Since the Global Forum on Taxation introduced its model agreement on the exchange of information on tax matters in 2002, the world's leading Offshore Financial Centres ("OFCs") have embraced this mechanism to allow a degree of transparency and access to information.

In 2003 the British Virgin Islands Legislature passed the Mutual Legal Assistance (Tax Matters) Act ("the Act"). The Act came into force on 1 January 2004 and was amended in 2005 to give effect to the European Union Directive on Taxation of Savings Income in the form of Interest Payments.

Following the example of the US Agreement, and in accordance with the intentions and provisions of the Act, the BVI has concluded a further 21 Tax Information Exchange Agreements ("TIEAs").

Although the leading OFCs have demonstrated a willingness to co-operate in this way in the fight against tax evasion, in practice the TIEAs have not been all that widely used. This fact seems to reflect that: 1. the exchange of information is not automatic and requires the requesting state to make a case as to why the information is required; and 2. in many cases the sort of information that a requesting state would want to collect is not actually held in the OFCs.

Although based on the standard form agreement, each TIEA entered into by the BVI Government is negotiated by a team comprising of individuals from the BVI International Finance Centre, the Ministry of Finance, the Inland Revenue Department and the Attorney General's office. Once signed, the TIEA must pass through the BVI's standard legislative process, which may take a year or two to complete, but is unpredictable.

The jurisdictions with which the BVI has TIEAs currently in force are: Australia, China, Denmark, Finland, France, Ireland, Norway, Sweden, UK and USA. The BVI has also signed agreements with Aruba, Curacao, Czech Republic, Faroe Islands, Germany, Greenland, Iceland, India, Netherlands, New Zealand, Portugal and St. Martin.

The parties to a TIEA will each designate a Competent Authority to be the point of first reference for any request. In BVI it is the Financial Secretary at the Ministry of Finance. The authority to respond to requests, however may, and almost invariably is, delegated to the Commissioner for the Inland Revenue.

Competant Authorities

By the terms of the TIEA, the contracting parties must ensure that their competent authorities can obtain and provide:

  1. information held by banks, other financial institutions, and any other person, including nominees and trustees acting in an agency or fiduciary capacity;
  2. information regarding the legal and beneficial ownership of companies, partnerships, trusts and other persons, including ownership information on all persons within an ownership chain.

Requests may also be made under the TIEA regime for officials from one contracting party to visit the territory of the other in order to examine individuals and/or review records.

A request is made from one competent authority to another and the requesting authority is required to provide the following information when making the request:

  1. the identity of the person under examination or investigation;
  2. the period for which the information is requested;
  3. the nature and type of the information requested;
  4. the tax purpose(s) for which the information is sought;
  5. reasonable grounds for believing that the information requested is present in the territory of the requested party and may be relevant to the tax purpose of the request;
  6. the name and address of any person believed to be in possession or control of the information requested;
  7. a declaration that the request confirms to the law and administrative practice of the requesting party and would be obtainable by the requesting party under its laws; and,
  8. a statement that the requesting party has pursued all means available in its own territory to obtain the information.

Upon receipt, the requested party has 60 days (or a "reasonable period" depending on the particular TIEA) within which to notify the requesting party of any deficiencies it finds in the request.

Decline Assistance

The BVI as a requested party may decline to assist in certain circumstances. These include: where the request is not made in conformity with the TIEA; or the requesting party has not pursued all means reasonably available to it within its own territory; or the information requested would not be available to the requesting party under its own laws. There are also exceptions where disclosure would be contrary to BVI public policy, where the information is subject to legal privilege or, if assisting would disclose any trade secret or process.

The standard regime in BVI provides for a 90 day period within which the request is to be granted or denied, and if denied for reasons to be given. If investigations aimed at uncovering the requested information are incomplete, the BVI Competent Authority will inform the requesting party.

If the BVI Competent Authority deems a request to be valid and one to which it will respond, they may issue notices to any individuals or other BVI authorities requiring them to provide information that is responsive to the request. Failure to comply with such a notice is an offence and the offender may be liable, upon summary conviction, to a fine of up to US$ 5,000 or imprisonment for up to two years, or both. Search warrants are also available as a means of enforcement, by an application to the BVI Magistrate.

Any information provided may only be disclosed to those officially concerned with the administration and enforcement of the relevant tax matters. The information cannot thereafter be disclosed to any other person or entity without the consent of the competent authority that provided it, except that it may be disclosed for the purpose of court proceedings related to the tax matters covered by the agreement.

There is little published information available on the number of requests made under TIEAs. For BVI it appears that a number of requests have been made but that in many cases the information requested has not been available because it is not information that BVI companies are required to keep with their registered agent (or otherwise) within the jurisdiction. Even jurisdictions with extensive banking industries, such as Jersey, do not appear to receive significantly more requests. It remains to be seen whether the international community will seek to move to an automatic and multilateral approach to the disclosure of tax information. For the time being at least, it does not appear that the TIEA regime has so far created a free-flow of information from the OFCs.

As originally appeared in Resolution, Offshore – Winter 2011/12

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