Table of Contents - : Peer Review Report - Phase 1: Legal and Regulatory Framework - Virgin Islands (British) © Oecd 2011

PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK VIRGIN ISLANDS (BRITISH) OECD 2011
TABLE OF CONTENTS 3
Table of Contents
About the Global Forum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Information and methodology used for the peer review of the Virgin Islands . . . 9
Overview of the Virgin Islands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 42
B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 48
C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
C.2. Exchange of information mechanisms with all relevant partners . . . . . . . . 56
C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . 58
C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 60
4 TABLE OF CONTENTS
Summary of Determinations and Factors Underlying Recommendations. . . . 63
Annex 1: Jurisdictions Response to the Review Report . . . . . . . . . . . . . . . . . . 67
Annex 2: List of all Exchange-of-Information Mechanisms in Force. . . . . . . . 69
Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . . 71
About the Global Forum
The Global Forum on Transparency and Exchange of Information for Tax
Purposes is the multilateral framework within which work in the area of tax
transparency and exchange of information is carried out by over 100 jurisdic-
tions, which participate in the Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of
the implementation of the international standards of transparency and exchange
of information for tax purposes. These standards are primarily reflected in the
2002 OECD Model Agreement on Exchange of Information on Tax Matters
and its commentary, and in Article 26 of the OECD Model Tax Convention on
Income and on Capital and its commentary as updated in 2004. The standards
have also been incorporated into the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably
relevant information for the administration or enforcement of the domestic tax
laws of a requesting party. Fishing expeditions are not authorised but all fore-
seeably relevant information must be provided, including bank information
and information held by fiduciaries, regardless of the existence of a domestic
tax interest.
All members of the Global Forum, as well as jurisdictions identified by
the Global Forum as relevant to its work, are being reviewed. This process is
undertaken in two phases. Phase 1 reviews assess the quality of a jurisdic-
tions legal and regulatory framework for the exchange of information, while
Phase 2 reviews look at the practical implementation of that framework. Some
Global Forum members are undergoing combined Phase 1 and Phase 2
reviews. The Global Forum has also put in place a process for supplementary
reports to follow-up on recommendations, as well as for the ongoing monitor-
ing of jurisdictions following the conclusion of a review. The ultimate goal is
to help jurisdictions to effectively implement the international standards of
transparency and exchange of information for tax purposes.
All review reports are published once adopted by the Global Forum.
For more information on the work of the Global Forum on Transparency
and Exchange of Information for Tax Purposes, and for copies of the published
review reports, please refer to www.oecd.org/tax/transparency.
ABOUT THE GLOBAL FORUM 5
EXECUTIVE SUMMARY 7
Executive summary
1. This report summarises the legal and regulatory framework for
transparency and exchange of information in the Virgin Islands. The inter-
national standard which is set out in the Global Forums Terms of Reference
to Monitor and Review Progress Towards Transparency and Exchange
of Information, is concerned with the availability of relevant information
within a jurisdiction, the competent authoritys ability to gain timely access
to that information, and in turn, whether that information can be effectively
exchanged with its exchange of information (EOI) partners.
2. The Virgin Islands is one of the Overseas Territories of the United
Kingdom. Economically it is mainly dependent on tourism and the financial
services industry, including a significant number of company registrations. With
respect to the financial services industry the Virgin Islands has a developed
regulatory framework, but this was not enacted with the specific objective of
enabling effective exchange information for tax purposes. Although the Virgin
Islands has made progress in improving its legal and regulatory framework in
order to be able to effectively exchange tax information, the report identifies a
number of deficiencies and makes recommendations to address those.
3. Obligations to ensure availability of ownership and identity information
for companies and partnerships are generally in place, as both companies and
limited partnerships are required to keep a register of its shareholders or partners.
The issuance of bearer shares is possible, but these are immobilised through a
custodial arrangement. This custodial arrangement effectively immobilises all
bearer shares and should allow the registered agents of the companies incorpo-
rated in the Virgin Islands to identify the owners of the bearer shares in accord-
ance with its obligations under the AML/CFT legislation. However, it is not clear
whether the registered agent is required to identify all beneficial owners or only
certain owners, and it is therefore recommended that the Virgin Islands clarifies
its laws on this issue. In respect of trusts the Virgin Islands rely for the most part
on AML/CFT legislation, which only ensures the availability of full ownership
information where the trust service provider considers the trust as presenting a
higher level of risk for money laundering or terrorist financing. Consequently,
full ownership information on trusts may not be available in all cases.
8 EXECUTIVE SUMMARY
4. A clear obligation to keep comprehensive accounting records only
exists for companies and persons carrying on financial services business.
Except in some limited cases, no express requirements are in place to keep
underlying documentation or to keep accounting records for a period of at
least five years with respect to any relevant entity or arrangement. Banking
information for all account-holders is available.
5. The Virgin Islands has enacted a specific law to grant their authori-
ties access powers to obtain and exchange information for the purposes of
complying with a request for information under a Tax Information Exchange
Agreement. However, this law only provides access to (a) information held by a
bank or other financial institution, or any person acting in an agency or fiduci-
ary capacity, including a nominee or trustee, and (b) information that relates to
the beneficial ownership of a company, partnership or other person. The law
does not grant access powers to obtain other information that may be foresee-
ably relevant to the administration of the tax laws of the requesting jurisdiction,
most notably accounting records from companies and other relevant entities
and arrangements not specifically mentioned. The Virgin Islands should ensure
that its access powers are extended to include all relevant information. It is
noted that the Virgin Islands has recently enacted legislation with the purpose
to address this issue which could not, however, be assessed in this report as it
was neither in force nor in effect as at May 2011.
6. In recent years the Virgin Islands has concluded a significant number
of TIEAs. The Virgin Islands now has a total of 21 signed TIEAs, which
cover a range of relevant partners. The TIEAs contain all provisions which
allow the Virgin Islands to exchange all foreseeably relevant information.
However, the deficiency identified in respect of the Virgin Islands access
powers also affects its ability to comply fully with the terms of the TIEAs
that it has entered into. Currently, 10 of these TIEAs are in force. In respect
of the other TIEAs, it is recommended that the Virgin Islands quickly takes
all steps necessary for them to enter into force.
7. As elements which are crucial to achieving effective exchange of
information are not yet in place in the Virgin Islands, it is recommended that
the Virgin Islands does not move to a Phase 2 review until it has acted on the
recommendations contained in the Summary of Determination and Factors
underlying Recommendations to improve its legal and regulatory framework.
A follow up report on the steps undertaken by the Virgin Islands to answer
the recommendations made in this report should be provided to the Peer
Review Group within six months after the adoption of this report. In addition,
the Virgin Islands should provide a detailed written report to the Peer Review
Group within 12 months of the adoption of this report.
INTRODUCTION 9
Introduction
Information and methodology used for the peer review of the Virgin Islands
8. The assessment of the legal and regulatory framework of the Virgin
Islands was based on the international standards of transparency and exchange
of information as described in the Global Forums Terms of Reference, and
was prepared using the Methodology for Peer Reviews and Non-Member
Reviews. The assessment was based on the laws, regulations and exchange of
information mechanisms in force or effect as at May 2011, other information,
explanations and materials supplied by the Virgin Islands, and information
supplied by partner jurisdictions.
9. The Terms of Reference (ToR) break down the standards of trans-
parency and exchange of information into 10 essential elements and 31 enu-
merated aspects under three broad categories: (A) availability of information;
(B) access to information; and (C) exchanging information. This review
assesses the Virgin Islands legal and regulatory framework against these
elements and each of the enumerated aspects. In respect of each essential ele-
ment, a determination is made that either: (i) the element is in place; (ii) the
element is in place but certain aspects of the legal implementation of the ele-
ment need improvement; or (iii) the element is not in place. These determina-
tions are accompanied by recommendations for improvement where relevant.
A summary of the findings against the elements is set out on pages 63-66 of
this report.
10. The assessment was conducted by a team which consisted of two
expert assessors and a representative of the Global Forum Secretariat:
Mr. Richard Green, States of Guernsey Income Tax; Mr. Olivier Vallaeys,
Ministry of Economy, Finance and Industry of France; and Mr. Mikkel
Thunnissen from the Global Forum Secretariat. The assessment team exam-
ined the legal and regulatory framework for transparency and exchange of
information and relevant exchange of information mechanisms in the Virgin
Islands.
10 INTRODUCTION
Overview of the Virgin Islands
11. The Territory of the Virgin Islands
1
is one of the Overseas Territories
of the United Kingdom, and is located within the Virgin Islands archipelago,
with the United States Virgin Islands at its immediate west, in the Lesser
Antilles. The Virgin Islands consists of approximately sixty islands, islets
and cays, twenty of which are inhabited. The largest island is Tortola, which
is approximately 20 km long and 5 km wide, and on which the capital, Road
Town, is situated. The total population of the Virgin Islands amounted to
23 000 people in 2008, the vast majority of whom reside on Tortola.
