BVI Government Invites Specialist in FATCA

The British Virgin Islands jurisdiction has invited a specialist in the United States Foreign Accounts Tax Compliance Act (FATCA), which is now being discussed by the U.S. and BVI governments. The specialist will make special presentations to individuals affected by the US law. Financial Secretary Mr Neil Smith stated in his comments that specialist’s visit has the purpose of informing residents on their individual obligations under FATCA. He said: "What is important to note, is that FATCA gives the Internal Revenue Service (IRS) a new mechanism to collect information on US citizens that are not properly filing US income tax returns and reporting their bank accounts. The government really wants to ensure US citizens in the BVI are aware of their general US tax filing requirements."

 A few months ago, the BVI government commissioned professional services firm KPMG to carry out a study on FATCA, to highlight the persons who may be exempt from reporting under the law, and for better comprehension of obligations of individuals who are not exempt from compliance with the law.

Brian Obvi,
Offshore Analyst

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BVI Government Discusses Foreign Account Tax Compliance Act

The British Virgin Islands jurisdiction has started to discuss the Foreign Account Tax Compliance Act (FATCA) with the US Department of the Treasury. According to BVI Premier Orlando Smith, who told this to reporters on August 20, 2013, the territory is talking about the “intergovernmental agreement” with the US to comply with FATCA.

The Premier expressed the opinion that this course of action is the best for the BVI, and noted that its financial services industry complies with it.

The Foreign Account Tax Compliance Act provides that the Inland Revenue Service obtains information on accounts of US taxpayers, held abroad at foreign financial institutions. If foreign financial institutions fail to disclose information on their US clients, account ownership, and changes on the account balance, it will result in the requirement to withhold 30 percent tax on US source income.

In August, the Cayman Islands has concluded negotiations with the United States on agreements for automatic information exchange under the Foreign Account Tax Compliance Act, and Bermuda and the Bahamas have also expressed their intention to comply with FATCA.

Brian Obvi,
Offshore Analyst

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International Tax Authority Set Up in BVI to Deal with TIEAs

The International Tax Authority (ITA) has been established in the Ministry of Finance of the British Virgin Islands. The new unit, designated by Financial Secretary Neil Smith, will ensure the effective exchange of tax information under Tax Information Exchange Agreements signed between the BVI and a number of countries.

Responsibilities of the International Tax Authority include dealing with practical aspects of TIEA requests, negotiating TIEA agreements with potential partners, and developing the framework within the BVI territory for the effective exchange if information. 

ITA will perform the functions section 4(1) of the Mutual Legal Assistance (Tax Matters) Act, 2003 (MLA), which is said to be the base for the BVI international co-operation regime in tax matters. The MLA gives effect to the terms of the Agreements between the Government of the British Virgin Islands and the Governments of the USA and of the United Kingdom for the exchange of information in relation to tax matters, which were signed in 2002. According to the Ministry of Finance, the MLA will apply to any similar agreement that the British Virgin Islands enters into.

Brian Obvi,
Offshore Analyst

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Statement of Cooperation Signed by BVI FSC and US Banking Regulators

The British Virgin Islands Financial Services Commission entered into an arrangement with the US banking regulators – the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision. The purpose of the arrangement is to share supervisory information to enhance the regulation of the banking industry and to promote the functioning of banks and banking organizations in the US and in the British Virgin Islands.

Through the Statement of Cooperation, the US banking regulators and the Commission expressed their willingness to “cooperate on the basis of mutual trust and understanding in the supervision of cross-border establishments of banks and banking organizations incorporated in the United States and the British Virgin Islands”.

Talking about sharing of information, the authorities of both jurisdictions recognized that close communications between home and host supervisors “would be mutually advantageous”. It is stated in the document that “cooperation would include contact during the authorization process of a cross-border establishment, as well as its ongoing activities”.

Regulators of both jurisdictions are going to conduct meetings as often as appropriate to discuss issues concerning banking, and to make every effort to encourage continuous and informal contacts between the parties.

Brian Obvi,
Offshore Analyst

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BVI Listing in OECD Report: Statement of BVI Premier Ralph O'Neal

The report published by OECD after the G-20 summit, which classified financial centres by their progress towards the “internationally agreed tax standard”, gave rise to the sharp reaction of some countries, which were included on the “grey list” - among them Switzerland, Luxembourg and Belgium.For BVI, which was expected to pass through the international inspection, it also became somehow disappointing to get into the grey category.

