Record keeping in the BVI - Amendment to the Mutual Legal Assistance Tax Matters Act 2003
In our News Bulletin of 10th December 2012 we reported on changes to BVI record keeping obligations applicable to all registered companies and limited partnerships. These changes came into force in November that year following amendment to the Mutual Legal Assistance (Tax Matters) Act 2003 (MLATM) and the 2006 Partnership Act.
In general terms, the obligation requires all BVI registered companies and limited partnerships to keep and maintain at the office of the registered agent, or elsewhere outside the BVI, the records and underlying documentation of the company. The obligation is in addition to the requirement to keep and maintain records under the BVI Business Companies Act 2004.
Earlier this month the BVI legislative assembly passed further amendments to MLATM and the Partnership Act.
The amendments to the MLA are intended to widen the scope of the exchange of information and secondly to clarify the record keeping obligations for BVI companies.
Under the original provisions of the MLATM, exchange of information could be initiated upon request, but the amendment now permits the automatic and spontaneous exchange of information. As a result, the amendment facilitates the implementation of the FATCA agreements with the US and UK.
The second amendment to the MLATM describes in greater detail what documents are necessary as the ‘records and underlying documentation’ required ‘ to show and explain’ the transactions of the company to enable the financial position of the company to be determined with reasonable accuracy. The amendment specifies that the documentation required includes accounts that provide details of:
1. all sums received and expended by the company;
2. what those receipts and payments relate to;
3. all sales and purchases by the company; and
4. the company’s assets and liabilities.
An amendment in the same terms has also been made to the Partnership Act 2006.
With the extension of the Convention on the Mutual Administrative Assistance on Tax Matters (the Convention) to cover BVI and UK relations, there are now over 60 agreements in place for the exchange of information between the BVI and its partners.
To enable an automatic exchange of information to take place the BVI and its partner must have in place a bi-lateral Competent Authority Agreement ( ‘CAA’) which is the preferred option of the BVI authorities. However, the Convention proposes the execution of a multi-lateral CAA which would compel all the signatories of such an agreement, automatically to exchange information with the other signatories. We understand that, not unreasonably in our view, the BVI authorities wish to maintain control over with whom they exchange information and are reluctant to join such an agreement.