12. The Virgin Islands reached a GDP of USD 1 215 million in 2008.
Tourism and other services industries are responsible for almost 90 per cent
of this amount. The financial services industry generates approximately 60%
of the government revenues, consisting mostly of fees for incorporating and
maintaining companies and obtaining licenses. Since 1964, the official cur-
rency of the Virgin Islands is the US dollar (USD).
13. The Virgin Islands is governed by a democratically elected 13-member
National Assembly and the Attorney General as an ex officio member and by
a Cabinet presided over by a governor, an appointee of the British Crown. The
Governor sitting as the representative of the United Kingdom is responsible for
external affairs, internal defence, security and the administration of the courts.
The Virgin Islands court system is part of the Eastern Caribbean court system
which was established in 1967 and now has a specialist commercial court, the
headquarters of which is located in the Virgin Islands. The final court of appeal
is the UK Privy Council.
14. The Virgin Islands is a common law jurisdiction which derives its
law from English common law and Virgin Islands statutes, including Orders-
in-Council made by the United Kingdom and extended to the Virgin Islands.
The financial services industry in the Virgin Islands
15. Since the mid 1980s the Virgin Islands has offered a wide range of
financial services and now has a well established financial services busi-
ness. A well-known aspect of this business is the company registration. The
number of companies registered in the Virgin Islands is impressive with
1. The name of the Territory is the Virgin Islands, but since 1917 the Territory has
been universally referred to as the British Virgin Islands (BVI) to distinguish
the islands from the American Territory, the United States Virgin Islands.
INTRODUCTION 11
459,364 registered active companies in a small economy. In 2010, 59,624
companies were incorporated and/or registered.
2
16. No stock exchange exists in the Virgin Islands. Nevertheless, com-
panies registered in the Virgin Islands may be listed on the Alternative
Investment Market (AIM) of the London Stock Exchange, the New York
Stock Exchange and the NASDAQ, and on the Hong Kong Stock Exchange.
17. The size of the financial services industry can also be shown by
looking at inward and outward foreign direct investment. From 2007-2009,
an average of USD 38 825 million was invested in the Virgin Islands, and
the 2009 FDI stock in the Virgin Islands totalled USD 156 229 million.
Investments from within the Virgin Islands averaged USD 30 241 million, and
the total outstanding FDI of the Virgin Islands in 2009 was USD 224 895 mil-
lion.
3
These numbers are similar to numbers for significantly larger economies
and it makes clear that the Virgin Islands is an important player in the finan-
cial services world.
18. The financial services industry is regulated by a number of differ-
ent laws which ensure that service providers operate in accordance with the
requirements of financial and regulatory standards, apply corporate govern-
ance procedures and that money laundering and terrorist financing are pre-
vented. Persons carrying on financial services business in or from within the
Virgin Islands, are only allowed to do so if licensed by the Financial Services
Commission (FSC). These regulated businesses are:
Company management business: the formation of companies in the
Virgin Islands, providing registered agent and registered office ser-
vices, providing directors or officers and providing nominee share-
holders. Licenses are granted either under the Company Management
Act or the Banks and Trust Companies Act.
Trust business: acting as a professional trustee, protector or admin-
istrator of a trust or settlement; or managing or administering any
trust or settlement. Licenses are granted under the Banks and Trust
Companies Act.
Banking business: accepting deposits of money and the employment
of such deposits (e.g. by giving loans or making investments) for the
account and the risk of the person accepting such deposits. Licenses
are granted under the Banks and Trust Companies Act.
2. The data in this paragraph is drawn from statistics of the Financial Services
Commission (FSC) in the Virgin Islands; see statistical bulletin Vol.21, December
2010 (www.bvifsc.vg).
3. The data in this paragraph is drawn from statistics of the United Nations Conference
on Trade and Development (UNCTAD), available on http://unctadstat.unctad.org.
12 INTRODUCTION
Insurance business: undertaking liability under a contract of insur-
ance to indemnify or compensate a person in respect of loss or
damage, including life insurance business and reinsurance business.
Licenses are granted under the Insurance Act.
Financing business: providing credit (either as a business or in the
course of another business) or leasing property to a resident in the
Virgin Islands. Licenses are granted under the Financing and Money
Services Act.
Money services business: money transmission services, cheque cashing
services, currency exchange services, and the issuance, sale or redemp-
tion of money orders or travellers cheques. Licenses are granted under
the Financing and Money Services Act.
Investment business: dealing in investments or arranging such deals,
managing investments, providing investment advice, providing
custodial or administration services with respect to investments and
operating an investment exchange. Licenses are granted under the
Securities and Investment Business Act.
19. The FSC is also the regulatory body which monitors all financial ser-
vices businesses and has a wide range of enforcement powers in its regulatory
toolkit including the power to impose fines or suspend or revoke licenses.
Some monitoring tasks are shared with the Financial Investigation Agency.
The Virgin Islands is transparent in providing the names of licensees on the
website of the FSC (www.bvifsc.vg).
20. Most of the regulatory rules in the Virgin Islands have been either
introduced or substantially amended in the last decade. One of the most
important changes has been the introduction of the BVI Business Companies
Act in 2004. Before, the Virgin Islands had separate regimes for companies
doing business in the Virgin Islands and International Business Companies,
which were subject to a separate offshore regime and were only allowed to
do business from within the Virgin Islands. The BVI Business Companies
Act abolished the distinction between local and offshore companies and
introduced a regime which was designed to meet international standards for a
longer period of time. Re-registration of all companies under the BVI Business
Companies Act was completed in 2009.
Taxation and international cooperation
21. Until 2005, the Virgin Islands levied an income tax on all companies,
except International Business Companies, and individuals. To comply with the
EU Tax Code of Conduct for Business Taxation, the Virgin Islands moved at the
beginning of 2005 to a zero rated income tax regime for all corporate entities in
INTRODUCTION 13
conjunction with a move to one corporate statute. To provide equity as between
corporate and individual taxpayers, it was decided to move to a zero rated tax
regime for individuals at the same time. To recoup the lost revenue from the
zero rated income tax regime, annual fees for companies were increased and a
payroll tax was introduced in the Payroll Taxes Act, 2004, which became effec-
tive 1 January 2005. Under this Act every employer and self-employed person
who carries on business in the Virgin Islands is charged with payroll tax at
rates up to 14% (of which a part may be deducted from the employees salaries).
The Income Tax Ordinance, under which the former income tax was levied,
however, still exists and provisions on the powers of the Commissioner are still
being applied. The rate of the income tax has been reduced to 0%.
22. In addition to the payroll tax several other taxes are levied, including
property taxes, stamp duty and custom duties.
22. The Virgin Islands has been involved in the OECDs work on stand-
ards for the exchange of information for tax purposes over the last decade. In
2002, the Virgin Islands committed to the international standards for trans-
parency and exchange of information. It developed a plethora of regulatory
laws to ensure transparency and availability of information. In addition, the
Virgin Islands introduced the Mutual Legal Assistance (Tax Matters) Act to
be able to access and exchange information pursuant to international infor-
mation exchange agreements. This allowed the Virgin Islands to be active
in concluding Tax Information Exchange Agreements (TIEAs), and signing
many of them in recent years.
Recent developments
23. On 17 May 2010, the Securities and Investment Business Act came
into force, establishing a new regulatory framework on persons engaged in
investment business activities and updating the licensing requirements for
public, professional and private mutual funds. The new Act introduces the
obligation for all funds to appoint a local authorised representative, which
will be a Virgin Islands entity or individual certified by the FSC for this pur-
pose. The authorised representative acts as the liaison between the FSC and
the fund, and is required to maintain such records as are prescribed by the
Mutual Funds Regulations in respect of the fund. With a total of 2951 active
mutual funds registered in the Virgin Islands managing an estimated several
hundred billion USD
4
in assets, they represent an important part of the finan-
cial services industry.
4. No complete statistics are available. For 2007 and 2008, 52% of the assets of
the mutual funds were reported to represent USD 423.2 million in 2007 and
USD 257.5 billion in 2008.
14 INTRODUCTION
24. An amendment to the Mutual Legal Assistance (Tax Matters) Act
entered into force on 13 July 2011. The purpose of this amendment is to
address the issue identified under element B.1. As the amendment was neither
in force nor in effect as at May 2011, it has not been assessed in this report.
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 15
Compliance with the Standards
A. Availability of Information
Overview
25. Effective exchange of information requires the availability of reliable
information. In particular, it requires information on the identity of owners
and other stakeholders as well as information on the transactions carried out
by entities and other organisational structures. Such information may be kept
for tax, regulatory, commercial or other reasons. If such information is not
kept or the information is not maintained for a reasonable period of time, a
jurisdictions competent authority may not be able to obtain and provide it
when requested. This section of the report describes and assesses the Virgin
Islands legal and regulatory framework on availability of information.
26. Availability of ownership and identity information in respect of
companies and limited partnerships is ensured under the Virgin Islands legal
and regulatory framework. In respect of trusts information on the identity of
the beneficiaries is only required to be kept where the trust presents a higher
level of risk in terms of money laundering or terrorist financing, which will
not always be the case.
