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Economic Substance Entity Classification Questionnaire - BVI
Please answer the following questionnaire to initially classify an Entity for the purpose of Economic Substance.
Please note that the types of entities that are considered "relevant entities" for the purpose of the Economic Substance regime will soon be expanded to include certain types of partnerships that are not currently listed in the drop down below. This section of the questionnaire will be updated once these amendments have come into force. If your Entity Type is a partnership that is not listed below but you would like to prepare for the eventuality of it being in scope, please
click here
to contact any member of Appleby's regulatory team for bespoke advice.
Section 1 - Entity Type
Type of Entity
A company or foreign company registered under the BVI Business Companies Act 2004
A limited partnership or foreign partnership registered under the Limited Partnership Act 2017
Other
The Entity is not within scope of the Economic Substance regime by virtue of its type.
The Entity is of a type that may fall under the Economic Substance regime in the BVI. It will be necessary to continue with the analysis.
Section 2 - Tax Residence
Is the Entity (i) resident for tax purposes in a jurisdiction outside the BVI which is not on annex 1 to the EU list of non-cooperative jurisdictions
for tax purposes, or (ii) a limited partnership whose general partners have elected that the limited partnership shall not have legal personality, pursuant to the Limited Partnership act 2017?
Yes
No
Can the Entity produce evidence of tax residence outside of the BVI, namely:
a letter or certificate from, or issued by, the competent authority for the jurisdiction in question stating that the entity is considered to be resident for tax purposes in that jurisdiction; or
an assessment to tax on the entity, a confirmation of self-assessment to tax, a tax demand, evidence of payment of tax, or any other document, issued by the competent authority for the jurisdiction in question.
Yes
No
Entities that are tax resident outside of the BVI and are able to produce proof that they are subject to taxation on income relating to their the BVI Islands relevant activities are not in scope of the Economic Substance regime. However, consideration should be given to whether an Economic Substance regime exists in the jurisdiction of tax residence.
Entities that are tax resident outside of the BVI and are able to produce proof that they are subject to taxation on income relating to their BVI relevant activities are not in scope of the Economic Substance regime. You have indicated that the Entity is tax resident outside of the BVI but evidence in the specified form is not available. The Economic Substance regime contains some flexibility about the form of proof that may be accepted by the authorities. It will be necessary to take legal advice, and possibly tax advice in the relevant jurisdiction.
Please
click here
to book a call.
Section 3 - Relevant Activities
Does the Entity carry on banking business
, as defined in the Banks and Trusts Companies Act, 2002?
Yes
No
Unsure
Your responses indicate that the Entity is a Relevant Entity carrying on the Relevant Activity of Banking business and therefore in scope of the Economic Substance regime. The entity will meet the economic substance test if:
1. the Relevant Activity is directed and managed in the BVI;
2. having regard to nature and scale of the Relevant Activity -
(i) there are an adequate number of suitably qualified employees in relation to that activity who are physically present in the BVI (whether or not employed by the relevant legal entity or by another entity and whether on temporary or long term contracts);
(ii) there is adequate expenditure incurred in the BVI; and
(iii) there are physical offices or premises as may be appropriate for the core income-generating activities.
3. The entity conducts core income-generating activity in the BVI
4. In the case of core income-generating activity carried out for the relevant entity by another entity:
a. No core income generating activity is carried on outside the BVI;
b. Only that part of the activities of that other entity which are solely attributable to generating income for the relevant legal entity and not for any other legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
c. The relevant entity is able to monitor and control the carrying out of that activity by the other entity.
Management and Direction in the BVI
For a Relevant Entity to be directed and managed from the BVI there must be an adequate number of board meetings held in the BVI, having regard to the nature of the relevant activity, and its importance in the overall business of the entity. For a board meeting to be held in the BVI there must be a quorum of directors physically present in the BVI. The directors of the entity attending such meetings must include among their number adequate expertise to direct the relevant activity. Decisions of the board regarding the relevant activity must be minuted, and minutes of those decisions must be kept in the BVI.
Adequate expenditure, adequate number of suitably qualified employees and appropriate premises in the BVI
These will be determined by reference to the size of the business. The legislation is not intended to require an entity to incur more expenditure or engage more employees than it really needs.
Expenditure can only be taken into account if it is incurred in the operation of the relevant activity.
The amount of expenditure incurred and the number of employees (and their qualifications) employed globally in the relevant activity, will be highly relevant to the question whether expenditure and employment in the BVI is or is not adequate.
