New legislative proposals aim to establish the BVI International Tax Authority (ITA) as a fully fledged independent government institution in the British Virgin Islands with its own legal personality, giving it autonomy over the performance of its functions.
The ITA was initially established within the Ministry of Finance to administer cross-border tax matters involving the British Virgin Islands. It was designated by the financial secretary as the competent authority under the Mutual Legal Assistance (Tax Matters) Act 2003 to perform these functions. Under the act, the financial secretary is designated as the competent authority. Further, under the framework of the act, the functions of the ITA include:
- negotiating tax information exchange agreements and other arrangements in relation to tax matters;
- dealing with all practical aspects of tax information exchange (eg, upon requests, automatic and spontaneous);
- continuing to develop the framework within the British Virgin Islands for the effective exchange of information; and
- ensuring that the British Virgin Islands is fully compliant with the international standards of transparency and exchange of information for tax purposes, and that the government fulfils its obligations under the tax exchange information agreements into which it has entered.
While rating the British Virgin Islands as 'largely compliant' in its Supplementary Peer Review Report, Phase 2: Legal and Regulatory Framework, the Global Forum on Transparency and Exchange of Information for Tax Purposes recommended that the British Virgin Islands should take the appropriate measures to ensure that it responds to all exchange of information requests in a timely manner and take a more tailored approach in handling these requests in circumstances which are not encountered on a routine basis and are likely to result in longer response times. Therefore, the British Virgin Islands has made a further commitment to the international standards on tax transparency and exchange of information requests and introduced The International Tax Authority Act 2017, under which the ITA will no longer operate as a department of the Ministry of Finance of the BVI Government. Instead, when the act is passed into law, the ITA will have a semi-autonomous character and be a statutory body with quasi-judicial authority. The scope of the proposed functions of the ITA, as outlined in the act, cements the British Virgin Islands' commitment to the recommendations made under the peer review.
Since 2009 these standards have evolved and new standards on automatic exchange of information have been introduced. As these standards continue to evolve and change, so too must the machinery required to cooperate on an international level. Through the passage of the act, the BVI government seeks to ensure that such cooperation is handled in the most efficient way and that the ITA is adequately staffed to do so. In order to better achieve these standards, it was determined that the ITA would be best served by being a statutory body, removed from the main day-to-day government operations and systems.
Some of the key features that the act is expected to introduce include:
- the establishment of the ITA as a body corporate, setting out the functions of the ITA and seeking to equip it in order to ensure that the British Virgin Islands is better able to adhere and respond efficiently to international standards in relation to cross-border tax matters;
- the implementation of a board of directors to govern the affairs of the ITA. The board will be made up of five members:
- the financial secretary (who will act as chair);
- the attorney general;
- the managing director of the BVI Financial Services Commission (FSC);
- the director of the ITA; and
- the director of the Financial Investigation Agency (FIA);
- the ability of the ITA to issue guidelines in relation to its functions after consulting with relevant agencies (any such guidelines must be available for inspection by all relevant persons, entities and legal or other persons);
- the facilitation of the secondment of public officers from the FSC, the FIA or any department of the government in general, and the provision of the framework and reporting obligations in relation to such secondments;
- the provision of immunity to the ITA and its officers from suit in relation to the performance of their functions, duties and powers under the act and protection of persons who provide information to the ITA from criminal or civil liability; and
- provisions for the confidentiality of any information that any person obtains as a result of his or her connection with the ITA.
From an administrative perspective, the act:
- requires the director of the ITA to prepare and submit an annual report to the board by June 30 each year, which should detail the work of the ITA for the previous year;
- allows the ITA to collect fees in relation to filings made under the Foreign Account Tax Compliance Act and the Common Reporting Standards, and to impose administrative penalties. Such fees and penalties will then form part of the operational funds and resources of the ITA and the ITA must prepare an annual budget that must be submitted to cabinet for approval;
- empowers the ITA to borrow money under certain conditions; and
- requires that the ITA keep proper accounts and other records of account, and prepare a statement of accounts for each financial year.
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