„Portfolio Company“ means the transaction of constituting a „pure equity interest“ within the meaning of the Act. A corporation falls within the definition of a „portfolio business“ if it holds only equity interests, dividends or capital gains. Legal entities that own other forms of investment (whether or not they hold equity interests) do not fall within the definition of „holding business“ as a relevant activity, as they are not pure investment companies. It should be noted that these legal entities are subject to less stringent regulations on substances than other relevant forms of activity. Appropriate content requirements are met in these cases if they comply with their legal obligations and have adequate staff and premises to hold and, if necessary, manage such holdings. Pure equity is likely to meet the requirements of economic substance with its registered representative in the British Virgin Islands and its registered office in the British Virgin Islands. In other words, the impact is minimal. For legal persons carrying out relevant activities, the date from which they are required to comply with the law is based on whether they were established before or after 1 January 2019 and on what is considered the first financial year of the company for the purposes of the law. Examples of basic income generating activities („CGAAs“) are included in the SE Act for each of the relevant activities. CIGAs are considered the essential and most valuable activities that generate the company`s revenue, and these activities must be carried out on Cayman. However, non-CIGA activities, such as back-office functions, expert professional advice or specialist services, can be used elsewhere.
A company can outsource its CIGA to the Cayman Islands as long as it continues to monitor and control the outsourced activities. Any company (registered or registered as a foreign company on Cayman) that is not a „national company“ (e.g. B only on Cayman or a non-profit corporation) or a limited liability company registered on Cayman and engages in any of the following „relevant activities“: Compliance with the ES Act is monitored and enforced by the Cayman Tax Information Authority. Companies subject to the SE Act must provide details of their compliance in an annual report and complete a section of the annual rate of return indicating whether they are subject to the SE Act. Failure to comply with the SE Act will result in fines of up to $100,000 and potentially the dismissal of a non-compliant business. Details of non-compliant companies are also disclosed to the relevant foreign tax authorities. The International Tax Cooperation (Economic Substance) Act (2021 revision) (the „SE Act“) will apply from 1 January 2019 to all newly incorporated companies falling within the scope of the SE Act and, from 1 July 2019, to companies incorporated and falling within the scope before 1 January 2019. There are regulations and guidelines that accompany the SE Act. The next step is to determine if your British Virgin Islands business is involved in any relevant activity.
Legal persons holding assets other than equity participations do not fall within the definition of a pure investment company, but may engage in other relevant activities. A company is managed and managed in the Cayman Islands in an appropriate manner if: Other guidelines are the legislation for legal entities registered in the British Virgin Islands (partnerships and limited partnerships) and for foreign partnerships (with the exception of partnerships that do not have the status of a legal entity) that carry on a regulated activity in the British Virgin Islands. If the company or partnership is resident for tax purposes in a jurisdiction outside the British Virgin Islands, it does not fall within the scope of the new rules. The second type is non-passage to the economic substance test, which takes into account the fact that this is the first or second case of non-compliance. The first instance of non-compliance involves a notice and fine of $5,000. The second will involve a fine of $200,000 ($400,000 for some intellectual property companies) or perhaps even the removal of the corporation from the registry. It should be noted that the activity as an investment fund does not constitute a relevant activity and therefore does not fall within the scope of the law, unless it carries out a relevant activity in addition to the activity as an investment fund. When does the fiscal year begin for testing purposes? For a company that carried on a relevant activity at a certain time during the fiscal year, but does not meet the definition of a legal entity because it was resident for tax purposes in another country during the reporting period, the return must include proof that the entity is a tax resident in the other country. Businesses that are tax residents outside the Cayman Islands are not required to have or report on an economic substance, but must file an annual notice and form proving their tax residency. Companies carrying out the following activities are subject to slightly different regulations: all companies in the British Virgin Islands are required to provide the BOSS system with information on their registered representative within six months of the end of each financial year.
This should be assessed on a case-by-case basis, based on the company`s activities and how its CIGA is formed. Directors should consider these factors, make a decision in good faith, and ensure that records are in place to support the basis and operation of this provision. In response to the concerns of the Corporate Tax Group on the European Union Code of Conduct and the recent OECD Guidelines on the Economic Substance of Companies in Jurisdictions that Subject Corporate Profits to Zero or Lower Tax Rates, the Government of the British Virgin Islands has published the Economic Substance (Partnerships and Limited Partnerships) Act 2018, which entered into force on 1 January 2019. In both cases, all legal entities must report to the ITA of the British Virgin Islands by 31 December 2020. The Law, supplemented by a Code of Statutory Interpretation, imposes substantive requirements on the economic substance of the legal persons concerned who are resident for tax purposes in the jurisdiction and carry out relevant activities in each financial year in which they have derived income from that activity. The economic substance is assessed over a certain period of time, usually one year. The law refers to this period as a fiscal year, although the period is not related to the accounting period of a legal entity. A legal entity that resides in the British Virgin Islands and carries out any of the relevant activities mentioned above, with the exception of the holding business, must be directed and managed in the British Virgin Islands, have a reasonable number of qualified employees who are physically present in the British Virgin Islands, make reasonable expenses and have adequate premises. Additional requirements are imposed on companies operating in the field of intellectual property. As a regional specialist in business services, Acclime helps companies and private clients advance their businesses and interests seamlessly in hard-to-navigate markets in Asia and beyond. Our years of market experience and in-depth knowledge help our clients avoid pitfalls and progress faster. Otherwise, a legal entity carrying on a relevant business at any time during a financial year is required to report the following information: In addition, management and management in the British Virgin Islands mean that a reasonable number of meetings of the Board of Directors are held in the British Virgin Islands, a quorum of directors physically present in the British Virgin Islands, although there is no requirement, that directors reside in the British Virgin Islands.
an appropriate level of expertise among Council members and the keeping of minutes of Council meetings in the British Virgin Islands. The first of the two is the provision of false (false) information, which involves a fine of 40,000 to 250,000 USD. Perpetrators can be imprisoned for up to five years. A fine of up to $75,000 or imprisonment for up to five years. Companies subject to the HE Act must, with respect to their relevant activities: In accordance with the Economic Substance (Partnerships and Limited Partnerships) Act 2018 („the Act“), published on 19 December 2018 and which entered into force on 1 January 2019, all legal entities carrying out a relevant activity in a financial year are required to demonstrate economic substance in the British Virgin Islands. Depending on the relevant activities carried out by a legal entity, the requirements for the economic substance may vary. Options for legal entities that do not want to meet the substance requirements may include building fabrics elsewhere, changing the commercial character, hiring and setting up a new business in an unaffected area of law. For assistance or further information, please contact Alan Ang a.ang@acclime.com or your regular Acclime Customer Manager. It should be noted that the list of basic income-generating activities contained in the law is not considered exhaustive. .
