Economic Substance Law refers to new legislation introduced in the BVI which responding to the concerns and actions of worldwide unfair tax practices from EU. The new law requires certain entities that are incorporated or registered in the BVI, and which conduct one or more of a set list of nine relevant activities, to comply with local requirements and demonstrate adequate ‘economic substance’ either in or outside BVI.

Refer to the Economic Substance Act 2019 (“ESA”), only for the entities which are carrying on business falls within the relevant activities categories are required to have the substance in the BVI or demonstrate its substance in the place of its operation or management.

These entities required to satisfy Economic Substance Test (“ES Test”) which depends on the business and type of relevant activities. There are three general aspects to BVI economic substance:

1. direction and management in BVI;
   
2. adequate expenditure and employees and appropriate premises in the BVI; and
   
3. Core Income Generating Activity (CIGA) carried on in the BVI.
   
   

Generally, a BVI company which carries on the relevant activities and declares its tax residency in other jurisdictions other than the BVI, it will be required to supply the following documents to demonstrate the company is a tax resident and has the substance in that jurisdiction:

1. Letter or certificate issued by the competent authority;
   
2. An assessment to tax on your company;
   
3. A confirmation of self-assessment to tax of your company;
   
4. Tax payable demand note; and
   
5. Evidence of tax payment.