Financial services companies registered in the British Virgin Islands as offshore entities will be required to establish physical registered office spaces in the jurisdiction if a bill currently being debated in parliament is passed.
The Economic Substance (Companies and Limited Partnerships) Bill, currently being decated by MPs in the House of Assembly, is likely to be passed into law by 31 December.
The bill is part of a series of reforms the BVI has committed to in response to EU criteria that threatened to blacklist the jurisdiction, among others worldwide. Should the BVI fail to comply, the EU will action diplomatic sanctions.
The bill stipulates that office spaces must also be staffed in proportion to the amount of profit the company is generating in or through the BVI.
There are currently more than 400,000 financial services companies registered as actively trading in the BVI.
Minister Myron Walwyn, commented on the challenges posed by the bull's likely passage: "We all know that [for them to relocate] between now and the 31 December is near to impossible. We also know that it's going to take a decade or more for us to be able to do that as well. There are a number of other issues that would be presented to us from that [legislation] — cultural issues, issues of space, the difficulty of companies moving and getting up from where they are located now, to come to the Virgin Islands."
In the EU's assessment, a range of factors are taken into account including tax transparency, fair taxation and a commitment to combat base erosion and profit shifting (BEPS).
Any jurisdiction judged by Brussels to be deficient within one or more of these areas is placed on either a blacklist or an intermediary ‘greylist'. While just 9 jurisdictions remain on the EU blacklist, 62 countries appear on the ‘greylist', including the BVI.