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- BRITISH VIRGIN ISLANDS
OTHER INTERNATIONAL AGREEMENTS
- TAX INFORMATION EXCHANGE
AGREEMENTS
The
British Virgin Islands have double tax treaties
with the UK, Japan and Switzerland; in the
last two cases, this means just that the UK's
treaty with the countries concerned has been
extended to the BVI. Prior to the introduction
of the BVIBC Act, the benefit of these Double
Tax Treaties applied only to BVI resident
companies, which had to take the form of Companies
Act (Cap. 285) Companies (see Forms
of Company). Since the overwhelming majority
of BVI companies took the form of the International
Business Company, the International Limited
Partnership or the Trust, all of which were
exempt from taxes and fell outside the ambit
of the Double Tax Treaties, offshore investors
were not in a position to use the BVI Double
Tax Treaties.
Since
the OECD recommenced its offshore tax transparency
crusade with the publication of its black/grey/white
list, the BVI has entered into numerous Tax
and Information Exchange Agreements to avoid
being branded as an uncooperative tax haven
(see below). In addition, an amendment to
the tax agreement with the UK was signed in
2008, and double tax agreements with seven
Nordic countries were signed in 2009.
The
jurisdiction was placed on the OECD's 'white
list' in July, 2009.
British
Virgin Islands Other International Agreements
The
British Virgin Islands has a Mutual Legal
Assistance Treaty with the USA. Following
pressure in early 2000 from the OECD and the
Financial Stability Forum of the G7, the BVI
announced in June that it would include within
the parameters of the treaty access to information
relating to criminal tax investigations and
that it would eliminate the requirement for
dual criminality. This would be accompanied
by the introduction of Compulsory Powers Legislation
to provide for access to information within
the BVI.
In
April, 2002, the British Virgin Islands Government
announced that an agreement had been reached
with the OECD without compromising the BVI's
principle of 'even keel' across all nations.
Robert
Mathavious, Managing Director of the BVI Financial
Services Commission, commented: "We are
pleased that an agreement with the OECD can
be reached without compromising our established
views. We are confident that working with
the OECD will enable us to retain our position
as a leading financial centre. We are pleased
to be accepted, and invited to participate,
as a full and equal partner in the OECD forum
of activities."
At
the same time, the BVI announced the signing
of a new Tax Information Exchange Agreement
with the United States of America.
Speaking
after the signing of the agreement, BVI Governor,
then Frank Savage, observed that allowing
the US Internal Revenue Service to pierce
banking secrecy in cases of tax evasion and
money laundering, clearly demonstrated that
the country had been working "to increase
the transparency of our systems and reduce
the potential for abuse."
Then
US Treasury Secretary, Paul O'Neill said that
the Bush administration welcomed the agreement
with the BVI, explaining that: "We have
an obligation to enforce our tax laws because
failing to do so undermines the confidence
of honest taxpayers of our system. One of
the keys to enforcement of our tax laws is
access to needed information."
In
2003 the BVI set up a Financial Investigation
Agency. This agency functions as a specialist
investigative law enforcement arm of government.
Its primary focus is to investigate the BVI
financial services industry and support the
BVI mutual legal assistant regimes.
The
Agency was officially launched in 2004. Highlighting
the agency’s launch as an example of
the territory’s dedication to upholding
international initiatives to combat financial
crime, then Chief Minister Orlando Smith commented:
“This commitment is the foundation of
our entire financial industry and, I can assure
you, it will always be a top priority for
this Government”.
The
FIA took over the role formerly carried out
by the Royal Virgin Islands Police Force.
In
January, 2006, a prospective Tax Information
Exchange Agreement (TIEA) between Australia
and the British Virgin Islands was reportedly
derailed at the last minute because the Caribbean
jurisdiction was holding out for special concessions
from Canberra as an inducement to sign the
agreement.
In
July 2006, Chief Minister Orlando Smith revealed
that the territory's government was considering
its future participation in the Caribbean
Single Market Economy (CSME).