Where a legal entity outsources part of its relevant activity, and that work meets the requirements for outsourcing, the expenditure on the outsourcing will be taken into account when assessing the adequacy of the legal entity's expenditure in the BVI.
The BVI International Tax Authority will publish rules relating to calculation of the number of employees, outsourcing etc.
Core Income-Generating Activities
The core income-generating activities for an Entity conducting banking business include:
(i) raising funds, managing risk including credit, currency and interest risk;
(ii) taking hedging positions;
(iii) providing loans, credit or other financial services to customers;
(iv) managing regulatory capital;
(v) preparing reports and returns.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on distribution and service centre business
, meaning either or both of the following (a) purchasing from foreign affiliates
(i) component parts or materials for goods; or (ii) goods ready for sale, and reselling such component parts, materials or goods; or (b) providing services to foreign affiliates in connection with the business outside the Islands (but does not include any activity included in any other relevant activity except holding company business)?
Yes
No
Unsure
Your responses indicate that the Entity is a Relevant Entity carrying on the Relevant Activity of distribution and service centre business and therefore in scope of the Economic Substance regime. The entity will meet the economic substance test if:
1. the Relevant Activity is directed and managed in the BVI;
2. having regard to nature and scale of the Relevant Activity -
(i) there are an adequate number of suitably qualified employees in relation to that activity who are physically present in the BVI (whether or not employed by the relevant legal entity or by another entity and whether on temporary or long term contracts);
(ii) there is adequate expenditure incurred in the BVI; and
(iii) there are physical offices or premises as may be appropriate for the core income-generating activities.
3. The entity conducts core income-generating activity in the BVI
4. In the case of core income-generating activity carried out for the relevant entity by another entity:
a. No core income generating activity is carried on outside the BVI;
b. Only that part of the activities of that other entity which are solely attributable to generating income for the relevant legal entity and not for any other legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
c. The relevant entity is able to monitor and control the carrying out of that activity by the other entity.
Management and Direction in the BVI
For a Relevant Entity to be directed and managed from the BVI there must be an adequate number of board meetings held in the BVI, having regard to the nature of the relevant activity, and its importance in the overall business of the entity. For a board meeting to be held in the BVI there must be a quorum of directors physically present in the BVI. The directors of the entity attending such meetings must include among their number adequate expertise to direct the relevant activity. Decisions of the board regarding the relevant activity must be minuted, and minutes of those decisions must be kept in the BVI.
Adequate expenditure, adequate number of suitably qualified employees and appropriate premises in the BVI
These will be determined by reference to the size of the business. The legislation is not intended to require an entity to incur more expenditure or engage more employees than it really needs.
Expenditure can only be taken into account if it is incurred in the operation of the relevant activity.
The amount of expenditure incurred and the number of employees (and their qualifications) employed globally in the relevant activity, will be highly relevant to the question whether expenditure and employment in the BVI is or is not adequate.
Where a legal entity outsources part of its relevant activity, and that work meets the requirements for outsourcing, the expenditure on the outsourcing will be taken into account when assessing the adequacy of the legal entity's expenditure in the BVI.
The BVI International Tax Authority will publish rules relating to calculation of the number of employees, outsourcing etc.
Core Income-Generating Activities
The core income-generating activities for an Entity conducting distribution and service centre business include:
(i) transporting and storing goods;
(ii) managing stocks;
(iii) taking orders;
(iv) providing consulting or other administrative services.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Other Relevant Activities
It is not uncommon for an Entity to undertake more than one Relevant Activity. For example, an entity conducting distribution and service centre business may also be conducting headquarters business
, financing and leasing business
or intellectual property business
. Where an Entity conducts more than one Relevant Activity, the applicable economic substance test will have to be met in respect of each one.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on finance and leasing business
, being the business of providing credit facilities for any kind of consideration
(unless the Entity is doing so in connection with banking business, fund management business or insurance business)?
Yes
No
Unsure
Your responses indicate that the Entity is a Relevant Entity carrying on the Relevant Activity of financing and leasing business and therefore in scope of the Economic Substance regime. The entity will meet the economic substance test if:
1 .the Relevant Activity is directed and managed in the BVI;
2. having regard to nature and scale of the Relevant Activity -
(i) there are an adequate number of suitably qualified employees in relation to that activity who are physically present in the BVI (whether or not employed by the relevant legal entity or by another entity and whether on temporary or long term contracts);
(ii) there is adequate expenditure incurred in the BVI; and
(iii) there are physical offices or premises as may be appropriate for the core income-generating activities.
