BVI Economic Substance – ITA begins the audit process | Conyers

Following the introduction of the Economic Substances (Partnerships and Limited Partnerships) Act 2018 (ES Act) and the passing of the deadline for the first deposits under it to be made by the entities BVI, the BVI International Tax Authority (ITA) has now started making audit requests to verify “relevant activities” carried out by BVI entities that have made their mandated economic substance declarations.

The issues raised by the ITA in these audit requests included not only details of the business purpose, assets and day-to-day operations of the affected entity, but also details of the actions taken by the entity to determine what relevant activities, if any, were carried out by the entity during the financial period in question. It is therefore important that BVI entities properly document any legal advice obtained and their decision-making process to determine their status under the ES Act (for example, through written advice notes from BVI legal counsel and resolutions directors).

BVI entities that have been determined to be carrying out “relevant activities” under the ES Act other than “passive holding activities” (including all entities that have provided multiple interest-bearing loans as a lender and entities that actively manage their investments) should now have taken concrete steps to ensure that their “basic income-generating activities” (as defined in the SE Act) and directors’ meetings and other processes Relevant decision-making takes place physically in the IVBs.

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