly, all licensees must submit their CORs relating to the 2020 compliance year by 31 March 2021.

What should a COR contain?

The Code sets out, in precisely the following terms, the minimum details that a COR should contain:

• the number of persons employed by the licensee;
• the names and positions of those employees who participated in any training, the content of material covered, the dates of any such training and a copy of the licensee’s training register;
• a list of any BVI laws that the licensee may have breached over the period under review and a summary of any remedial action and time frame taken to address any such breach;
• a copy of the licensee’s register of compliance breaches (which it is required to maintain under the Code);
• the total number of suspicious activity reports made during the year of the COR;
• a list of significant complaints (as defined in the Code) made by customers of the licensee indicating the dates of the complaint, the nature of these complaints and how they were handled;
• an indication of whether there has been a significant breakdown in the internal control structure of the licensee including any compliance risks that may be associated with the licensee’s business relative to:
  • its existing risk management strategy, policies, systems and controls, and whether the internal controls remain sufficient and appropriate for the licensee’s business; and
  • whether the strategy, policies, systems and internal controls are being implemented and complied with in an effective manner;
• confirmation of whether the licensee remains properly resourced, structured, and organised to enable it to effectively undertake its business activities, including serving the number and types of its customers; and
• confirmation of the level of compliance by the licensee with its reporting, filing and all other obligations under the Code and any other applicable financial services legislation.

Can a licensee request an extension of time to prepare and submit its COR?

There are no clear provisions in the Code or the Act governing whether and how the Commission would consider requests for an extension of time to file a COR. It is likely that the Commission will, as it did prior to the 2019 amendments to the Code, continue to deal with such requests on a case-by-case basis to determine whether the circumstances justify any extension being given or if any enforcement action ought to be taken where a COR has not been submitted by the specified deadline. Considering the likely discretionary nature of that exercise, licensees are well advised to submit their COR to the Commission on time to avoid the risk of any enforcement action being taken against them.

What enforcement action might the Commission take if a licensee fails to submit a COR on time or at all?  

The Commission has broad enforcement powers under the Act which it may exercise in any case where it is of the opinion that a licensee has contravened any provision of the Code or any other financial services legislation. In exercising such powers, the Commission has several options ranging from the issuance of a warning letter against a licensee to the revocation or suspension of its licence. In cases where a licensee has failed to submit its COR, the Commission typically imposes a fine commensurate with the degree of non-compliance. However, repeated infractions could result in more severe enforcement action.

Conclusion

CORs assist both the Commission and the licensee in monitoring the licensee’s compliance with the Code and other applicable financial services legislation. Accordingly, it is enormously important for licensees to prepare accurate and comprehensive CORs that comply with the Code. In doing so, licensees not only avoid the risk of enforcement action for failure to submit a compliant and timely COR; they also benefit from the opportunity to assess their compliance functions against the background of this obligatory regulatory self-inspection.

If you need any further guidance on preparing and submitting a COR or determining whether a licensee is exempt from this reporting requirement, please email us or reach out to one of our lawyers using the contact details below.