3. The entity conducts core income-generating activity in the BVI
4. In the case of core income-generating activity carried out for the relevant entity by another entity:
a. No core income generating activity is carried on outside the BVI;
b. Only that part of the activities of that other entity which are solely attributable to generating income for the relevant legal entity and not for any other legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
c. The relevant entity is able to monitor and control the carrying out of that activity by the other entity.
Management and Direction in the BVI
For a Relevant Entity to be directed and managed from the BVI there must be an adequate number of board meetings held in the BVI, having regard to the nature of the relevant activity, and its importance in the overall business of the entity. For a board meeting to be held in the BVI there must be a quorum of directors physically present in the BVI. The directors of the entity attending such meetings must include among their number adequate expertise to direct the relevant activity. Decisions of the board regarding the relevant activity must be minuted, and minutes of those decisions must be kept in the BVI.
Adequate expenditure, adequate number of suitably qualified employees and appropriate premises in the BVI
These will be determined by reference to the size of the business. The legislation is not intended to require an entity to incur more expenditure or engage more employees than it really needs.
Expenditure can only be taken into account if it is incurred in the operation of the relevant activity.
The amount of expenditure incurred and the number of employees (and their qualifications) employed globally in the relevant activity, will be highly relevant to the question whether expenditure and employment in the BVI is or is not adequate.
Where a legal entity outsources part of its relevant activity, and that work meets the requirements for outsourcing, the expenditure on the outsourcing will be taken into account when assessing the adequacy of the legal entity's expenditure in the BVI.
The BVI International Tax Authority will publish rules relating to calculation of the number of employees, outsourcing etc.
Core Income-Generating Activities
The core income-generating activities for an Entity conducting finance or leasing business include:
(i) agreeing funding terms;
(ii) identifying and acquiring assets to be leased (in the case of leasing);
(iii) settling the terms and duration of any financing or leasing;
(iv) monitoring and revising any agreements;
(v) managing any risks.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Other Relevant Activities
It is not uncommon for an Entity to undertake more than one Relevant Activity. For example, an entity conducting financing and leasing business may also be conducting headquarters business
, distribution and service centre business
or intellectual property business
. Where an Entity conducts more than one Relevant Activity, the applicable economic substance test will have to be met in respect of each one.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on fund management business
, being the conduct of an activity that requires the entity to hold an investment business licence pursuant section 4 and category 3 of schedule 3 of the Securities Investment Business Act 2010?
Yes
No
Unsure
Your responses indicate that the Entity is a Relevant Entity carrying on the Relevant Activity of fund management business and therefore in scope of the Economic Substance regime. The entity will meet the economic substance test if:
1. the Relevant Activity is directed and managed in the BVI;
2. having regard to nature and scale of the Relevant Activity -
(i) there are an adequate number of suitably qualified employees in relation to that activity who are physically present in the BVI (whether or not employed by the relevant legal entity or by another entity and whether on temporary or long term contracts);
(ii) there is adequate expenditure incurred in the BVI; and
(iii) there are physical offices or premises as may be appropriate for the core income-generating activities.
3. The entity conducts core income-generating activity in the BVI
4. In the case of core income-generating activity carried out for the relevant entity by another entity:
a. No core income generating activity is carried on outside the BVI;
b. Only that part of the activities of that other entity which are solely attributable to generating income for the relevant legal entity and not for any other legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
c. The relevant entity is able to monitor and control the carrying out of that activity by the other entity.
Management and Direction in the BVI
For a Relevant Entity to be directed and managed from the BVI there must be an adequate number of board meetings held in the BVI, having regard to the nature of the relevant activity, and its importance in the overall business of the entity. For a board meeting to be held in the BVI there must be a quorum of directors physically present in the BVI. The directors of the entity attending such meetings must include among their number adequate expertise to direct the relevant activity. Decisions of the board regarding the relevant activity must be minuted, and minutes of those decisions must be kept in the BVI.
Adequate expenditure, adequate number of suitably qualified employees and appropriate premises in the BVI
These will be determined by reference to the size of the business. The legislation is not intended to require an entity to incur more expenditure or engage more employees than it really needs.
Expenditure can only be taken into account if it is incurred in the operation of the relevant activity.
The amount of expenditure incurred and the number of employees (and their qualifications) employed globally in the relevant activity, will be highly relevant to the question whether expenditure and employment in the BVI is or is not adequate.
Where a legal entity outsources part of its relevant activity, and that work meets the requirements for outsourcing, the expenditure on the outsourcing will be taken into account when assessing the adequacy of the legal entity's expenditure in the BVI.
