The Economic Substance (Companies and Limited Partnerships) Act, 2018 (the Act) was introduced in the BVI,
effective 1 January 2019, to address the concerns of the EU Code of Conduct Group and the OECD Forum on
Harmful Tax Practices regarding economic substance.

A draft Economic Substance Code was issued by the International Tax Authority on 23 April 2019 containing Rules
and Guidance relating to the interpretation of the Act and how the International Tax Authority of BVI (ITA) will carry
out its obligations is summarized below. Through the final code is not yet published, we do not expect substantial
changes, in which case we shall update you as soon as it is circulated.

The Act introduces requirements for certain BVI entities that are carrying on one or more “relevant activities” to
have adequate economic substance in the BVI. Entities which do not carry on any “relevant activity” are not subject
to the economic substance requirements. Entities which are tax resident in a jurisdiction outside of the BVI
(provided that jurisdiction is itself not on the EU taxation “blacklist”) are also not subject to the economic substance
requirements, but still need to determine whether they carry on any “relevant activities”.

For those entities which are subject to the requirements, the extent of the economic substance required (if any)
depends on which of the relevant activities an entity conducts and the nature and scale of that relevant activity.
Entities which are only conducting the business of being a “pure equity holding entity” are subject to a much
reduced economic substance requirement.

The Act applies to BVI companies, foreign companies registered in the BVI, BVI limited partnerships with legal
personality and foreign limited partnerships registered in the BVI and which have legal personality. BVI limited
partnerships which have not elected to have legal personality are not subject to the Act.

All BVI entities which are subject to the Act need to consider the impact and report additional information to their
registered agent which, in turn, is required to report certain information to the competent authority in the BVI (via
the BOSS system).

Please contact us for further details and send us your request to receive the more details and our booklet.