The Legislation
The amendments to the British Virgin Islands (“BVI”) Business Companies Act (the “BC Act”) and BVI Business Companies Regulations (the “Regulations”) were published by the BVI government and entered into force on 1 January 2023.In this article we analyze a major change, which is relevant to the accounting requisite of BVI International Business Companies, the introduction of Article 98(a) for the preparation and submission of an Financial Annual Return. The official Financial Annual Return form was published in the Gazette on 2 March 2023.
What are the existing obligations?
A BVI company is currently required to keep records and documents that enable the financial position of the company to be determined with reasonable accuracy. When the records are kept at a place other than the office of the company´s registered agent, the company shall provide the registered agent with a written record of the physical address of the place at which the records and underlying documentation are kept and the name of the person who maintains and controls the company´s records.
What is the new requirement?
With effect from 1 January 2023, there is a further requirement for a BVI company to prepare and file with its registered agent an “annual return” containing certain prescribed financial information.
Where to obtain the Financial Annual Return Form (the “FAR”)?
For a copy of the official form please click here.
To whom the company shall send the FAR to?
All BVI companies must submit its FAR to its registered agent.
Will the FAR be publicly available?
No. The FAR will not be filed with the Registrar or be publicly available. The FAR is only filed privately with the registered agent of the company. Registered agents will have to notify the Registrar if a company does not file its FAR, no later than 30 days after the FAR was due.
When must the FAR be led?
The FAR is due for financial periods starting on 1 January 2023 or later. The FAR must be filed within 9 months after the end of the company’s financial/fiscal year to which the annual return relates. The default first period is 31st December 2023; but it is permitted for a company to use a different financial year.
For example:
-
- A company with a financial year from 1st January 2023 to 31st December 2023 has until 31st September 2024 to file its first financial annual return.
- A company with a financial year from 1st June 2023 to 31st May 2024 has until 28th February 2025 to file its first financial annual return.
The FAR must be audited?
No. There is no requirement that the financial information included in an annual return be audited or certified by a Public Accountant.
What accounting principles and currency must be used?
There are no prescribed accounting policies or principles that need to be followed. Any currency may be used for the FAR.
Which companies are exempt?
The requirement to file an annual financial does not apply to:
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- Public companies whose shares are listed on a recognized stock exchange,
- A company that is regulated under BVI financial services legislation and already provides financial statements to the BVI Financial Services Commission in accordance with the requirements of that financial services legislation, and
- A company that already files its annual tax return with the BVI tax authority. Companies which are in liquidation are also exempted from this requirement, provided the FAR was not already due prior to the commencement of the liquidation.
What are the penalties for a company that do not file the FAR?
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- For the first month or part thereof after the ‑ling of the FAR was due, the
- penalty shall be $300;
- For each month or part thereof after the first month referred to in subparagraph (a), the penalty shall be $200, up to a maximum of $5,000.
- Where a company is liable to the maximum penalty referred to in sub-paragraph (b) and has not ‑led its annual return, the Registrar may strike the name of the company of the Register.
What do you need to do?
Keep collecting the financial records of the BVI Company, such as invoices, agreements, receipts, bank statements, etc. to be available when the time comes for the preparation and submission.
How will we assist?
We are developing the portal that will be used to submit FAR. Also, our specialized team will assist with the accounting work required and the preparation and submission of the FAR on behalf of the companies for those clients who wish us to do so. Please contact us for more information or for any you may need at bvi@morimor.com or your usual contact.
BVI companies have been required to keep financial records for many years so we envisage this new FAR will not create an issue for many of our clients, but we suggest all clients take this opportunity to consider whether their financial records are in good order and sufficiently detailed to be able to produce the required information.
Please note that the above are for reference only and do not constitute any kind of advice. Continuing its ongoing commitment to the development and maintenance of the very highest standards of economic and financial propriety, the British Virgin Islands (BVI) Government has enacted this amendment to its legislation that embraces a global initiative.
We don’t believe that this new requirement is prejudicial to the BVI’s core financial services business and will not undermine or even impact on those key features of the jurisdiction, that have led to the BVI becoming one of the world’s most successful financial centers. The FAR requirement is designed to ensure that BVI company legislation continues to comply with international standards and best practices as a leading financial center.
This publication is only for informative purpose and it does not represent our legal opinion on the subjects published here.
Author: Fanny Evans