The BVI International Tax Authority (the "ITA") has announced that, with effect from March 2020, it is accepting electronic filings for Country-by-Country Reporting ("CbCR") in accordance with Section 38 of the Mutual Legal Assistance Tax Matters Act, 2003 (the "Act").
The Mutual Legal Assistance Tax Matters (Amendment) Act 2018 (the "Amendment Act") introduced CbCR in the BVI, essentially implementing, under the Act, the model legislation published pursuant to the OECD's Base Erosion and Profit Shifting Action 13 Report (Transfer Pricing Documentation and Country by Country Reporting) (the "OECD Report").
Pursuant to the OECD Report and the Amendment Act, qualifying multinational enterprises ("MNE") are required to report certain financial information annually for each tax jurisdiction in which the MNE operates in order to promote greater transparency for tax authorities in participating jurisdictions by making reliable information for high-level transfer pricing risk assessments available.
Accordingly, the ITA will automatically exchange country-by-country reports ("CbC Reports") as filed by MNEs in the BVI with its counterpart tax authorities in other participating jurisdictions.
Any information reported pursuant to the Act will be subject to confidentiality restrictions, which must meet the requirements of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, to which the United Kingdom is a party and under which the BVI, by extension, is a participating jurisdiction.
Further to the Amendment Act, any 'Constituent Entity' (for example, a business unit that is included in the consolidated financial statements) of an MNE Group, which is resident for tax purposes in the BVI, will have registration and potential reporting obligations in the BVI.
For the purposes of the Act, an 'MNE Group' is a group that, with respect to any fiscal year, includes:
(a) Two or more enterprises which are tax resident in different jurisdictions; or
(b) An enterprise that is resident for tax purposes in one jurisdiction and is subject to tax through a permanent establishment in another jurisdiction and, in either case, has a total consolidated group revenue of equal to or more than €750 million for its preceding fiscal year.
Each Constituent Entity of an MNE Group that is resident for tax purposes in the BVI must be registered as such with the ITA and, if it is the 'Ultimate Parent Entity' or 'Surrogate Parent Entity' of the relevant MNE Group (i.e. its 'Reporting Entity'), it will also have reporting requirements in the BVI.
Broadly, the Ultimate Parent Entity of an MNE Group is the entity within that MNE Group which owns, directly or indirectly, a sufficient interest in one or more Constituent Entities of the MNE Group such that it is required to prepare consolidated financial statements for the group (or would be required to do so if it were listed on a public stock exchange in its jurisdiction of tax residence). A Surrogate Parent Entity is a Constituent Entity that, subject to certain conditions, has been appointed by the MNE Group as the sole substitute for its Ultimate Parent Entity for CbCR purposes.
Where more than one BVI-based Constituent Entity is a part of the same MNE Group, each such Constituent Entity is required to register individually with the ITA and must also identify both the name and tax residence of the Reporting Entity for its MNE Group.
Registration and Reporting Deadlines
Any Constituent Entity of an MNE Group that is resident for tax purposes in the BVI must register with the ITA no later than the last day of the reporting fiscal year of the relevant MNE Group.
A Constituent Entity of any MNE Group which fails to register with the ITA within the applicable timeframe will be liable on conviction to a fine not exceeding US$100,000.
CbC Reports must be filed within 12 months after the last day of the reporting fiscal year of the relevant MNE Group.
BVI Financial Accounting Reporting System
CbC Reports will need to be filed with the ITA through its electronic portal, the BVI Financial Account Reporting System ("BVIFARS"), which has been updated, as of March 2020, to accommodate CbCR. The ITA will not accept CbR Reports by email.
Constituent Entities that have already registered with the ITA do not need to re-register for the updated BVIFARS. Each relevant entity's registration confirmation and BVIFARS account number will be sent by the ITA to the responsible person identified in the relevant registration documents as submitted to the ITA.
The ITA has confirmed it will issue a further update in order to inform Reporting Entities of their commencement date for CbCR along with any further instructions required in light of recent updates made to BVIFARS.
Extended FATCA / CRS Enrolment and Filing Deadlines
On 20 April 2020, the ITA announced the extension of enrolment and applicable filing deadlines for FATCA to 31 July 2020 and to 31 August 2020, respectively.
The ITA has also extended the enrolment and filing deadlines for CRS to 30 June 2020 and 31 July 2020, respectively.
Further to its 18 March 2020 Press Release (announcing the activation of its business continuity plan for COVID-19), the ITA has indicated that further adjustments to FATCA / CRS enrolment and filing deadlines may be considered, on a case-by-case basis where, for example, a Financial Institution is in a position where it cannot meet an applicable extended enrolment or filing deadline.
Financial Institutions in such a position are advised to contact the ITA by email at email@example.com in order to request an extension, detailing:
(a) The name of the relevant affected jurisdiction(s);
(b) The particular reason(s) why any required filing(s) are affected; and
(c) Why an extension is being requested.
The ITA has acknowledged receipt of a number of more general queries regarding BVIFARS.
If contacting the ITA directly, Financial Institutions who have encountered issues with BVIFARS are advised to include the words 'BVIFARs Filing Concern' in the subject of their query and provide screenshots illustrating the relevant issue(s), along with a full explanation of the issue(s) encountered so that these may be adequately and appropriately addressed by the ITA.
The ITA has confirmed that where a required filing (and applicable deadline) is affected by issues with BVIFARS, an affected Financial Institution will not be penalised for a late filing.
Originally published May 5, 2020.
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