The BVI International Tax Authority will publish rules relating to calculation of the number of employees, outsourcing etc.
Core Income-Generating Activities
The core income-generating activities for an Entity conducting fund management business include:
(i) taking decisions on the holding and selling of investments;
(ii) calculating risks and reserves;
(iii) taking decisions on currency or interest fluctuations and hedging positions;
(iv) preparing relevant regulatory or other reports for government aurthorities and investors.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on headquarters business
, being the business of providing any of the following services to an entity in the same Group
: (a) the provision of senior management; (b) the assumption or control of material risk for activities carried out by any of those entities in the same Group; or (c) the provision of substantive advice in connection with the assumption or control of risk referred to in paragraph (b) (but does not include banking business, financing and leasing business, fund management business, intellectual property business, holding company business or insurance business)?
Yes
No
Unsure
Your responses indicate that the Entity is a Relevant Entity carrying on the Relevant Activity of headquarters business and therefore in scope of the Economic Substance regime. The entity will meet the economic substance test if:
1. the Relevant Activity is directed and managed in the BVI;
2. having regard to nature and scale of the Relevant Activity -
(i) there are an adequate number of suitably qualified employees in relation to that activity who are physically present in the BVI (whether or not employed by the relevant legal entity or by another entity and whether on temporary or long term contracts);
(ii) there is adequate expenditure incurred in the BVI; and
(iii) there are physical offices or premises as may be appropriate for the core income-generating activities.
3. The entity conducts core income-generating activity in the BVI
4. In the case of core income-generating activity carried out for the relevant entity by another entity:
a. No core income generating activity is carried on outside the BVI;
b. Only that part of the activities of that other entity which are solely attributable to generating income for the relevant legal entity and not for any other legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
c. The relevant entity is able to monitor and control the carrying out of that activity by the other entity.
Management and Direction in the BVI
For a Relevant Entity to be directed and managed from the BVI there must be an adequate number of board meetings held in the BVI, having regard to the nature of the relevant activity, and its importance in the overall business of the entity. For a board meeting to be held in the BVI there must be a quorum of directors physically present in the BVI. The directors of the entity attending such meetings must include among their number adequate expertise to direct the relevant activity. Decisions of the board regarding the relevant activity must be minuted, and minutes of those decisions must be kept in the BVI.
Adequate expenditure, adequate number of suitably qualified employees and appropriate premises in the BVI
These will be determined by reference to the size of the business. The legislation is not intended to require an entity to incur more expenditure or engage more employees than it really needs.
Expenditure can only be taken into account if it is incurred in the operation of the relevant activity.
The amount of expenditure incurred and the number of employees (and their qualifications) employed globally in the relevant activity, will be highly relevant to the question whether expenditure and employment in the BVI is or is not adequate.
Where a legal entity outsources part of its relevant activity, and that work meets the requirements for outsourcing, the expenditure on the outsourcing will be taken into account when assessing the adequacy of the legal entity's expenditure in the BVI.
The BVI International Tax Authority will publish rules relating to calculation of the number of employees, outsourcing etc.
Core Income-Generating Activities
The core income-generating activities for an Entity conducting headquarters business include:
(i) taking relevant management decisions;
(ii) incurring expenditures on behalf of affiliates;
(iii) co-ordinating group activities.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Other Relevant Activities
It is not uncommon for an Entity to undertake more than one Relevant Activity. For example, an entity conducting headquarters business may also be conducting distribution and service centre business
, financing and leasing business
or intellectual property business
. Where an Entity conducts more than one Relevant Activity, the applicable economic substance test will have to be met in respect of each one.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on insurance business
, as defined in section 3(1) of the Insurance Act, 2008?
Yes
No
Unsure
Your responses indicate that the Entity is a Relevant Entity carrying on the Relevant Activity of Insurance business and therefore in scope of the Economic Substance regime. The entity will meet the economic substance test if:
1. the Relevant Activity is directed and managed in the BVI;
2. having regard to nature and scale of the Relevant Activity -
(i) there are an adequate number of suitably qualified employees in relation to that activity who are physically present in the BVI (whether or not employed by the relevant legal entity or by another entity and whether on temporary or long term contracts);
(ii) there is adequate expenditure incurred in the BVI; and
(iii) there are physical offices or premises as may be appropriate for the core income-generating activities.
3. The entity conducts core income-generating activity in the BVI
4. In the case of core income-generating activity carried out for the relevant entity by another entity:
a. No core income generating activity is carried on outside the BVI;
b. Only that part of the activities of that other entity which are solely attributable to generating income for the relevant legal entity and not for any other legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
c. The relevant entity is able to monitor and control the carrying out of that activity by the other entity.
