Exchange of Information requests to British Virgin Islands (BVI)- CBDT Instructions
BRITISH Virgin Islands (BVI) is one of the most important jurisdictions for India from the point of Exchange of Information (EOI) relationship. Over the past few years, India has sent several EOI requests to BVI under the India-BVI Tax Information Exchange Agreement (TIEA). A lot of requests are likely to be made to the BVI in near future in view of the investigations being carried out in the Panama Papers. Even though the EOI Cell of India has been making continuous efforts to improve the efficiency and efficacy of the information exchange process with BVI, a large number of deficiencies are being observed in the EOI requests sent by field officers.
The Board informs the field about some important features of investments in BVI:
Procedure for incorporating a company in the BVI: Any person who wishes to form a registered company in BVI must do so through a licensed Registration Agent (RA). The agent is required (amongst other things) to obtain client due diligence (CDD also sometimes referred to as "know your client" or KYC) to comply with the regulations.
There are more than 100 registered agents in BVI who provide company management business services like formation of companies, providing registered agent and registered offices, providing directors or officers and nominee shareholder licenses. The Financial Service Commission of BVI grants licenses to these RA to carry out these services for BVI companies as well as for companies incorporated or registered in a jurisdiction outside the Virgin Islands. One of the most popular service providers is Portcullis Group which has operations in BVI, Singapore, Cayman Islands, Hong Kong, Mauritius etc. The concerned BVI entity of the group is Portcullis Trust Net (BVI) Limited. Another service provider is Fidelity Corporate Services. As stated above, there are more than 100 such service providers.
The RA must properly identify and know the client and the beneficial owner( s) of the new company as per the requirement of law and the conditions of the Company Management License. Therefore, before the RA proceed with a new incorporation for any first-time client, they need to receive a few documents, such as, certified copy of passport, proof of address, etc., that identify and characterize the clients. Upon receipt of the due diligence information and payment of requisite fees, RA prepares and files the Memorandum and Articles of Association and other mandatory documents required to register a BVI Business Company. The initial company formation paperwork is prepared and signed on client's behalf by the RA and there is no need for the client to sign any incorporation documents for a Business Company. In order to comply with the minimum domestic presence requirements in the BVI, RA provides a Registered Address and Registered Agent service for the client's new company.
Shareholding of BVI Companies: Companies in BVI are not required to state their authorized capital. They need to simply state the number of shares they will issue but not the monetary value of the capital. Thus, a company may issue its shares at a "market value", or at a value that its first owners deem fit, depending on the capitalization requirements of the company. Thus, a company with the same 50,000 shares may raise substantially different amounts of capital from its would-be shareholders, depending on its capitalization needs and plans of the shareholders. Consequently, there are no requirements to have any amount of paid-up capital, or to pay it in by a certain deadline.
The details of shareholders of the company are not publically available. The law in BVI only requires that the shareholder information (Register of Shareholders) must be kept on file with the Registered Agent, where it is confidential and accessible only by the members of the company. However, the law also allows for the shareholder information to be filed with the Registry of Companies as an option - if the shareholders so want.
A very important feature to keep confidentiality about shareholding is "keeping shares registered in the name of nominee and not in the name of actual owner". For example, Indian resident X having a company ABC in the BVI can make person Y and Z as the shareholders of the company ABC. Person Y and Z can either be individual or corporate entity. There are few companies who provide these types of shareholders services. Some subsidiary companies of Portcullis Trust Net (BVI) Limited which provide shareholding and directorship services are Execorp Limited, Shrecorp Limited etc. In such cases, there may an agreement/correspondence between actual owner/beneficial owner and nominee shareholders.
Directors of BVI Companies: In the BVI, Business Companies need to have a minimum of one director, either a private individual or a corporate entity, which may be resident of BVI or any other jurisdiction. If director is not a resident in BVI, the BVI authorities may not be in a position to provide information of the director. Therefore, in such situation field authorities should make separate EOI request to the country where the director is resident.
CBDT wants the field formations to understand the intricacies while making a request for information relating to a BVI company.