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2014.12.18 - BVI: Tougher requirements for keeping accounting records

 

In 2012, the British Virgin Islands already implemented additional provisions in relation to keeping of accounting records for the companies registered in the British Virgin Islands. Please see more information at http://ioserv.com/en/theor/publications/?id=12)

In 2014, the above provisions were extended and updated. On 16th September 2014 the Mutual Legal Assistance (Tax Matters) (Amendment) Act 2014 was adopted in the British Virgin Islands, which, together with the above mentioned 2012 provision supplemented the principal Act being the Mutual Legal Assistance (Tax Matters) Act 2003.

The Mutual Legal Assistance (Tax Matters) (Amendment) Act 2014 clarifies the term “records and underlying documentation” by defining it as follows:

  • all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place
  • all sales and purchases of goods by the company; and
  • the assets and liabilities of the company.

An additional important aspect of the current amendments is much stricter penalties for officials of the British Virgin Islands company for violations committed in relation to the above provision for record keeping requirements.

The Mutual Legal Assistance Amendment (Tax Matters) (Amendment) Act 2014 provides that:
"A person who, without lawful and reasonable excuse, fails to comply with a request for information made by the competent authority, commits an offence and is liable, on conviction of indictment, to a fine not exceeding USD 100,000 or to imprisonment for a term not exceeding 5 years, or both."

This means that if the BVI company receives a formal request (Notice to Produce Information) from the competent institution (BVI International Tax Authority) for specific business documentation of any transaction or transactions of the company, and the company fails to provide such documentation within the period specified in this notice, which is usually ten business days, the above sanctions may be applied to the company’s officials.

INTERNATIONAL OVERSEAS SERVICES comments:

Whilst the 2014 supplement does not introduce fundamental changes in the existing law, it increases the fine amount by 20 times and sets the period of possible imprisonment for officials for failure to comply with the record keeping requirements.

Given the level of fines involved, the risk resulting from the absence of accounting records is too high to take to risk the failure of this provision.

It is also important to note that, in accordance with the Mutual Legal Assistance (Tax Matters) Act 2003 as amended in 2012 and 2014, the British Virgin Island company’s accounting records must be kept for 5 years after particular business transactions are completed.

It is therefore certain that the British Virgin Island registration agents as well as other Trust and Company Services Providers working in the field of registration and maintenance of British Virgin Island companies will implement tougher provisions to ensure that accounting records are properly kept by the relevant British Virgin Island companies.

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