British Virgin Islands: Double Tax Treaties
Tax Information Exchange Agreements
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.”