27. Under the BVI Business Companies Act, the issuance of bearer
shares is possible, but these are immobilised through a custodial arrange-
ment. This custodial arrangement effectively immobilises all bearer shares
and should allow the registered agents of the companies incorporated in
the Virgin Islands to identify the owners of the bearer shares in accordance
with its obligations under the AML/CFT legislation. However, it is not clear
16 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION
whether the registered agent is required to identify all beneficial owners or
only certain owners, and it is therefore recommended that the Virgin Islands
clarifies its laws on this issue.
28. Rules to keep reliable accounting records, including underlying
documentation, for a period of at least five years are not consistently in place.
Companies are required to keep reliable accounting records, but for partner-
ships and trusts no consistent obligations to maintain reliable accounting
records, including underlying documentation, exist. Except in the limited
cases of persons licensed to carry on financial services business, no express
obligation exists to keep all records and documentation for a period of at least
five years with respect to any relevant entity or arrangement. Element A.2 is
therefore found to be not in place.
29. The AML/CFT legislation ensures that all records pertaining to
the accounts as well as to related financial and transactional information is
required to be kept by all banks.
30. In general, where an obligation exists in the Virgin Islands to keep
relevant records, enforcement provisions are in place to address the risk of
non-compliance. In most cases, it is the FSC which can apply its wide range
of enforcement powers. Enforcement measures consist of fines, imprisonment
and, in the case of licensees, suspension or revocation of a licence is also pos-
sible. The effectiveness of the enforcement provisions will be assessed as part
of the Virgin Islands Phase 2 review.
A.1. Ownership and identity information
Jurisdictions should ensure that ownership and identity information for all relevant
entities and arrangements is available to their competent authorities.
Companies (ToR A.1.1)
31. The BVI Business Companies Act (BCA) is the central piece of leg-
islation governing the establishment of and further arrangements with respect
to companies. Under the BCA, three types of companies may be incorporated:
Companies limited by shares: this type of company has only share-
holders as its members. Their liability is limited to the amount unpaid
(if any) on their shares. Specific sub-types include segregated portfo-
lio companies and restricted purposes companies (see below).
Companies limited by guarantee: this type of company can have both
shareholders and guarantee members. Guarantee members are liable
to contribute an amount defined in the memorandum of the company
to the companys assets in the event that the company is liquidated.
There has to be at least one guarantee member (s. 79(2) BCA).
Unlimited companies: this type of company can have both share-
holders and unlimited members. Unlimited members have unlimited
liability for the liabilities of the company. There has to be at least one
unlimited member (s. 79(3) BCA).
32. A company limited by shares can be designated as a Segregated
Portfolio Company (SPC) or a Restricted Portfolio Company (RPC). An SPC
is a company which may create one or more segregated portfolios for the
purpose of segregating the assets and liabilities of the company held within
a certain segregated portfolio from the assets and liabilities of the company
not held within a segregated portfolio or within any other segregated port-
folio (s. 138(1) BCA). An SPC is a single legal entity (s. 138(2) BCA), but
it is allowed to issue shares in respect of any segregated portfolio (s. 139
BCA). A company may only be incorporated or registered as an SPC after
written approval of the FSC, which can only be obtained if the company
will be licensed as an insurer or if it will be a mutual fund (s. 135 BCA).
As at 3 March 2011, a total number of 104 SPCs are registered in the Virgin
Islands, of which 7 are insurance companies and the others are mutual funds.
33. At its incorporation, a company may state that it is an RPC and define
its purposes (s. 10 BCA), which can be any purpose. These purposes may be
changed, but its status of RPC has to remain as such throughout its existence
(s. 14 BCA). RPCs are predominantly used as special purpose vehicles, usually
formed to issue debt instruments. Persons acquiring securities issued by the
RPC have the additional layer of comfort that if the RPC seeks to engage in
any transactions prohibited by its constitutional documents, those transactions
will be void. At this point in time, 24 companies are registered as an RPC.
34. The obligations regarding retention of ownership information which
are applicable to other companies limited by shares apply equally to SPCs
and RPCs.
35. All companies are required to have a registered office and a regis-
tered agent in the Virgin Islands (s. 90 and 91 BCA). The registered office
and registered agent must be identified upon registration of the company (s. 6
BCA) and any subsequent changes must be registered as well (s. 92 BCA). A
company which does not have a registered agent is liable on summary convic-
tion to a fine of USD 10 000. There is no obligation for companies other than
companies licensed to carry on financial services business to have directors
that are resident in the Virgin Islands.
36. Registered agents are licensed and regulated by the FSC under the
Company Management Act and the Banks and Trust Companies Act. These
Acts set out licensing requirements for persons carrying on company man-
agement business. Company management is defined as:
a. the formation of Virgin Islands companies, including the continua-
tion of companies as Virgin Islands companies;
b. the provision of registered agent services;
c. the provision of registered office services;
d. the provision of directors or officers for companies, whether such
companies are Virgin Islands companies or companies incorporated
or registered in a jurisdiction outside the Virgin Islands; and
e. the provision of nominee shareholders in companies, whether such
companies are Virgin Islands companies or companies incorporated
or registered in a jurisdiction outside the Virgin Islands.
37. The FSC can issue a license to carry on company management busi-
ness to any person, taking into account the detailed requirements set out in the
Regulatory Code. Persons who carry on company management business with-
out being licensed are liable upon summary conviction to a fine not exceeding
USD 50 000 or to imprisonment for a term not exceeding two years, or both.
Ownership information held by companies
38. All companies incorporated under the BCA are required to keep a
register of members. This register should contain the following information,
as appropriate for the company (s. 41 BCA):
a. the names and addresses of the persons who hold registered shares
in the company;
b. the number of each class and series of registered shares held by each
shareholder:
c. in the case of a shareholder who holds bearer shares, the total number
of each class and series of bearer shares held;
d. with respect to each bearer share certificate issued by the company,
i. the identifying number of the certificate,
ii. the number of each class or series of bearer shares specified in
the certificate,
iii. the date of issue of the certificate, and
iv. the name and address of the custodian of the certificate;
e. the names and addresses of the persons who are guarantee members
of the company;
f. the names and addresses of the persons who are unlimited members;
g. the date on which the name of each member was entered in the reg-
ister of members; and
h. the date on which any person ceased to be a member.
39. Section 54 BCA prescribes that registered shares are transferred by
written instrument signed by the transferor and containing the name and
address of the transferee. This instrument must be sent to the company and
upon receipt the company shall enter the name of the new shareholder in the
register of members. In the case of an SPC, the same rules apply in respect of
shares in any segregated portfolio (s. 139(4) BCA).
40. The company is required to keep the register of members or a copy
thereof at the office of its registered agent. If a copy is kept at the office of
the registered agent, the company shall notify the registered agent within 15
days, in writing, of any change. Failing to comply with these register-keeping
obligations results in the company being liable on summary conviction to a
fine of USD 10 000 (all s. 96 BCA).
Ownership information held by the registered agent
41. Section 38(1) Regulatory Code prescribes that the registered agent
is required in its own right to keep adequate and orderly records of anything
that it is required to maintain under the BCA which includes the register of
members as described above. The registered agent has to retain these records
for at least five years after the end of its business relationship with the com-
pany (s. 39 Regulatory Code).
42. In addition, the registered agent is subject to AML/CFT legislation
under the Anti-Money Laundering Regulations (AMLR) and the Anti-Money
Laundering and Terrorist Financing Code of Practice (CoP). This means that
Customer Due Diligence (CDD) rules apply on the basis of which the registered
agent must verify certain details in respect of the ownership of the company
(details of the CDD rules are explained below in the section on foreign compa-
nies). A registered agent who fails to comply with the CDD rules is liable on
summary conviction to a fine not exceeding USD 25 000 or to imprisonment
for a term not exceeding two years, or both (s. 25(8) CoP). Documentation in
respect of the CDD carried out must be maintained in the Virgin Islands by the
registered agent for at least five years after the end of its business relationship
with the company (s. 8 AMLR and s. 39 Regulatory Code).
43. A registered agent is not required to perform CDD when its customer
is a regulated company (s. 6 AMLR). These companies are subject to regula-
tory rules on ownership information in addition to the requirement to keep a
register of members under the BCA.
Ownership information held by the authorities
44. Upon the incorporation of a company in the Virgin Islands, it has
to be registered in the Register of Companies (s. 7 BCA). Various informa-
tion has to be provided upon registration (s. 6 and 9 BCA), but this does
not include information identifying the owners of the company. However, a
company may elect (s. 231 BCA) to file a copy of its register of members (=
shareholders or other members). In that case, ownership information will be
available at the Register of Companies.
