July 2023
The BVI International Tax Authority (ITA) is now actively enforcing compliance with economic substance (ES) requirements, investigating entities and taking necessary action. This enforcement follows legislative changes made in 2022, expanding the ITA’s enforcement powers. The economic substance regulations were initially introduced in 2019 to meet international commitments to the EU Code of Conduct Group for Business Taxation and the OECD’s Forum on Harmful Tax Practices.
Entities registered in the BVI must comply with ongoing obligations related to the ES regime, with specific reporting requirements within set timeframes. Failure to comply or report prescribed information carries significant penalties, including criminal repercussions for providing false information or intentional non-compliance.
Entities must demonstrate compliance by maintaining adequate systems, and the ITA has extensive investigative powers to request information. Non-compliance may result in penalties, liquidation, and dissolution in severe cases, although the ITA emphasizes this as a last resort.
The process involves assessment periods, potential audits, and the possibility of appeals through court procedures. Entities must establish mechanisms to ensure compliance with these regulations and keep records for at least six years from the end of each financial period.