Management and Direction in the BVI
For a Relevant Entity to be directed and managed from the BVI there must be an adequate number of board meetings held in the BVI, having regard to the nature of the relevant activity, and its importance in the overall business of the entity. For a board meeting to be held in the BVI there must be a quorum of directors physically present in the BVI. The directors of the entity attending such meetings must include among their number adequate expertise to direct the relevant activity. Decisions of the board regarding the relevant activity must be minuted, and minutes of those decisions must be kept in the BVI.
Adequate expenditure, adequate number of suitably qualified employees and appropriate premises in the BVI
These will be determined by reference to the size of the business. The legislation is not intended to require an entity to incur more expenditure or engage more employees than it really needs.
Expenditure can only be taken into account if it is incurred in the operation of the relevant activity.
The amount of expenditure incurred and the number of employees (and their qualifications) employed globally in the relevant activity, will be highly relevant to the question whether expenditure and employment in the BVI is or is not adequate.
Where a legal entity outsources part of its relevant activity, and that work meets the requirements for outsourcing, the expenditure on the outsourcing will be taken into account when assessing the adequacy of the legal entity's expenditure in the BVI.
The BVI International Tax Authority will publish rules relating to calculation of the number of employees, outsourcing etc.
Core Income-Generating Activities
The core income-generating activities for an Entity conducting insurance business include:
(i) predicting and calculating risk;
(ii) insuring or re-insuring against risk;
(iii) providing insurance business services to clients.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on shipping business
, being any of the following activities involving the operation of a ship
anywhere in the world other than in solely within Virgin Islands waters (as defined in section 2(2) of the Merchant Shipping Act, 2001):
the business of transporting, by sea, persons, animals, goods or mail;
the renting or chartering of ships for the purpose described in paragraph (a);
the sale of travel tickets or equivalent, and ancillary services connected with the operation of a ship;
the use, maintenance or rental of containers, including trailers and other vehicles or equipment for the transport of containers used for the transport of anything by sea; or
management of the crew of a ship?
Yes
No
Unsure
Your responses indicate that the Entity is a Relevant Entity carrying on the Relevant Activity of shipping business and therefore in scope of the Economic Substance regime. The entity will meet the economic substance test if:
1. the Relevant Activity is directed and managed in the BVI;
2. having regard to nature and scale of the Relevant Activity -
(i) there are an adequate number of suitably qualified employees in relation to that activity who are physically present in the BVI (whether or not employed by the relevant legal entity or by another entity and whether on temporary or long term contracts);
(ii) there is adequate expenditure incurred in the BVI; and
(iii) there are physical offices or premises as may be appropriate for the core income-generating activities.
3. The entity conducts core income-generating activity in the BVI
4. In the case of core income-generating activity carried out for the relevant entity by another entity:
a. No core income generating activity is carried on outside the BVI;
b. Only that part of the activities of that other entity which are solely attributable to generating income for the relevant legal entity and not for any other legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
c. The relevant entity is able to monitor and control the carrying out of that activity by the other entity.
Management and Direction in the BVI
For a Relevant Entity to be directed and managed from the BVI there must be an adequate number of board meetings held in the BVI, having regard to the nature of the relevant activity, and its importance in the overall business of the entity. For a board meeting to be held in the BVI there must be a quorum of directors physically present in the BVI. The directors of the entity attending such meetings must include among their number adequate expertise to direct the relevant activity. Decisions of the board regarding the relevant activity must be minuted, and minutes of those decisions must be kept in the BVI.
Adequate expenditure, adequate number of suitably qualified employees and appropriate premises in the BVI
These will be determined by reference to the size of the business. The legislation is not intended to require an entity to incur more expenditure or engage more employees than it really needs.
Expenditure can only be taken into account if it is incurred in the operation of the relevant activity.
The amount of expenditure incurred and the number of employees (and their qualifications) employed globally in the relevant activity, will be highly relevant to the question whether expenditure and employment in the BVI is or is not adequate.
Where a legal entity outsources part of its relevant activity, and that work meets the requirements for outsourcing, the expenditure on the outsourcing will be taken into account when assessing the adequacy of the legal entity's expenditure in the BVI.
The BVI International Tax Authority will publish rules relating to calculation of the number of employees, outsourcing etc.