Although
the BVI is not taking part in the single market
process, Dr Smith stated that the government
will continue to examine the pros and cons
of participation, particularly from the trade
angle.
In
August 2007, it emerged that the the British
Virgin Islands Financial Services Commission
and the Jersey Financial Services Commission
had signed a memorandum of understanding designed
to further co-operation between the two regulatory
bodies.
The
MoU establishes a formal basis for co-operation,
including the exchange of information and
investigative assistance. Such collaboration
should help to protect investors and depositors
and to promote the integrity of financial
services markets in Jersey and the British
Virgin Islands.
John
Harris, Director General of the Jersey FSC,
said: “I am delighted that we have been
able to conclude formal arrangements for sharing
regulatory information with the British Virgin
Islands Financial Services Commission. A number
of finance industry firms have a presence
in both jurisdictions and this Memorandum
of Understanding will ensure that where regulatory
information needs to be exchanged it can be
done in a rapid and efficient manner.”
Robert
Mathavious, Managing Director and Chief Executive
Officer of the BVI FSC, added: “As leading
international finance centres, Jersey and
the BVI have cooperated formally and informally
on regulatory matters over a number of years.
I am delighted that this Memorandum of Understanding
will enable us to work more closely together
to the benefit of both of our regulatory regimes.
For the BVI FSC, the Memorandum is a further
sign of our commitment towards effective international
cooperation that builds our capacity as a
world-class jurisdiction.
He
added: “The business communities in
the BVI and Jersey already work closely together
in many ways. The Memorandum of Understanding
will provide them with further assurance of
being able to rely on high quality regulation
in both jurisdictions.”
In
May, 2010, the Australian government announced
that agreements for the allocation of taxing
rights with the Isle of Man, Jersey and the
British Virgin Islands had come into force.
These
so-called Additional Benefits Agreements (ABAs)
help to prevent double taxation by allocating
the taxing rights over certain income of pensioners,
students and government employees who are
resident of Australia, the Isle of Man, Jersey
or the British Virgin Islands.
The
ABAs also provide for a mechanism to deal
with disputes arising from transfer pricing
adjustments.
The
ABA with the Isle of Man entered into force
on March 18, 2010; the ABAs with the British
Virgin Islands and Jersey entered into force
on April 12, 2010 and April 15, 2010 respectively.
“These
arrangements are part of the new taxation
and financial relationship between Australia
and these countries,” Assistant Treasurer,
Senator Nick Sherry, said on May 21.
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TIEAs
In
October 2008 Australian Assistant Treasurer
Chris Bowen and the Premier of the BVI Ralph
O’Neal announced the signing of a Tax
Information Exchange Agreement between Australia
and the BVI.
The
TIEA provides for full exchange of information
on request in both criminal and civil tax
matters and builds upon legislation in both
jurisdictions, which already provides for
mutual legal assistance in criminal matters.
Under
the terms of the TIEA, Australia and the BVI
have agreed not to apply prejudicial or restrictive
measures based on harmful tax practices to
residents or nationals while the TIEA is in
force and effective. Further, Australia will
remove any governmental references to the
BVI as a ‘tax haven’ and will
list the BVI as an ‘information exchange
country’ in the Taxation Administration
Regulations 1976. This will provide residents
of the BVI with access to reduced withholding
tax rates on distributions of certain income
they may receive from Australian managed investment
trusts.
In
addition to the TIEA, Australia and the BVI
have signed an agreement for the allocation
of taxing rights with respect to certain income
of individuals, which will provide benefits
to Australian and BVI residents. Australia
and the BVI have also agreed to enter into
discussions, when appropriate, to foster further
co-operation in areas of mutual interest.
In
response to the signing of the TIEA, Mr Bowen
said:
“The
TIEA between Australia and the BVI demonstrates
both jurisdictions’ commitment to international
co-operation and effective exchange of information.
The BVI’s co-operation in fostering
these international standards of transparency
and exchange of information enhances its reputation
as a globally integrated and responsible financial
centre.”