Tax law
45. The Income Tax Ordinance (ITO) under which the Virgin Islands
used to levy an income tax from both individuals and companies, is still
in force but the rate of income tax is now 0%. Taxpayers still must register
with the Commissioner when they become liable to tax, i.e. when they derive
income from the Virgin Islands (s. 4A and s. 5 ITO). Under the Payroll Taxes
Act (PTA) all employers having employees who render services wholly or
mainly in the Virgin Islands, and all self-employed persons, also must regis-
ter with the Commissioner (s. 3 and s. 3A PTA). Both the ITO and the PTA
do not impose any obligations on providing ownership information to the
authorities upon registration or keeping such information.
Regulated companies
46. Companies are only allowed to carry on company management
business, trust business, banking business, insurance business, financing
business, money services business or investment business if licensed by the
FSC. As part of the license application process, section 10 Regulatory Code
requires a company to fill out an approved form (F100) which contains a list
of all shareholders and controllers, which includes the beneficial owners.
Any subsequent ownership change resulting in any person holding five or ten
percent (depending on the kind of business) or more in the licensed company
or resulting in a change of the ownership interest of a person already hold-
ing five or ten percent or more in the licensed company, is subject to prior
approval by the FSC. Ownership information is therefore available to the
FSC, however this may not be updated in respect of small shareholdings.
Foreign companies
47. Foreign companies are only allowed to carry on business in the Virgin
Islands if they are registered in the Register of Foreign Companies (s. 186
BCA). There is no general definition of carrying on business in the BCA, but
it includes a foreign company having a place of business in the Virgin Islands.
Currently, 42 foreign companies are registered. Upon registration various
information has to be provided, including evidence of its incorporation, but
this does not include ownership information. Like all companies, foreign
companies which carry on business in the Virgin Islands are required to have
a registered agent in the Virgin Islands or are otherwise liable upon summary
conviction to a fine of USD 10 000 (s. 189 BCA).
48. All registered agents shall apply CDD rules under the AMLR and the
CoP. Section 19(5)(d) CoP prescribes that where the registered agent wishes
to enter into a business relationship with a company, it must determine the
ownership of the company and details of any group of which the company is a
part, including details of the ownership of the group. This determination must
be reviewed at least once every three years or, in case of companies posing
a high money-laundering or terrorist financing risk, at least once every year
(s. 21 CoP).
49. The level of detail of ownership information that must be determined
by the registered agent is not entirely clear. On the one hand, there are three
references mentioning beneficial ownership in general. The officially pub-
lished Explanation which serves as a guide to understand the requirements
of the CoP to section 19 states that It is also important that, in respect of
a legal person, the entity or professional [such as a registered agent] identi-
fies the beneficial owner thereof. In addition, section 25(1) CoP requires the
registered agent to verify specific information in respect of the ownership of
a company and of the beneficial owner of that company. Finally, section 26(2)
CoP states that, where a company is assessed to be of low risk with respect to
money-laundering or terrorist financing, CDD still requires the verification
of the beneficial owners or controllers of that company. The combination of
sections 19, 25 and 26 CoP and the Explanation therefore suggests that all ben-
eficial owners should be determined by the registered agent in applying CDD.
50. On the other hand, section 25(2) CoP sets out the specific information
that must be obtained for determining the identity of a company, and the only
requirement to identify shareholders is that the identity of each individual
who owns at least ten percent of the company should be obtained (s. 25(2)
(g) CoP). It is not immediately clear whether this requirement refers to either
beneficial ownership or indirect ownership (because indirect owners may
also have substantial control of a company). It also seems not consistent with
other indications in the CoP as mentioned above, which suggest that also
corporate beneficial owners must be identified. Taking into account that
the official Explanation to the CoP states that it is essential [] to be able
to ascertain and verify the identity of the controlling elements or owners in
relation to every legal person, it may be concluded that all individuals who
are the ultimate owners and hold an interest of at least ten percent in the com-
pany must be identified according to section 25(2)(g) CoP.
51. The Virgin Islands advised that they consider the rules of the CoP to
prescribe that registered agents are in all cases obliged to obtain full informa-
tion on all beneficial owners in the company. This does, however, not align with
the specific information that is set out in section 25(2) CoP, which only men-
tions information on certain not all beneficial owners. The more specific
provision may well be what registered agents take as their guideline. Although
a system is in place to identify (certain) owners of foreign companies, the lack
of clarity and consistency of the CoP on this matter may lead registered agents
to apply the rules unevenly. However, it is clear that at a minimum all individu-
als with a controlling interest of at least ten percent in the foreign company
must be identified. Further ownership information on these companies should
be available in the jurisdiction where they were incorporated.
52. It should be noted that no CDD has to be carried out where the for-
eign company is regulated in another jurisdiction where it performs activities
similar to activities which are regulated in the Virgin Islands (s. 6 AMLR). In
this case, the requirements to maintain ownership information will generally
depend on the law of the jurisdiction in which the company is incorporated.
Considering the low number of foreign companies registered in the Virgin
Islands (42) and the fact that in most cases some ownership information will
be available through the CDD measures carried out by the registered agent,
the instances where no full ownership information on foreign companies is
available are not expected to significantly impede the effective exchange of
information.
Nominees
53. Acting (or providing for another person to act) as a nominee share-
holder for another person is considered a relevant business under the
AMLR and CoP (s. 2(1) AMLR). Consequently, persons acting as a nominee
shareholder are required to carry out CDD and identify the persons for whom
they act as a legal owner in accordance with section 19 CoP. Documentation
in respect of the CDD carried out must be maintained in the Virgin Islands
by the nominee for at least five years after the end of its business relationship
with the person for whom they act (s. 8 AMLR and s. 39 Regulatory Code).
54. A related issue may arise where legal practitioners represent their
clients in setting up a company in the Virgin Islands. In that context, it should
be noted that section 6(1)(c) AMLR makes an exception to the obligation to
carry out CDD if the applicant for business (the party proposing to a rel-
evant person in the Virgin Islands that they enter into a business relationship,
s. 2(1) AMLR) is a legal practitioner or accountant who is subject to similar
obligations in the area of anti-money laundering as the registered agent in the
Virgin Islands would be. Although the applicant for business of a registered
agent would normally be the company, the AMLR could also be read that the
legal practitioner representing that company is the applicant for business, as
this is the party in contact with the registered agent. In the latter case, the
requirement to maintain ownership information does not exist for the regis-
tered agent under the AML/CFT legislation, and identifying nominee share-
holders and beneficial owners may depend on the law governing this legal
practitioner or accountant. It is noted that information on the legal owners of
the company is in any case available through the register of members that the
Virgin Islands company is required to keep.
Mutual funds
55. For the operation of mutual funds in the Virgin Islands additional
registration and regulatory rules apply. A fund is not allowed to carry on
business as a mutual fund in or from within the Virgin Islands unless it is
registered with or recognised by the FSC under the Securities and Investment
Business Act (SIBA). Contravention of this rule could lead to a penalty of
USD 40 000 on summary conviction or USD 75 000 on indictment (s. 4(1)
and Schedule 7 SIBA). Four categories of mutual funds can be registered in
the Virgin Islands:
Public funds: funds that offer their investment shares to the general
public.
Professional funds: funds the shares of which are made available only
to professional investors. The initial investment of each investor shall
not be less than USD 100 000.
Private funds: funds which are not authorised to have more than fifty
investors or invitations to subscribe for the fund interests are made
on a private basis only.
Recognised foreign funds: this can be any type of fund.
56. As at September 2010, there were 1929 professional funds, 811 private
funds and 211 public funds registered in the Virgin Islands. The assets under
their management are estimated to represent a value of several hundred billion
USD.
5
5. See footnote 4.
57. Public funds can only be Virgin Islands companies or unit trusts gov-
erned by the Virgin Islands trust law and with a trustee based in the Virgin
Islands (s. 45 SIBA). No such restrictions apply with respect to other mutual
funds, which can take the form of companies, trusts, partnerships or any other
form. All mutual funds must have an authorised representative, which is either
a Virgin Islands company, a partnership formed under the Virgin Islands
laws or an individual residing in the Virgin Islands (s. 64 and 65 SIBA). Such
authorised representative must be certified by the FSC and acts as the main
intermediary between the FSC and the mutual fund he/she represents. Public
funds, professional funds and private funds are also required to have a fund
administrator (s. 7 and 16 of the Mutual Fund Regulations), which must be a
licensee under the SIBA in case he operates from within the Virgin Islands
(s. 4 and Schedule 2 SIBA).
58. Depending on the legal form of the mutual fund, it will be subject to
the same requirements to keep ownership information as other companies,
partnerships or trusts, including having a registered agent in the case of a
company or limited partnership. This would ensure availability of ownership
information in respect of mutual funds in all cases where it is ensured for
other entities with the same legal form.
59. As explained in the Introduction, the SIBA was enacted one year
ago, and it has been complemented by the Mutual Fund Regulations and the
Public Funds Code. All references to the former Mutual Funds Act are now
to be read as reference to the SIBA, following the general rule of interpreta-
tion laid down in section 30(1) Interpretation Act. This means that, regardless
of their form, mutual funds themselves and their authorised representatives
are subject to the AML/CFT legislation, which obliges them to identify and
verify the owners of their customers.
