British Virgin Islands: BVI's FATCA Implementation Continues


The implementation of the FATCA Intergovernmental agreements (IGAs) signed by the BVI with the US and the UK has taken another step forward by way of amendments to the Mutual Legal Assistance (Tax Matters) Act, 2003 (MLAT) (published in the Gazette on 16 September 2014) and the issue on 23 October 2014 of the Mutual Legal Assistance (Tax Matters) (No.4) Order, 2014 (No. 4 Order).

The effect of the No.4 Order is to apply Part I of MLAT to the US IGA and the UK IGA. Since its enactment in 2003 MLAT has developed the legislative framework for exchange of tax information under the network of Tax Information Exchange Agreements (TIEAs) signed by the BVI. Whereas exchange of information under the TIEAs is on request, automatic exchange of information under the IGAs is facilitated by a new Section 3A of MLAT which provides for the Minister to make further Orders in order to implement the IGAs by, for example, specifying the information required to be provided to the International Tax Authority and the deadlines by which the information must be provided.

The Minister is expected to make further Orders providing further details of the reporting regime in the near future.


Amendments to Record Keeping Obligations

The MLAT amendments (contained in the Mutual Legal Assistance (Tax Matters) (Amendment) Act, 2014) also provide some additional clarification as to the extent of the record keeping obligations of BVI companies. All BVI companies have been required to maintain and retain all of their "records and underlying documentation". Whereas previously MLAT stated that records and underlying documentation "included accounts" further guidance is offered by way of the following extended definition which provides that:

"Records and underlying documentation includes accounts in relation to:

  1. all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place;
  2. all sales and purchases of goods by the company; and
  3. the assets and liabilities of the company."

Corresponding amendments have been made to the Partnership Act, 1996 which applies to all BVI general and limited partnerships. While the additional guidance is welcome, the amendments do not, in our opinion, extend the record keeping obligations beyond those in the original section 5A of MLAT and section 98 of the BVI Business Companies Act, 2004 (which continues unamended).

We prepared a guide to record keeping obligations following the amendments to MLAT in 2012 which first introduced section 5A. The guide has been updated to reflect the latest changes.

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