The Government of the British Virgin Islands announced on 2 January 2018 that legislation for the implementation of economic substance requirements was passed on 19 December 2018. The Economic Substance (Companies and Limited Partnerships) Act 2018, which was published in the Official Gazette on 28 December, addresses the European Union’s (EU) concerns over "economic substance" and came into force from 1 January 2019. The requirements include that a legal entity that carries on a relevant activity during any financial period must comply with the economic substance requirements in relation to that activity. Relevant activities include:
Specific substance requirements apply for certain activity types, but in general, a legal entity is considered to comply with economic substance requirements if:
Where a legal entity fails to provide information or provides false information to determine if the substance requirements are met, a fine up to USD 40,000 and/or imprisonment up to two years will apply on summary conviction, which is increased to USD 75,000 and/or imprisonment up to five years for conviction on indictment.
Where a determination is made that the substance requirements are not met, a penalty of USD 5,000 up to 20,000 will be imposed (USD 50,000 for high risk IP company). If a legal entity fails to act to comply and a second determination is made, an additional penalty of USD 10,000 up to 200,000 will be imposed (USD 400,000 for high risk IP company).
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