Conclusions
60. All companies are required to keep updated information identifying
its members (shareholders and other members) at the office of its registered
agent. In addition, regulated companies are required to submit ownership
information to the FSC upon registration and ask permission for any sig-
nificant ownership change. Foreign companies, like domestic companies,
are required to have a registered agent which must perform CDD under the
AML/CFT legislation to identify its customers beneficial owner(s). Although
there is some lack of clarity on the level of detail of this information, suffi-
cient information is available on the owners of foreign companies. Overall,
information identifying the owners of companies is available in the Virgin
Islands (see, however, the section on bearer shares below).
Bearer shares (ToR A.1.2)
61. Any Virgin Islands company that can issue shares is allowed to issue
bearer shares if it is stated so in its memorandum as filed at the Register of
Companies (s. 9(2) and 38 BCA) and kept by the registered agent (s. 96(1)
(a) BCA), except for a company limited by shares which is registered as
a segregated portfolio company. According to recent information
6
, a total
of 536 companies incorporated in the Virgin Islands is authorised to issue
bearer shares according to its memorandum. Under the BCA a system has
been established to identify the beneficial owners of bearer shares through a
custodial arrangement.
62. A bearer share must be held either by an authorised custodian or a
recognised custodian, and is otherwise disabled (s. 70 BCA). Authorised and
recognised custodians need to be approved or recognised as such by the FSC
(s. 50A and 50B of the Financial Services Commission Act). An authorised
custodian may be either a person holding a license under any Virgin Islands
regulatory law, or a foreign body corporate. Recognised custodians must be
an investment exchange or a clearing organisation carrying on business in a
jurisdiction that is a member of the Financial Action Task Force. There are
currently 13 persons approved by the FSC to act as authorised custodians, and
10 institutions are recognised by the FSC to act as recognised custodians.
63. Upon delivery of the bearer share to or the deposit with the author-
ised custodian, the following information shall be provided to the authorised
custodian in a notice (s. 71(1) BCA):
a. the full name of the beneficial owner of the bearer share;
b. the full name of any person having an interest in that share, whether
by virtue of a charge on the share or otherwise, or containing a state-
ment that no other person has an interest in that share; and
c. such other information as may be required.
64. An authorised custodian shall send a notice to the registered agent of
the company that it is the custodian of the bearer share (s. 72(1) BCA). Where
the bearer share is delivered to or deposited with a recognised custodian, the
information mentioned in s. 71(1) BCA shall be submitted by the custodian
to the registered agent of the company within 14 days of the delivery or the
deposit (s. 71(3) BCA).
65. A change of ownership of a bearer share held by an authorised custo-
dian is effective as soon as this authorised custodian receives a notice of this
change including the details identifying the new owner (s. 75(1) BCA). Where
6. Data as at 18May 2011.
the bearer share is held by a recognised custodian, the change of ownership
is effective only from the time this recognised custodian submits a notice
including the details of the new owner to the registered agent of the company
(s. 75(2) BCA).
66. An authorised custodian shall keep the notice containing the own-
ership details provided to him upon delivery or deposit and any notices of
subsequent changes in the ownership at its office (which has to be an office
approved by the FSC if it is located outside the Virgin Islands) and shall
ensure that the bearer share remains at all times within its custody and control
(s. 72(2) BCA). The notice containing the ownership details of the bearer share
and any subsequent notices of a change of ownership must be provided where
an authorised custodian transfers possession of the bearer share (s. 73(2) BCA).
67. The custodial arrangement described above effectively immobilises
all bearer shares, ensuring that the beneficial owners of these shares are
known by the custodians at all times. Although the custodian may not always
be located in the Virgin Islands, the registered agent always knows either
who the beneficial owner of the bearer share is (in the case of a recognised
custodian) or who the custodian of the share is (in the case of an authorised
custodian). The registered agent is subject to the general record-keeping
requirement under the Regulatory Code, which requires records of all ser-
vices provided to its customers to be kept and retained for at least five years
from the end of the business relationship. In addition, the registered agent
must perform CDD under the AML/CFT legislation to identify its customers
(the companys) beneficial owner(s) at least every three years (s. 19 and s. 21
CoP) and he/she will be able to do that by either having this information
automatically (in the case of a recognised custodian) or by obtaining the
information from the authorised custodian. It should be noted that a lack of
clarity and consistency of the requirements in the CoP on how to apply the
CDD rules has been identified above. It is therefore recommended that the
Virgin Islands should clarify its laws on this issue.
Partnerships (ToR A.1.3)
68. The law governing partnerships in the Virgin Islands is the Partnership
Act. A partnership is defined as the relation of which subsists between per-
sons carrying on a business in common with a view of profit (s. 3 Partnership
Act). The Partnership Act provides for both general partnerships and limited
partnerships to be formed. Limited partnerships are one of the following two
types:
local limited partnerships
international limited partnerships
Limited partnerships
69. Limited partnerships are not allowed to carry on banking business,
insurance business or trust business (s. 50(1) Partnership Act). Furthermore,
international limited partnerships shall not carry on business with persons
resident in the Virgin Islands or own an interest in real property in the Virgin
Islands. All 679 limited partnerships currently
7
registered in the Virgin
Islands are registered as international limited partnerships.
70. All limited partnerships are required to have a registered office
and a registered agent in the Virgin Islands (s. 82 and 84 Partnership Act).
A general partner that wilfully contravenes these requirements is liable on
summary conviction to a penalty of USD 100 for each day the contravention
continues (s. 85 Partnership Act). Registered agents of limited partnerships
are licensed and regulated by the FSC under the Company Management Act
and the Banks and Trust Companies Act in the same way as registered agents
for companies (see section on companies above). In the case of a local limited
partnership, one of the general partners can also be the registered agent (s. 84
Partnership Act).
Ownership information held by the authorities
71. Upon forming a limited partnership in the Virgin Islands, it has to be
registered at the Registrar of Limited Partnerships, which issues a registration
certificate (s. 55 Partnership Act). If a partnership which according to its arti-
cles is a limited partnership, is not so registered, it is deemed to be a general
partnership and every partner shall be deemed to be a general partner (s. 56
Partnership Act).
72. Upon registration, a memorandum has to be submitted to the Registrar.
This memorandum shall include the full name of each of the general partners
and their respective addresses, as well as the address of the registered office
and the name and address of the registered agent (s. 53 Partnership Act).
Ownership information held by partnerships and its registered agents
73. The general partners of a limited partnership shall maintain at the
registered office of the limited partnership a register containing the name
and address, amount and dates of contributions of each partner and the
amount and date of any payment representing a return of any part of any
partners contribution. The register shall be updated within 21 business days
of any change (s. 83 Partnership Act). Such register should therefore contain
ownership and identity information on every partner in a limited partnership.
7. As at 31 December 2010.
A general partner that wilfully contravenes this requirement is liable on
summary conviction to a penalty of USD 100 for each day the contravention
continues (s. 85 Partnership Act).
74. The registered agent of a limited partnership is subject to AML/
CFT legislation under the AMLR and the CoP. This means that CDD rules
apply. Section 19(5)(d) CoP prescribes that where the registered agent wishes
to enter into a business relationship with a legal person (which includes any
partnership for the purposes of the CoP), it must determine the ownership
of the partnership. This determination shall be reviewed at least once every
three years or, in case of partnerships posing a high money-laundering or
terrorist financing risk, at least once every year (s. 21 CoP). Specific infor-
mation that must be verified by the registered agent in respect of the owner-
ship of a limited partnership includes the full name and current residential
address of each partner (s. 25(5) CoP). A registered agent who fails to comply
with the CDD rules is liable on summary conviction to a fine not exceeding
USD 25 000 or to imprisonment for a term not exceeding two years, or both
(s. 25(8) CoP). Documentation in respect of the CDD carried out must be
maintained in the Virgin Islands by the registered agent for at least five years
after the end of its business relationship with the company (s. 8 AMLR and
s. 39 RC).
General partnerships
75. General partnerships carrying on business in the Virgin Islands
follow the common law principle whereby all information in respect of
ownership is detailed in the partnership agreement/deed subscribed to and
agreed upon by all partners. Section 30 of the Partnership Act further states
that partners are bound to render true accounts of all things affecting the
partnership to any partner, agent or representative. It is unclear whether
this obligation includes a requirement for identity information in respect of
the partners to be retained. However, it is noted that a general partnership is
essentially the sum of its partners and the English common law rule on part-
nerships applies where all partners are equally and severally obligated and
liable to the partnership.
76. Under the PTA, all partners in a partnership which is carrying on
business in the Virgin Islands are deemed employees of that partnership if
they render services to the partnership and participate in the income or profits
of the partnership (s. 6(a) PTA). General partners will normally fall in this
category. This means that the general partnership, as the deemed employer
of the general partners under the PTA, must register with the Commissioner
and tax has to be paid on the (deemed) remuneration paid to the general part-
ners. The annual tax return that has to be submitted by the general partner-
ship requires all (deemed) employees to be identified and the nature of their
employment has to be indicated. This means that it will generally be clear
from this form who the general partners of the general partnership are, and
the tax authorities will have this information available in their administration.