This was told by BVI Premier Ralph O'Neal in the press release issued on the G20 Summit and an Organisation for Economic Co-operation and Development (OECD) Progress Report. By his words, the BVI is disappointed that the format of the listings does not recognise its long standing commitment and implementation of international standards.

Yet, the Premier said that the business in BVI will be as usual, regardless of the ranking, and said the territory would provide continuing support in promoting transparency. Ralph O'Neal said, "We are aware that the G-20 Leaders intend to develop further proposals on financial regulation and we will also be monitoring these closely ... As a co-operative member of the global community, the BVI will continue to adopt international regulatory standards of best practice as they emerge."

BVI are planning to continue negotiations with OECD countries for conclusion of Tax Information Exchange Agreements. Currently, there are three TIEAs signed by the territory with the US, the UK, and Australia. In his statement, the Premier announced that the number of TIEAs will come to ten on May 18, when it signs seven agreements with “the Nordic countries.”

Brian Obvi,
Offshore Analyst

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Premier Forecasts Long-Term Effects of US Financial Issues on BVI Economy

While the U.S. government tries to minimize the effects of large-scale financial crisis on its citizens, BVI proves to be one of the countries whose economy can also be affected by the problems in the U.S. financial system. However, by words of Hon. Ralph T. O’ Neal, Premier and Minister of Finance, the BVI has not yet been afftected because its commercial banks have not been involved to the sub-prime crisis and subsequent credit. Financial Services Commission has not reported any fallout because of the financial crisis in the U.S.

The Premier noted that BVI economy, based on tourism and financial services sectors, is highly dependent on the US and Europe. BVI tourism is more dependent sector, while financial services are dependent just to some extent, because largest part of BVI financial business comes from Asia, which is also the major market for incorporation of offshore business companies.

Ralph O'Neal said that the BVI government is concerned over the long term effects, because “given the depth of the financial crisis the BVI's financial services industry could also be affected.” He noted that the financial crisis has already resulted in the U.S. economy recession, and the recessions in the United Kingdom and Europe are very probable, followed by unemployment and inflation.

The recession can affect consumer and business confidence, spending and financing, which directly impact the economy of the BVI. Premier O'Neal also explained that “the global credit crunch could affect the Government's ability to secure overseas financing and borrowing locally could hamper private investment.”

In the beginning of this week, investors still expected larger bank turmoil, and banks continued to put aside cash. The Federal Reserve and other Central Banks of the U.S. are working on measures to make billions available to troubled banks, and solve the financial problem that continues to move ahead.

Brian Obvi,
Offshore Analyst

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BVI Financial system used by the US State Department to pay 5 million reward to anonymous offshore recipient

According to RIA news and Serbian newspaper Press, the US State Department paid $5 million as a reward to an anonymous, offshore recipient for assisting in the capture of former leader of Bosnian Serbs and the wartime Bosnian Serb president Radovan Karadzic. By the official reports, he was arrested in Belgrade on July 21 after more than 10 years on the run.

Payment number RW 20-036-008/2 was made on July 23, two days after the news of Karadzic's arrest was released, to an anonymous offshore account in the British Virgin Islands. According to Western diplomatic sources, the payment to the BVI account was made as a reward for information that allowed to catch the fugitive.

The money is said to be paid by the State Department's Rewards for Justice Program, which usually pays for information that helps prevent terrorist attacks. The Rewards for Justice Program earlier claimed that the reward had been paid for assistance in the killing of an Afghan militant leader.

The Serbian paper informed that the only such case close in time to the $5 mln payment to the unknown BVI company was the killing of Al Qaeda's main chemical and biological weapons expert Abu Khabab al Masri. However, the terrorist was killed at least four days after the reward was paid, but on the same day as Radovan Karadzic was caught, and this was confirmed by British secret agents.

Karadzic's attorney said he suspected the people who caught Karadzic three days before the official arrest could have received this reward to the BVI offshore account.

The arrest of the former Bosnian Serb leader was one of the conditions set by the European Union for Serbia's membership. Karadzic is the most prominent war crimes suspect to appear in the Hague since Serbian President Slobodan Milosevic.

Brian Obvi,
Offshore Analyst

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