“The
TIEA also complements the strong commitment
of the governments of Australia and the BVI
to international standards on anti-money laundering
and counter-terrorism financing, as set by
the Financial Action Task Force. The Australian
government particularly welcomes the BVI’s
admission as a full member to the International
Organisation of Securities Commissions, where
it joins more than 100 jurisdictions with
recognised high standards of regulation and
compliance.”
Mr
O’Neal said:
"In
addition to the TIEA, we have also negotiated
a further package of measures that will bring
benefits to the BVI, including technical assistance,
non-discriminatory tax treatment and an agreement
covering the allocation of taxing rights for
students and government employees. The BVI
looks forward to an ongoing cooperative relationship
with Australia."
Residents of ‘information exchange countries’
are subject to withholding tax at the following
rates: 22.5% for fund payments made between
1 July 2008 and 30 June 2009; 15% (final)
for fund payments made between 1 July 2009
and 30 June 2010; and 7.5% (final) for fund
payments made from 1 July 2010.
For
the 2008-09 income year, as an interim measure,
investors resident in information exchange
countries are eligible to claim a deduction
for expenses relating to fund payments. The
net amount will be subject to tax at 22.5%.
Residents of other countries are subject to
a final withholding tax of 30%.
Just
days after it sealed the arrangement with
the government of Australia, the BVI signed
a TIEA with the UK.
The
BVI/UK TIEA provides for exchange of information
on request relating to a specific criminal
or civil tax matter under investigation. This
agreement builds upon legislation in both
jurisdictions which already provides for mutual
legal assistance in criminal matters.
In
addition to the TIEA, BVI and the United Kingdom
have signed an agreement for the avoidance
of double taxation with respect to taxes on
income, which will provide benefits to BVI
and UK residents. Both Governments have also
stated that neither party has any intention
of introducing any discriminatory, prejudicial
or restrictive measures based on harmful tax
practices while the TIEA is in force.
In
response to the signing of the TIEA, O’Neal
said: “The conclusion of this TIEA demonstrates
the commitment of both the BVI and the United
Kingdom governments to international co-operation
in transparency and exchange of information.
We welcome HM Treasury’s acknowledgement
of BVI's leadership role in global tax standards
and our reputation for good governance in
financial matters. As is recognised in the
TIEA, both governments have long been active
in international efforts in the fight against
financial and other crimes. The BVI will continue
to foster and develop international best practice
in all areas of financial regulation.”
He
added: “In addition to the TIEA, we
have also successfully negotiated a declaration
of intent for non-discriminatory tax treatment
and a double taxation agreement covering taxes
on income for pensioners, students and government
employees.”
The
tax agreements between the BVI and the UK
will enter into force as soon as both governments
have completed the legislative procedures
needed to give them effect.
In
May 2009 British Virgin Islands government
announced the signing of bilateral tax information
exchange agreements with the six Nordic countries,
which include the Faroe Islands, Finland,
Greenland, Iceland, Norway and Sweden at the
Icelandic Embassy in Copenhagen, Denmark,
on May 18.
The
agreements were signed by BVI Minister of
Health and Social Development Dancia Penn
and senior officials from the Nordic group.
The OECD model agreements will provide for
the exchange of information in tax matters
in both civil tax matters and where there
is concrete proof of the perpetration of a
tax crime.
At
the ceremony Penn also concluded agreements
for the avoidance of double taxation with
the Nordic group on behalf of the British
Virgin Islands.
In
June 2009 BVI leader Ralph O’Neal announced
the conclusion of a Tax Information Exchange
Agreement with France. The signing of the
agreement brings the British Virgin Island’s
tally of such agreements to eleven, one short
of being deemed ‘fully-compliant’
with the OECD’s principles of transparency
and information exchange.