Core Income-Generating Activities
The core income-generating activities for an Entity conducting shipping business include:
(i) managing the crew (including hiring, paying and overseeing crewmembers);
(ii) hauling and maintaining ships;
(iii) overseeing and tracking deliveries;
(iv) determining what goods to order and when to deliver them;
(v) organising and overseeing voyages.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on intellectual property business
, being the business of holding intellectual property assets?
Note that this term does not apply to a business which owns intellectual property merely as an adjunct to its business.
Yes
No
Unsure
Your responses indicate that the Entity is a Relevant Entity carrying on the Relevant Activity of Intellectual Property business and therefore in scope of the Economic Substance regime. The entity will meet the economic substance test if:
1. the Relevant Activity is directed and managed in the BVI;
2. having regard to nature and scale of the Relevant Activity -
(i) there are an adequate number of suitably qualified employees in relation to that activity who are physically present in the BVI (whether or not employed by the relevant legal entity or by another entity and whether on temporary or long term contracts);
(ii) there is adequate expenditure incurred in the BVI;
(iii) there are physical offices or premises as may be appropriate for the core income-generating activities; and
(iv) where the relevant activity is intellectual property business and requires the use of specific equipment, that equipment is located in the BVI.
3. The entity conducts core income-generating activity in the BVI.
4. In the case of core income-generating activity carried out for the relevant entity by another entity:
a. No core income-generating activity is carried on outside the BVI;
b. Only that part of the activities of that other entity which are solely attributable to generating income for the relevant legal entity and not for any other legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
c. The relevant entity is able to monitor and control the carrying out of that activity by the other entity.
Management and Direction in the BVI
For a Relevant Entity to be directed and managed from the BVI there must be an adequate number of board meetings held in the BVI, having regard to the nature of the relevant activity, and its importance in the overall business of the entity. For a board meeting to be held in the BVI there must be a quorum of directors physically present in the BVI. The directors of the entity attending such meetings must include among their number adequate expertise to direct the relevant activity. Decisions of the board regarding the relevant activity must be minuted, and minutes of those decisions must be kept in the BVI.
Adequate expenditure, adequate number of suitably qualified employees and appropriate premises in the BVI
These will be determined by reference to the size of the business. The legislation is not intended to require an entity to incur more expenditure or engage more employees than it really needs.
Expenditure can only be taken into account if it is incurred in the operation of the relevant activity.
The amount of expenditure incurred and the number of employees (and their qualifications) employed globally in the relevant activity, will be highly relevant to the question whether expenditure and employment in the BVI is or is not adequate.
Where a legal entity outsources part of its relevant activity, and that work meets the requirements for outsourcing, the expenditure on the outsourcing will be taken into account when assessing the adequacy of the legal entity's expenditure in the BVI.
The BVI International Tax Authority will publish rules relating to calculation of the number of employees, outsourcing etc.
Core Income-Generating Activities
The core income-generating activities for an Entity conducting intellectual property business include:
(i) where the business concerns intellectual property assets such as patents, research and development;
(ii) where the business concerns non-trade intangible assets such as brand, trademark and customer data, marketing, branding and distribution.
There is a presumption that a legal entity does not conduct core income-generating activity if the activities being carried on from within the BVI do not include any of the activities above.
This presumption may be rebutted where the activities being carried on from within the BVI include:
(a) Taking the strategic decisions and managing (as well as bearing) the principal risks relating to the development and subsequent exploitation of the intangible assets generating income;
(b) Taking the strategic decisions and managing (as well as bearing) the principal risks relating to acquisition by third parties and subsequent exploitation of the intangible asset;
(c) Carrying on the underlying trading activities through which the intangible assets are exploited and which lead to the generation of revenue from third parties.
There is also a presumption that an entity does not conduct core income-generating activity if the entity is a high risk IP legal entity.
This presumption may be rebutted where a high degree of control over the development, exploitation, maintenance, enhancement and protection of the intellectual property asset is exercised by suitably qualified employees of the relevant legal entity who are physically present and perform their functions from within the BVI and who are on long-term contracts.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Other Relevant Activities
It is not uncommon for an Entity to undertake more than one Relevant Activity. For example, an entity conducting intellectual property business may also be conducting distribution and service centre business
, financing and leasing business
or headquarters business
. Where an Entity conducts more than one Relevant Activity, the applicable economic substance test will have to be met in respect of each one.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on holding company business
, defined as "pure equity holding business", meaning that the entity only holds equity participations in other entities and only earns dividends and capital gains?
