On April 3 2002, it was announced that the government of the British Virgin Islands (BVI) has reached an agreement with the Organization of Economic Corporation and Development (OECD) concerning the OECD's initiative on Harmful Tax Competition and Tax Havens.
The BVI has formally agreed to the principle of exchange of information and transparency. As a result of this agreement the BVI will not be included on any OECD list of uncooperative jurisdictions and will not be subject to any co-ordinated framework of defensive measures by OECD countries.
The commitment to exchange of information with respect to tax will be implemented on the basis of bilateral negotiations with individual jurisdictions. As proof of this commitment it was also announced on April 3 2002 that a Tax Information Exchange Agreement (TIEA) has been entered into with the US. Legislation is now required in the BVI to implement this agreement. In line with the agreement with the OECD, the BVI has agreed with the US an effective exchange of information on request for criminal tax matters from January 1 2004 and for civil tax matters from January 1 2006.
With respect to the principle of transparency, the commitment is a general one. Information concerning beneficial ownership of all legal entities formed in the BVI and foreign legal entities carrying on business in the BVI is to be made available to BVI tax or regulatory authorities on request. Any such information that is made available to another jurisdiction pursuant to a bilaterally-negotiated TIEA would be provided on request. It should be emphasized that there will be no automatic exchange of tax information and there are safeguards against speculative 'fishing expeditions'. (Automatic exchange of tax information is being requested by the EU but is being strongly resisted by the BVI and the other British Overseas Territories.)
With respect to transparency, the BVI has undertaken to require the keeping of accounts by all legal entities formed in the BVI or having a place of business in the BVI. With respect to the filing and/or auditing of accounts for such legal entities, any requirements in this regard, including exceptions to any filing and/or auditing requirements, will be established through ad hoc discussion groups from the OECD and other committed jurisdictions to address these particular issues.
The commitment to the OECD does not require the BVI to alter its tax rates or to cease the tax exempt regime for international business companies, international limited partnerships or trusts.
Over the last 10 years the BVI has established a track record of compliance with international standards for financial services regulation. This is reflected in various pieces of legislation such as The Mutual Legal Assistance (USA) Act, 1990, The Criminal Justice (International Incorporation) Act, 1993, The Financial Services (International Corporation) Act, 2000, The Financial Services Commission Act, 2001 and the gateway provisions in various regulatory statutes.
Through its agreement with the OECD, the BVI has ensured that it will be able to participate fully on an equal basis in the global forum of OECD member countries and committed non-OECD jurisdictions, on the establishment of internationally-accepted standards for the implementation of agreed principles for the exchange of information and transparency. It has also been agreed that the implementation of the measures will only occur when all OECD members and non-OECD jurisdictions with which the BVI competes in the provision of financial services agree to apply the same measures themselves.
Richard A Peters