The British Virgin Islands has released guidance notes on the requirements of the Common Reporting Standards (CRS) as implemented in the British Virgin Islands.
This is welcome news as, until now, there has been no BVI-specific guidance and the interpretation of the CRS rules has been reliant on the general guidance provided in the CRS Implementation Handbook (issued by the Organisation for Economic Cooperation and Development). The additional guidance has provided certainty on some key points, as well as a wealth of commentary and guidance on the specific interpretation of the CRS.
The CRS was brought into force in the British Virgin Islands with the introduction of the Mutual Legal Assistance (Tax Matters) (Amendment) (No 2) Act in 2015, as subsidiary legislation to the Mutual Legal Assistance (Tax Matters) Act 2003. Under Section 22(1) of the amended act, the financial secretary is the competent authority for CRS purposes. Under Statutory Instrument 6/2016, the financial secretary designated the International Tax Authority (ITA) to perform these functions.
Key points that have been clarified include the following:
- The initial notification to the ITA – which must be made by all reporting financial institutions by April 30 2017 – and all annual reporting will be made via the BVI Financial Account Reporting System. This is the online portal that the ITA has been using to receive reporting in relation to UK Crown Dependency and Overseas Territories (UK CDOT) and the Foreign Account Tax Compliance Act.
- The list of participating jurisdictions published by the ITA is the list that financial institutions should use to determine whether an account is held by a person in a reportable jurisdiction and whether it needs to be reported to the ITA. There is no requirement for financial institutions to check whether the jurisdiction has entered into an automatic exchange relationship with the British Virgin Islands. The list of participating jurisdictions is as broad as possible, comprising all committed jurisdictions, whether they will commence exchanging information in 2017 or 2018. This should simplify the process for financial institutions as they will not need to repeat the due diligence process each time that a country completes an exchange agreement with the British Virgin Islands. The ITA will then pass on relevant information to only those reportable jurisdictions which have completed exchange agreements with the British Virgin Islands.
- As previously understood, the agreement between the British Virgin Islands and the United Kingdom for the automatic exchange of information (UK CDOT) will continue alongside CRS for 2017, but will be phased out in 2018. The guidance notes have confirmed that where there is overlap, there is no requirement for duplicate reporting. However, for reporting in 2017, some accounts will be reportable under UK CDOT, but will not yet need to be reported under CRS (eg, lower-value pre-existing individual accounts and pre-existing entity accounts, unless already identified). Similarly, certain accounts may be reportable under CRS, but not under UK CDOT – for example, those that fall below certain thresholds. When determining what should be reported in 2017, this should be the maximum information required to be reported under UK CDOT or CRS. In 2018, all reporting will be in accordance with CRS.
- Reporting requirements under the EU Savings Directive,(1) which has been repealed, will end on December 31 2016 and will be replaced with CRS, except to the extent that any obligations in relation to reporting years until that date remain unsatisfied. The last reporting year under the directive is therefore the year ending December 31 2016.
- Although the filing of nil returns is not mandatory, any reporting financial institutions with no reportable accounts must still complete the notification requirement via the BVI Financial Account Reporting System.
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