Yes
No
Unsure
Your responses indicated that the Entity is a Relevant Entity carrying on pure equity holding company business. Such businesses are within the scope of the Economic Substance regime, but are subject to a reduced economic substance test which is satisfied if the Entity confirms that:
it has complied with all applicable filing requirements under the BVI Business Companies Act, 2004 or the Limited Partnership act, 2017 (whichever is relevant); and
it has, in the BVI, adequate employees and premises for holding equity participations and, where it manages those equity participations, has, in the BVI, adequate employees and premises for carrying out that management.
A pure equity holding company maintaining a registered office in the BVI with a registered office service provider may be able to satisfy the reduced substance requirements where it is passively holding interests in other entities, depending on the level and complexity of activity required to operate its business. A pure equity holding company is not required to be directed and managed in the BVI nor is there a requirement that the entity carries on core income-generating business in the BVI. There are no restrictions on the extent to which a pure equity holding entity may outsource its activity.
If the Entity is not passive (that is, if it manages its equity participations), we strongly recommend that you contact us for bespoke advice.
Depending on the exact nature of the assets held, it may be that the Entity is not a pure equity holding company at all, and may therefore be out of scope of the economic substance requirements entirely. If you are in any doubt on this whatsoever we recommend that you contact us.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Although the Entity is of a type that could be within the scope of the legislation, your responses indicate that the business does not carry on a Relevant Activity and on that basis compliance with the Economic Substance regime is not required. Please note, however, that this conclusion depends on your responses being accurate in all respects, which we have not been able to verify. We caution that the information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
You have selected "Unsure" for one or more answers in Section 3.
In order to determine whether the Entity carries on the relevant activity, it will be necessary for us to obtain full information on day-to-day business activities of the entity and consider the Entity's core income-generating activities.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
EU List of Non-Cooperative Jurisdictions
×
As of 21 June 2019, the
EU list of non-cooperative jurisdictions
is composed of: American Samoa, Belize, Fiji, Guam, Marshall Islands, Oman, Samoa, Trinidad and Tobago, United Arab Emirates, US Virgin Islands, and Vanuatu.
Banking Business
×
Banking business is defined in s.2(1) of the Banks and Trust Companies act, 2002 as "the business of receiving (other than from a bank or trust company) and holding on current, savings, deposit or other similar account money which is repayable by cheque or order and may be invested by way of advances to customers or otherwise but does not include the receiving on savings, deposit of similar account money which is paid by one company to another at a time when -
One is the subsidiary of the other; or
Both are subsidiaries of another company".
Affiliate
×
Affiliate bears the same meaning as an "affiliated company" specified in regulation 2(2) of the BVI Business Companies Regulations 2012, modified so that references to a company include references to a limited partnership, and other expressions appropriate to companies shall be construed as including references to the corresponding persons, documents or organs, as the case may be, appropriate to limited partnerships. Regulation 2(2) of the BVI Business Companies Regulations 2012 states that "...a company is affiliated with another company if it is in the same group as the other company".
Consideration
×
For these purposes, but without limiting the generality of the test:
Consideration may include consideration by way of interest;
The provision of credit may be by way of instalments for which a separate charge is made and disclosed to the customer in connection with:
The supply of goods by hire purchase,
Leasing other than any lease granting an exclusive right to occupy land, or
Conditional sale or credit sale.
Where an advance or credit repayable by a customer to a person is assigned to another person, that other person is deemed to be providing the credit facility for the purposes of the test.
Investment Management
×
Category 3 of Schedule 3 of the Securities Investment Business Act 2010 reads as follows:
"Investment Management
Sub-category A: Managing Segregated Portfolios (excluding Mutual funds)
Sub-category B: Managing Mutual Funds
Sub-category C: Managing Pension Schemes
Sub-category D: Managing Insurance Products
Sub-category E: Managing Other Types of Investment"
Group
×
Group, in relation to a company (the "first company"), means the first company and any other company that is:
A parent of the first company
A subsidiary of the first company
A subsidiary of a parent of the first company
A parent of a subsidiary of the first company
For these purposes, "parent" in relation to the first company, means another company that whether acting alone of under an agreement with one or more persons,
Holds, whether legally or equitably, a majority of the issued shares of the first company
Has the power, directly or indirectly, to exercise, or control the exercise of, a majority of the voting rights in the first company,
Has the right to appoint or remove the majority of the directors of the first company
Has the right to exercise a dominant influence over the management and control of the first company pursuant to a provision in the constitutional documents of the first company, or
Is a parent of a parent of the first company;
And "subsidiary", in relation to the first company, means a company of which the first company is a parent.