Trusts (ToR A.1.4)
77. The rules governing trusts in the Virgin Islands are based on English
common law, supplemented by the Trustee Act and the Virgin Islands Special
Trusts Act. Section 2 Trustee Act defines a trust as the legal relationship
created, either inter vivos or on death, by a settlor when assets have been
placed under the control of a trustee for the benefit of a beneficiary or for a
special purpose.
78. The Virgin Islands Special Trusts Act creates a special opt-in trust
regime for shares of Virgin Islands companies. Trusts created under this
regime are commonly called VISTA trusts. The reason to create a VISTA
trust is to enable trustees to retain shares in a Virgin Islands company, irre-
spective of the financial benefits of holding them.
8
This will for example
enable trustees to accommodate a settlors intention for the company shares
to be held for his children. The sole trustee of a VISTA trust must be a trustee
licensed under the Banks and Trust Companies Act.
79. The Banks and Trust Companies Act sets out licensing requirements
for companies carrying on trust business. Section 2(1) of this Act defines
trust business as the business of (a) acting as a professional trustee, protec-
tor or administrator of a trust or settlement; or (b) managing or administering
any trust or settlement. The FSC can issue a license to carry on trust business
(either a Class I or a Class II license, depending on whether the company is
also licensed to carry on company management business) to any company,
taking into account the detailed requirements set out in the Regulatory Code
and the Banks and Trust Companies Act. One of the requirements is that the
licensee designates (and notifies to the FSC) a principal office in the Virgin
Islands and two individuals resident in the Virgin Islands as its authorised
representatives (s. 9 Banks and Trust Companies Act). Companies which carry
on trust business without being licensed are liable to a fine not exceeding
80. There are two exemptions to the rule that a company is not allowed to
carry on trust business without a license, both introduced under the Financial
Services (Exemptions) Regulations. The first exemption is the Private
Trust Company (PTC). A PTC is regarded as such if its business consists
solely of unremunerated trust business (no direct or indirect remuneration is
8. According to the prudent man of business rule under English common law, a trus-
tee may be obliged to sell the shares for a profit or to reduce risk in certain situations.
received by the PTC for its services) or related trust business (each benefi-
ciary of the trust has a specified family relationship with the settlor or is a
charity). A PTC shall not solicit trust business from members of the public
and its registered agent shall be a person holding a Class I license
9
. A total of
718 PTCs are currently registered in the Virgin Islands.
81. A company which acts solely as a bare trustee
10
is also not required
to obtain a license to carry on trust business.
Information held by the authorities
82. There is no requirement for trusts to be registered. In fact, the Trustee
Act provides for an express exemption from registration under the provisions
of the Registration and Records Act (s. 91 Trustee Act). Also, trusts are gen-
erally not subject to any tax in the Virgin Islands (s. 90 Trustee Act).
Information held by trustees and service providers
83. The Trustee Act only imposes obligations to keep certain ownership
information on trustees in respect of purpose trusts, which are trusts without
a particular beneficiary. Such trusts may be used for commercial purposes,
such as isolating assets in financial deals or separating voting from economic
control. The trustee of a purpose trust, of which at least one has to be a pro-
fessional, must keep records of the identity of any other trustees and of the
settlors (s. 84(21) and s. 84A(28) Trustee Act).
84. Companies that carry on trust business are required to obtain a
license to do so. Other persons can act as a trustee, administrator or protector
of a trust without being licensed. However, any person professionally engag-
ing in trust business is subject to AML/CFT legislation (s. 2(1) AMLR and
s. 2(1) CoP). Section 19(3)(a) CoP prescribes that in case the trust service pro-
vider wishes to enter into a business relationship with respect to a trust, CDD
rules apply. This requires the trust service provider to obtain the following
information (s. 28 CoP):
a. the name of the trust;
b. the date and country of establishment of the trust;
c. where there is an agent acting for the trust, the name and address of
the agent;
9. A person holding a Class I license is licensed to carry on both trust business and
company management business.
10. A trustee acts as a bare trustee if he/she only conveys the trusts assets to the ben-
eficiary (according to trusts provisions) and has no other duty under the trust.
d. the nature and purpose of the trust;
e. identifying information in relation to any person appointed as trustee,
settlor or protector of the trust.
85. Where the trust service provider does not itself act as the trustee but
rather is hired by the trustee to provide its services (which will, for example,
usually be the case for the registered agent of a PTC), the following additional
information has to be obtained by the trust service provider (s. 19(5) CoP):
a. the type of trust;
b. the nature of the activities of the trust and the place where its activi-
ties are carried out;
c. where the trust forms part of a more complex structure, details of the
structure, including any underlying companies;
d. classes of beneficiaries, charitable objects and related matters;
e. whether the trust or trustee is subject to regulation and, if so, details
of the regulator.
86. Where the trust service provider considers that the trust presents
a higher level of risk, all beneficiaries with a vested right in the trust shall
also be identified (s. 28(2) CoP). No strict line exists between the different
levels of risk. However, the official Explanation to the CoP provides detailed
guidance on which factors are to be considered in making the risk assess-
ment. Also, it is clear that in case of a non-face to face business relationship,
enhanced CDD measures should be applied because a higher level of risk
exists (s. 29(4) CoP). In other cases, it is left to the judgment of the trust ser-
vice provider, with the assistance of the guidance in the CoP, whether a trust
presents a higher level of risk. A person who fails to comply with the CDD
rules is liable on summary conviction to a fine not exceeding USD 25 000 or
to imprisonment for a term not exceeding two years, or both (s. 28(3) CoP).
Documentation in respect of the CDD carried out must be maintained in the
Virgin Islands by the registered agent for at least five years (s. 8 AMLR and
s. 45(1)(a) CoP).
Conclusions
87. Trustees of purpose trusts must keep identity information on the
settlors and other trustees. In addition, AML/CFT legislation applies to all
trustees, administrators or protectors of trusts which carry on trust business
as a professional. This would include any professional acting as a trustee of
a PTC or acting as a bare trustee. Under AML/CFT legislation, trust service
providers are required to identify trustees, settlors and protectors of trusts.
In relation to trusts which the trust service provider considers as posing a
higher level of risk in terms of money laundering or terrorist financing, ben-
eficiaries with a vested right in the trust shall also be identified. As the trust
service provider will not always consider a trust to present a higher level of
risk, information identifying the beneficiaries of trusts may not be available
in all cases.
88. Also, where a trust is created under the laws of the Virgin Islands
which has no other connection with the Virgin Islands, there may be no infor-
mation about the trust available in the Virgin Islands.
Foundations (ToR A.1.5)
89. The Virgin Islands law does not allow for the establishment of
foundations.
Enforcement provisions to ensure availability of information
(ToR A.1.6)
90. The Virgin Islands should have in place effective enforcement provi-
sions to ensure the availability of ownership and identity information, one
possibility among others being sufficiently strong compulsory powers to
access the information. This subsection of the report assesses whether the
provisions requiring the availability of information with the public authorities
or within the entities reviewed in section A.1 are enforceable and failures are
punishable. Questions linked to access are dealt with in Part B.
91. As described in the respective subsections, persons are generally
liable to penalties if they contravene a requirement to keep any kind of own-
ership information. Key penalties are available if:
a company does not keep a register of members: USD 10 000.
a limited partnership does not keep a register containing details on
each partner: USD 100 for each day a general partner wilfully con-
travenes this obligation.
a service provider fails to comply with the CDD rules under the
AML/CFT legislation: USD 25 000 or imprisonment for a term not
exceeding two years, or both.
a company does not have a registered agent: USD 10 000.
a limited partnership does not have a registered agent: USD 100 for
each day a general partner wilfully contravenes this obligation.
92. In addition to the penalties related to a specific contravention, the
FSC has a wide range of enforcement powers in its regulatory toolkit in case
of a contravention of the Financial Services Commission Act, the Regulatory
Code and any other financial services legislation, which includes the BCA,
the Partnership Act and the CoP. These powers include applying to the Court
for a protection order (s. 39 Financial Services Commission Act), suspension
or revocation of a license (s. 38 Financial Services Commission Act) and the
imposition of administrative penalties ranging from USD 100 and USD 5 000
(s. 2(2) Financial Services (Administrative Penalties) Regulations).
93. No specific penalties apply in respect of the duties of authorised and
recognised custodians holding bearer shares. However, administrative penal-
ties and other enforcement powers as described in the previous paragraph can
be imposed on such custodians by the FSC.
94. The effectiveness of the enforcement provisions which are in place in
the Virgin Islands will be assessed as part of its Phase 2 review.
Determination and factors underlying recommendations
Determination
The element is in place, but certain aspects of the legal implementation
of the element need improvement.
Factors underlying
recommendations Recommendations
It is not clear under the Virgin Islands
Anti Money Laundering legislation
whether service providers are required
to identify all beneficial owners or
only certain owners. Consequently,
full ownership information may not be
available where a company has issued
bearer shares.