The
agreement will provide the respective countries’
tax authorities with information on tax matters
upon request in cases where there is sufficient
concrete evidence of the perpetration of a
tax crime. It was signed by O’Neal and
French Budget Minister Eric Woerth, who commented
that the signing of the agreement was “further
evidence of the British Virgin Islands’
willingness to implement the OECD principles
of transparency and information exchange,”
adding that it would have “a favourable
impact on the British Virgin Islands in relation
to the application of specific French tax
provisions, based on an effective exchange
of information criterion.”
Speaking
at a press conference before the signing O’Neal
commented on the BVI's intention to be removed
from the OECD’s grey list:
“Our
12th TIEA is in the very near future. Although
that would reach the number suggested by the
OECD and the G-20, we do not intend to stop
there; we intend to continue to negotiate
with other countries like Germany, Austria,
Brazil, Mexico, Argentina, Canada and as many
countries as we can make contact with and
are willing to negotiate with the [British
Virgin Islands].”
In
August, 2009, the BVI signed its 12th Tax
Information Exchange Agreement (TIEA) after
concluding an agreement with New Zealand.
The
signing, which took place on August 13, meant
that the BVI was placed on the “white
list” of those countries which have
“substantially implemented” the
internationally agreed tax standard as set
by the Organization for Economic Cooperation
and Development (OECD).
In
November, 2009,
British Virgin Islands Premier, Ralph O’Neal
announced that, in line with the jurisdiction’s
commitment to acting as a responsible financial
services centre, he would travel to the Netherlands
to sign the islands’ thirteenth tax
information exchange agreement on Friday,
September 11.
The
agreement marked a significant milestone for
the territory, O’Neal noted, observing
that it illustrated the jurisdiction's continued
commitment to ensuring transparency in the
operation of the financial services sector
and to the principles of good governance,
despite surpassing the twelve TIEA quota set
by the G20.
In
December, 2009, the BVI signed texts with
Ireland and China. The
agreements were signed by Premier and Minister
of Finance, Ralph O’Neal, Ireland’s
Ambassador to the United Kingdom, Bobby McDonagh,
and Chinese Deputy Commissioner of the State
Administration of Taxation, Qian Guanlin.
The two agreements took the territory's tally
of such agreements to 17.
A
TIEA with Germany was signed on 5 October,
2010. In a joint declaration, the BVI and
Germany stated that the agreement represents
a milestone in relations between the two governments,
and that both are committed to examining other
areas of mutual co-operation and benefit.
One
day later, the BVI and Portugal signed a TIEA
in London. Speaking at the signing ceremony,
signatory for the BVI, Deputy Premier and
Minister of Health and Social Development,
Dancia Penn stated: “The government
of the British Virgin Islands is proud of
its record of positive engagement in international
initiatives and our reputation as a responsible
finance centre with the highest standards
of regulation. We very much welcome Portugal’s
recognition of the BVI government’s
reputation as a constructive and cooperative
member of the international community. We
are convinced that this TIEA will mark a new
era in relations between the BVI and Portugal.”
In
February, 2011, the Indian High Commissioner
of India and BVI's Deputy Premier signed a
Tax Information Exchange Agreement. A joint
declaration was signed as part of he TIEA.
In it, the Governments of BVI and the Republic
of India state that both countries are active,
constructive and cooperative members of the
international community with globally integrated
and responsible finance centres. It further
states that: "This Agreement represents
a milestone in relations between the two Governments
and both are committed to examine other areas
of mutual co-operation and benefit, including
a double taxation agreement."
The
agreement was ratified by the BVI government
in September, 2011, along with agreements
with Aruba and the Czech Republic.
In
June, 2011, the BVI and Czech Republic signed
a TIEA which, according to both governments,
represented a milestone in bilateral relations.
The
governments of both countries issued a joint
statement, which said: “The Czech Republic
and BVI have long been active in international
efforts in the fight against financial crimes
and each share a common commitment to develop
and comply with international standards on
money laundering, terrorist financing and
financial regulation. The Czech Republic recognises
the BVI government's reputation as a constructive
and co-operative member of the international
community with a globally integrated and responsible
finance centre.”
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