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by pltm
(PLTM) - With the passage of the recent Economic Substance legislation in the BVI, companies have expressed their concern to BVI Finance, but none have signaled their intent to exit the Territory—a fear that was registered by legislators before passing the legislation.
This, even as the BVI awaits the answer to whether or not the European Union will accept this legislation and save the Territory from blacklisting.
Executive Director of BVI Finance, Mrs. Lorna Smith yesterday, January 18, when asked about the response of companies in the Financial Services Sector, said, “There’s a large number of questions that they want answered.”
She said they are concerned and BVI Finance is trying to address their questions and concerns to bring them the necessary clarity.
The introduction of this legislation will be in keeping with Government’s pledge to implement it by the end of this year, so as to allay concerns of the EU as it relates to tax transparency, fair taxation, base erosion and profit shifting (BEPS) in the Territory.
Countries that are lacking in legislation or found to be culpable of such adverse activities are blacklisted, while some are placed on the “greylist,” which the Territory is now on.
The BVI was placed on the greylist after commitment was made by the Government to address these issues—specifically concerns related to economic substance.
This legislation mandates that companies show that their activities are directed and managed in the Virgin Islands, having regard to the nature and scale of the relevant activity.
The legislation further dictates that there be “adequate numbers of suitably qualified employees in relation to that activity or physically present in the Virgin Islands, whether or not employed by the relevant legal entity or by another entity, or whether on temporary or long term contracts.”
These companies will also have to show that there is adequate expenditure incurred in the Virgin Islands, as well as the necessary premises, office space and equipment for the registered operations, by June.
“We are looking to get that to them through guidance forums from our legal team, I should say from the international tax authority, which is the Government entity that is responsible for the implementation of the new law. We ourselves will issue further briefings to the industry to give them the level of clarity that they need on their many questions,” Mrs. Smith explained.
She added that while “there could be losses in the initial stage…We are making sure that all of them are answered to the best of our ability. They are concerned.”
However, like the companies, the Executive Director said they are also waiting on the response by the European Union.
“We will know…we have enacted the legislation in time and we know that there were the three concerns by the EU. We have met their demands. We will know what their decision is…mid-February to know what the decision of the EU will be. We have no reason to be pessimistic,” she told media operatives.
In the meantime, she says there needs to be a more optimistic approach to the implications of the legislation.
“There are those opportunities in terms of substance,” she stated, however, she added, “It requires the Government to sit with the industry and see what the industry will be.”
This also provides employment opportunities for BVIslanders, she noted.
“For instance, management has to be here in the BVI so that would require more directors from the BVI. We have a number of people, in fact, I would say…not four-fifths, two-thirds is too low of our industry, are BVIslanders. It gives us the opportunity for those people to become, if they need to be beefed up in their training and so on, it will be those opportunities for more directors in the BVI in terms of mind and management, more staff,” she stressed.
The Executive Director urged, “Don’t need to look at it from a position of fear, we need to look at it from a position of opportunities.”