The Virgin Islands should clarify
its laws to ensure availability of
full ownership information where a
company has issued bearer shares.
It is only in relation to trusts which
the trusts service provider regards as
presenting a higher level of risk in
terms of money laundering or terrorist
financing, that beneficiaries with a
vested right in the trust have to be
identified.
The Virgin Islands should ensure
that information that identifies the
beneficiaries of a trust is available in
all cases.
A.2. Accounting records
Jurisdictions should ensure that reliable accounting records are kept for all
relevant entities and arrangements.
95. A condition for exchange of information for tax purposes to be effec-
tive, is that reliable information, foreseeably relevant to the tax requirements
of a requesting jurisdiction is available, or can be made available, in a timely
manner. This requires clear rules regarding the maintenance of accounting
records.
General requirements (ToR A.2.1)
96. Under section 98 BCA all Virgin Islands companies are required to
keep records that are sufficient to show and explain the companys transac-
tions and will, at any time, enable the financial position of the company to
be determined with reasonable accuracy. A company that fails to keep such
records is liable on summary conviction to a fine of USD 10 000. It is noted
that there is no express obligation to prepare financial statements or allow
them to be prepared under the Companies Act. With records explaining all
transactions (receipts, payments and other transactions) and sufficient to
determine the financial position of the company (assets, liabilities and other
rights and obligations having a bearing on the financial position), all elements
allowing for financial statements to be prepared seem present. Therefore the
existing rule may be considered sufficient to allow financial statements to be
prepared. Nevertheless, as no specific guidance has been issued in respect of
the type of accounting records to be kept, the existing requirements will be
further examined in the Phase 2 review of the Virgin Islands.
97. For partnerships, section 30 Partnership Act states that partners are
bound to render true accounts and full information of all things affecting the
partnership to any partner, his agents or representatives. In addition, section 81
Partnership Act prescribes that a limited partnership shall keep such accounts
and records as the partners consider necessary or desirable in order to reflect
the financial position of the limited partnership. Failing to do so results in the
partners being liable to a fine of USD 5 000 under the general provision that
any person who contravenes any provision of the Partnership Act commits an
offence (s. 113 Partnership Act). What kind of accounting records are to be kept
is left to the discretion of the partners and no guidelines are provided in the law.
It is not clear whether the existing obligations ensure that reliable accounting
records are available in all cases for general or limited partnerships.
98. Under common law all trustees resident in the Virgin Islands are
subject to the fiduciary duty to the beneficiaries to keep proper records and
accounts of their trusteeship. The Trustee Act does not hold an additional
obligation for a trust to keep any records. Only in the case of a purpose trust,
the Trustee Act (s. 84(21) and s. 84A(28)) requires one of the trustees to keep
the accounts of the trust within the Virgin Islands, but no further specifica-
tion of the nature of the accounts is prescribed. It is not clear whether the
existing obligations ensure that reliable accounting records are available in
all cases in respect of trusts.
Licensed persons
99. As mentioned in the Introduction, persons carrying on company man-
agement business, trust business, banking business, insurance business, financ-
ing business, money services business or investment business are required to
obtain a license from the FSC to do so. In regulating these businesses, addi-
tional requirements to keep accounting records apply. The regulating laws
11
all
contain a provision requiring the licensee to keep financial records that:
a. are sufficient to show and explain its transactions;
b. will, at any time, enable its financial position to be determined with
reasonable accuracy;
c. will enable them to prepare financial statements; and
d. will enable their financial statements to be audited.
100. Licensees are required to keep their financial records in the Virgin
Islands, either at their (principal) office or at a place of which the FSC is noti-
fied in writing. Foreign licensees (if applicable) shall at least keep accounting
records in the Virgin Islands in respect of the business it undertakes in the
Virgin Islands and shall notify the FSC in writing where the other financial
records are kept. Licensees failing to comply with the record keeping rules
commit an offence
12
. Under the Banks and Trust Companies Act and the
Company Management Act, licensees are then liable upon summary convic-
tion to a fine of USD 25 000 or to imprisonment for a term not exceeding
one year, or to both. Under the Insurance Act and the Financing and Money
Services Act, licensees are then liable upon summary conviction to a fine
of either USD 40 000 (corporate body) or USD 30 000 (individual). Mutual
funds failing to comply with the record keeping rules are liable upon sum-
mary conviction to a fine of USD 20 000 (corporate body) or USD 15 000
(individual). In addition, all licensees are subject to the wide range of
enforcement powers of the FSC as described under A.1.6.
11. Banks and Trust Companies Act (s. 17), Company Management Act (s. 17), Insur-
ance Act (s. 52), Financing and Money Services Act (s. 19) and Securities and
Investment Business Act (s. 17 and s. 59).
12. Except persons carrying on investment business other than mutual funds.
Records to be kept for customers of licensees
101. Section 38(1)(b) Regulatory Code requires all licensees to keep ade-
quate and orderly records of all services provided to, and transactions under-
taken for, its customers. All companies and limited partnerships are required
to have a licensed registered agent, but there is no obligation to conduct all
transactions through them or any other licensee. This requirement on licensees
does therefore not ensure availability of full accounting records for all compa-
nies and limited partnerships.
102. Most Virgin Islands trusts will have a professional trustee or admin-
istrator, which has to be a licensee under the Banks and Trust Companies
Act. In general, trustees or administrators will undertake all transactions
with respect to the trust and the requirement in section 38(1)(b) Regulatory
Code would therefore require records to be kept for most trusts. It is, how-
ever, not clear whether this obligation would satisfy the requirements of
aspect A.2.1 of the Terms of Reference as there is no express reference for
the trustee to be able to determine the financial position of the trust and this
does then also not necessarily allow for financial statements to be prepared.
Records to be kept under the AML/CFT legislation
103. Section 9 AMLR requires a relevant person to maintain a record of
all transactions carried out by or on behalf of its customer. A relevant person
includes any person whose business it is to act as a service provider, such as
registered agents and professional trustees. This language is very broad, and
implies that, although there is no obligation for companies or limited partner-
ships to conduct all transactions through its registered agent, the registered
agent must still keep records of all transactions carried out by the company
or limited partnership whether or not the agent is involved in the transaction.
However, the Virgin Islands advised that the reference to transactions car-
ried out by the customer refers to transactions reported by the customer to
the service provider as part of their business relationship.
104. In any case, the requirements under the AML/CFT legislation in
respect of accounting records only pertain to transactions. This does not
necessarily enable the financial position of the customer to be determined and
allow for financial statements to be prepared.
Underlying documentation (ToR A.2.2)
105. The BCA, the Partnership Act and the Trustee Act do not expressly
impose an obligation to retain underlying documentation, such as invoices,
contracts, etc.
AML/CFT legislation
106. The AML/CFT legislation requires records of transactions to be kept
from which investigating authorities will be able to compile an audit trail for
suspected money laundering (s. 9 AMLR). This may require that underly-
ing documentation in relation to those transactions should be kept. However,
as mentioned before, there is no obligation for any person to conduct all its
transactions through a service provider. In addition, the requirements under
the AML/CFT legislation only pertain to transactions, which does not cover
underlying documentation reflecting details of all assets and liabilities of a
person.
5-year retention standard (ToR A.2.3)
107. The BCA, the Partnership Act and the Trustee Act do not provide for
a minimum retention period of any records.
Licensed persons
108. Under the various laws governing licensees, it is required that they
keep all financial records for a period of at least five years (six years under
the Insurance Act) after the completion of the transaction to which they
relate. The same penalties for non-compliance apply
13
as described in para-
graph 100 above.
109. A retention period of at least five years for records kept by licensees
(except licensees licensed under the Securities and Investment Business
Act) is also required under the Regulatory Code (s. 39). Under this Code
(s. 38(1)(b)) licensees also have to keep records of transactions undertaken
for their customers. Under the Financial Services (Administrative Penalties)
Regulations the FSC can impose an administrative penalty between USD 500
and USD 5 000 in case a person fails to comply with this requirement.
AML/CFT legislation
110. Section 10 AMLR and section 45 CoP require that records pertaining
to a transaction are kept for a period of at least five years from the date the
business relationship was ended. Failing to comply with this obligation results
in the person being liable upon summary conviction to a fine not exceeding
13. Except for mutual funds.
Conclusions on A.2
111. Rules to keep accounting records are in place in the Virgin Islands
for companies and for persons holding a license to carry on certain business
only. There are also requirements for partnerships and trusts to maintain
certain forms of accounting records under a combination of common law, the
Partnership Act and the Trustee Act, regulatory rules and AML/CFT legis-
lation. However, the approach taken under the various rules is inconsistent
and focuses on keeping records of transactions only, which means that they
are not sufficient in terms of their comprehensiveness. Reliable accounting
records may therefore not be available for partnerships and trusts in all cases.
