Recent changes in Economic Substance Laws in overseas jurisdictions have begun to impact Hong Kong companies incorporated overseas in the British Virgin Islands (“BVI”), Bermuda, and the Cayman Islands.
The new amendments include requirements such as maintaining physical premises staffed sufficiently to realistically carry out the operations of the business in the location where the company is incorporated.
On 31 May 2020, the BVI International Tax Authority (the ITA) officially implemented 3 amendments to BVI’s Economic Substance Laws that came into effect on 1 January 2019.
Amendments to The Beneficial Owner Secure Search (BOSS) System Act, 2017 were enforced on 1 October 2019 Under Section 16 of Economic Substance (Companies and Limited Partnerships) Act, 2018 (the ESA). The BOSS Act sets out the laws/guidelines on the use of a secure search system that facilitates the effective and efficient storage and retrieval of beneficial owner information for all corporate and legal entities using the system. Thus, The BOSS Act is relevant to the reporting requirements under the ESA.
- Substance rule in the British Virgin Islands
- Substance rule in Bermuda
- Substance rule in the Cayman Islands
- Substance rule in Anguilla
- Substance rule in Belize
- Substance rule in Turks and Caicos Islands
- Substance rule in Seychelles
- Substance rule in Labuan
Impact for Hong Kong Companies
Companies are advised to carry out an internal review to ascertain if the entity is caught by the economic substance rules and especially on whether the entity is:
- carrying on any of the relevant activities in an affected overseas jurisdiction, and if so;
- whether the entity is considered tax resident outside of the overseas jurisdiction
If caught by the economic substance rules, carry out remedial measures such as:
- revising the corporate group’s operational and legal structure, and/or
- wind down the overseas entities, if feasible, to fall outside of the scope of the Act
Migrate your company
This process normally takes several days, depending on the destination and availability of required documents. We stand ready to assist you with your needs in relation to migrating your overseas registered company.
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