Insurance Business
×
Insurance business is defined in section 3(1) of the Insurance Act, 2008 as "the business of undertaking liability under a contract of insurance to indemnify or compensate a person in respect of loss or damage, including the liability to pay damages or compensation contingent upon the happening of a specified event, and includes life insurance business and reinsurance business".
Ship
×
Ship has the meaning specified in section 2(1) of the Merchant Shipping Act, 2001 but does not include a fishing vessel, a pleasure vessel, or a small ship (in each case, as defined in section 2(1) of that Act).
Intellectual Property Assets
×
Intellectual property assets means any intellectual property right in intangible assets, including but not limited to copyright, patents, trade marks, brand, and technical know-how, from which identifiable income accrues to the business (such income being separately identifiable from the income generated from any tangible asset in which the right subsists). "Income" in respect of an intellectual property asset is defined as including:
Royalties;
Capital gains and other income from the sale of an intellectual property asset;
Income from a franchise agreement; and
Income from licensing the intellectual property asset.
High Risk IP Legal Entity
×
A high risk IP legal entity is defined as a legal entity which carries on an intellectual property business and which
Acquired the intellectual property asset
From an affiliate
In consideration for funding research and development by another person situated in a country or territory other than the BVI; and
Licenses the intellectual property asset to one or more affiliates or otherwise generates income from the asset in consequence of activities (such as facilitating sale agreements) performed by foreign affiliates.
Distribution and Service Centre Business
×
Distribution and service centre business means either or both of the following (a) purchasing from foreign affiliates
1
(i) component parts or materials for goods; or (ii) goods ready for sale, and reselling such component parts, materials or goods; or (b) providing services to foreign affiliates in connection with the business outside the Islands (but does not include any activity included in any other relevant activity except holding company business).
1
Affiliate bears the same meaning as an "affiliated company" specified in regulation 2(2) of the BVI Business Companies Regulations 2012, modified so that references to a company include references to a limited partnership, and other expressions appropriate to companies shall be construed as including references to the corresponding persons, documents or organs, as the case may be, appropriate to limited partnerships. Regulation 2(2) of the BVI Business Companies Regulations 2012 states that "...a company is affiliated with another company if it is in the same group as the other company".
Headquarters Business
×
Headquarters business is the business of providing any of the following services to an entity in the same Group
1
: (a) the provision of senior management; (b) the assumption or control of material risk for activities carried out by any of those entities in the same Group; or (c) the provision of substantive advice in connection with the assumption or control of risk referred to in paragraph (b) (but does not include banking business, financing and leasing business, fund management business, intellectual property business, holding company business or insurance business).
1
Group, in relation to a company (the "first company"), means the first company and any other company that is:
A parent of the first company
A subsidiary of the first company
A subsidiary of a parent of the first company
A parent of a subsidiary of the first company
For these purposes, "parent" in relation to the first company, means another company that whether acting alone of under an agreement with one or more persons,
Holds, whether legally or equitably, a majority of the issued shares of the first company
Has the power, directly or indirectly, to exercise, or control the exercise of, a majority of the voting rights in the first company,
Has the right to appoint or remove the majority of the directors of the first company
Has the right to exercise a dominant influence over the management and control of the first company pursuant to a provision in the constitutional documents of the first company, or
Is a parent of a parent of the first company;
And "subsidiary", in relation to the first company, means a company of which the first company is a parent.
Financing and Leasing Business
×
Finance and leasing business is the business of providing credit facilities for any kind of consideration
1
(unless the Entity is doing so in connection with banking business, fund management business or insurance business).
1
For these purposes, but without limiting the generality of the test:
Consideration may include consideration by way of interest;
The provision of credit may be by way of instalments for which a separate charge is made and disclosed to the customer in connection with:
The supply of goods by hire purchase,
Leasing other than any lease granting an exclusive right to occupy land, or
Conditional sale or credit sale.
Where an advance or credit repayable by a customer to a person is assigned to another person, that other person is deemed to be providing the credit facility for the purposes of the test.
Intellectual Property Business
×
Intellectual property business is the business of holding intellectual property assets
1
? Note that this term does not apply to a business which owns intellectual property merely as an adjunct to its business.
1
Intellectual property assets means any intellectual property right in intangible assets, including but not limited to copyright, patents, trade marks, brand, and technical know-how, from which identifiable income accrues to the business (such income being separately identifiable from the income generated from any tangible asset in which the right subsists). "Income" in respect of an intellectual property asset is defined as including:
Royalties;
Capital gains and other income from the sale of an intellectual property asset;
Income from a franchise agreement; and
Income from licensing the intellectual property asset.