The British Virgin Islands (BVI) International Tax Authority (ITA) has issued a statement on the due diligence obligations required of financial institutions in relation to the Common Reporting Standard.
BVI financial institutions are required to set out in writing their policies and procedures to identify foreign taxpayers with financial accounts in the British Virgin Islands. These written policies and procedures have been required since 2015, following amendments to the Mutual Legal Assistance (Tax Matters) Act, 2003. The requirement was strengthened in 2018 by a further amendment to the Act.
In its May 11, 2020, statement, the ITA highlighted that these policies and procedures should include the following:
- identifying each jurisdiction in which an account holder or a controlling person is resident for income tax or corporation tax purposes for the purposes of any tax imposed by the law of the jurisdiction that is of a similar character of either of those taxes;
- applying the due diligence procedures set out in CRS; and
- ensuring that any information obtained in accordance with the Act or a record of steps taken to comply with the Act in respect of a financial account is kept for at least six years from the end of the year to which the information relates during which the steps were taken.
For those Virgin Islands Financial Institutions (VIFIs) that are considered Non-Reporting Financial Institutions (NRFIs) and are not required to report under the CRS, it is sufficient that these NRFIs outline the facts and analysis leading to the conclusion that they meet the definition of an NRFI. They should also detail the policies they follow to regularly review whether the status still applies, the ITA said.
Specific rules apply to a VIFI that is considered to be a reporting financial institution where they are trustee of a Trustee Documented Trust. They should prepare policies and procedures which apply to all TDTs. Those TDTs are not be expected to have their own written policies and procedures, the ITA said.
Further, the ITA said that VIFIs that have applied any threshold exemptions must keep an internal record of the application of the exemptions as part of the policies and procedures.
In response to COVID-19, the ITA said it would take a “pragmatic approach” in relation to these notifications. It said any VIFIs that are facing any difficulties in providing the Authority with their policies and procedures due to COVID-19 are encouraged to contact it.