112. Requirements to keep underlying documentation as such and to main-
tain accounting records and underlying documentation for a period of at least
five years exist only under the AML/CFT legislation. However, the obligations
under the AML/CFT legislation apply to service providers only. These service
providers do not have the obligation to keep reliable accounting records of
their customers business, but generally only to keep records of transactions
performed through them. This means that accounting records including under-
lying documentation may not be available for a period of at least five years
with respect to companies, partnerships and trusts in all cases.
Determination
The element is not in place.
Factors underlying
There is no consistent obligation
for partnerships and trusts to keep
reliable accounting records.
The Virgin Islands should ensure
that reliable accounting records are
required to be kept by partnerships
and trusts in all cases.
Consistent requirements for
companies, partnerships and trusts
to keep underlying documentation are
not in place.
The Virgin Islands should ensure that
underlying documentation is required
to be kept by all relevant entities and
arrangements.
Except in limited cases pertaining
to persons licensed to carry on
financial services business, no
minimum retention period to maintain
accounting records and underlying
documentation exists.
all relevant entities and arrangements
maintain accounting records and
underlying documentation for a period
of at least five years.
A.3. Banking information
Banking information should be available for all account-holders.
113. Persons are only allowed to carry on banking business in or from
within the Virgin Islands if they hold a valid license for that purpose issued
by the FSC under the Banks and Trust Companies Act. There are currently 7
banks operating in or from within the Virgin Islands under a license.
Record-keeping requirements (ToR A.3.1)
114. There are no record-keeping requirements specifically designed
for banks and the accounts and transactions of its customers. As a licensee,
banks do have the obligation to keep adequate and orderly records which
must include all services provided to and transactions undertaken for cus-
tomers pursuant to section 38(1)(b) Regulatory Code. These records must be
maintained for a period of at least five years (s. 39(2) Regulatory Code) and
they should be sufficient to enable the FSC to monitor the compliance of the
bank with its regulatory and AML/CFT obligations.
115. Banks are also subject to AML/CFT legislation and under section 44
CoP they are required to take necessary measures to ensure that the following
records are maintained:
a. the name and address of the customer;
b. in the case of a monetary transaction, the kind of currency and amount
involved;
c. the beneficiary of the monetary transaction or product, including his
name and address;
d. where the transaction involves a customers account, the number,
name or other identifier with respect to the account;
e. the date of the transaction;
f. vthe nature of the transaction and, where the transaction involves secu-
rities and investment, the form in which funds are offered and paid out;
g. in the case of a transaction involving an electronic transfer of funds,
sufficient detail to enable the establishment of the identity of the cus-
tomer remitting the funds and compliance with paragraph (c);
h. account files and business correspondence with respect to a transac-
tion; and
i. sufficient details of the transaction for it to be properly understood.
116. Banks are required to maintain this information for a period of at
least five years (s. 45 CoP) and in case of non-compliance they are liable to a
fine not exceeding USD 25 000 or to imprisonment for a term not exceeding
two years, or both (s. 45(9) CoP).
117. The level of specificity of the requirements under the AML/CFT
legislation is much higher than under the Regulatory Code and they appear
to be sufficient to ensure availability of banking information (financial and
transactional information and account files) in the Virgin Islands.
Determination
The element is in place.
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 41
B. Access to Information
Overview
118. A variety of information may be needed in respect of the administration
and enforcement of relevant tax laws and jurisdictions should have the author-
ity to access all such information. This includes information held by banks and
other financial institutions as well as information concerning the ownership of
companies or the identity of interest holders in other persons or entities. This
section of the report examines whether the Virgin Islands legal and regulatory
framework gives to its competent authority access powers that cover all relevant
persons and information, and whether the rights and safeguards that are in place
would be compatible with effective exchange of information.
119. The Virgin Islands competent authority (the Financial Secretary or a
person or authority designated by him) has a broad power to obtain (i) infor-
mation held by a bank or other financial institution, or any person acting in an
agency or fiduciary capacity including a nominee or trustee; and (ii) informa-
tion regarding the beneficial ownership of a company, partnership or other
person. However, a power to obtain other information that is foreseeably
relevant for tax purposes, such as accounting records from persons other than
banks or other financial institutions, or persons acting in an agency or fiduci-
ary capacity, is not provided for. As a result, element B.1 is found to be not in
place and a recommendation has been made.
120. The access powers of the competent authority are usually exercised
by the issue of a notice to provide the information, and penalties are in place
in case of non-compliance. In addition, a search warrant can be obtained with
a Magistrate, both in the case of non-compliance and in cases where the com-
petent authority is of the opinion that the information is endangered.
121. The powers of the competent authority do not apply to items subject
to legal privilege. The information covered by legal privilege in the Virgin
Islands is in accordance with the standards. There are also no other secrecy
provisions which would prevent information to be obtained. Finally, no noti-
fication rights or similar procedures exist in the Virgin Islands which could
unduly prevent or delay the exchange of information.
42 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION
B.1. Competent Authoritys ability to obtain and provide information
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information).
122. The Financial Secretary or a person or authority designated by him
is the competent authority of the Virgin Islands. The execution of requests
for information is delegated to the Commissioner of Inland Revenue. The
Commissioners powers to obtain and provide information that is the subject
of a request under an exchange of information arrangement is derived from
the Mutual Legal Assistance (Tax Matters) Act (MLAA). Initially enacted to
establish the competent authoritys powers under the TIEA between the Virgin
Islands and the United States, it provides for the same powers under any simi-
lar agreement as has been provided for by Order of the Minister of Finance. So
far, such Order has been provided for in respect of each TIEA that is in force.
Ownership and identity information (ToR B.1.1)
123. Section 5(1) of the MLAA reads as follows:
The Authority may, for the purposes of complying with a request
under the Agreement, by notice in writing, require any person
to provide such information as may be specified in the notice,
provided that
a. the person is reasonably believed to have the information to
which the notice relates; and
b. the information requested is
i. information held by a bank or other financial institution,
or any person acting in an agency or fiduciary capacity,
including a nominee and trustee; or
ii. information regarding the beneficial ownership of a
company, partnership or other person.
124. The part of the quoted provision relating to ownership and identity
information (s. 5(1)(b)(ii) MLAA) is similar to the first part of Article 5(4)(b)
of the OECD Model TIEA, but it does not explicitly mention trusts or other
arrangements. The Virgin Islands confirmed that according to their inter-
pretation information regarding the beneficial ownership of trusts or other
arrangements is covered by this provision through the reference to other
person.
125. The Virgin Islands has no laws on bank secrecy, but the common law
principle of confidentiality is recognised and applied. However, for the pur-
poses of complying with a request for information under a TIEA, all informa-
tion held by banks, other financial institutions, and any person acting in an
agency or fiduciary capacity including nominees and trustees can be obtained
on the basis of section 5(1)(b)(i) MLAA. This provision is consistent with the
standard.
126. A notice to provide the information described above can be issued
to any person, provided that this person is reasonably believed to have the
information. The standard requires the competent authority to have the power
to obtain and provide information from any person within its territorial juris-
diction who is in the possession or control of such information. The Virgin
Islands confirmed that the word have in section 5(1)(a) MLAA is inter-
preted by the competent authority as encompassing possession or control.
127. There is no variation of the powers between instances where the
information is required to be kept pursuant to an explicit legal obligation,
or not. Also, the power of the competent authority to obtain the informa-
tion covered by section 5 MLAA extends to any person. The Virgin Islands
confirmed that this also comprises other government bodies and statutory
bodies, and that in practice notices have been issued to other government
agencies and that they were complied with.
128. Section 33C(3) of the Financial Services Commission Act states
that the FSC is not compelled to provide any assistance relating to matters
of taxation while cooperating with foreign regulatory authorities. A foreign
regulatory authority does generally not encompass tax authorities and the
Virgin Islands confirmed that this does not include cases of tax informa-
tion exchange under TIEAs. In case information is needed from the FSC
in this respect, this would be accommodated under usual department to
department cooperation following the procedure under section 5 MLAA:
section 33C (3) of the Financial Services Commission Act does not apply in
the case of a notice issued under section 5 of the MLAA. A Memorandum
of Understanding is currently being developed to facilitate administrative
matters between the competent authority and the FSC. It should be noted that
information in the Virgin Islands is generally available from sources other
than the FSC and that sole reliance on the FSC in respect of information that
is foreseeably relevant for tax purposes is unlikely to occur.
Accounting records (ToR B.1.2)
129. Section 5(1)(a) MLAA covers the same information as Article 5(4)(a)
of the OECD Model TIEA. It is therefore relevant to note that paragraph 47 of
the Commentary to the OECD Model TIEA states that Article 5(4)(a) should
not be taken to suggest that a competent authority is obliged only to have the
authority to obtain and provide information from the persons mentioned.
130. Section 5(1) MLAA is the only source of powers for the Virgin Islands
competent authority to obtain and provide information that is the subject of a
request under an exchange of information arrangement. As this provision only
applies in respect of information cited in section 5(1)(b) MLAA, access powers
are only granted where accounting records must be obtained from banks, other
financial institutions, or any person acting in an agency or fiduciary capacity
including a nominee and trustee.
131. The Virgin Islands takes the view that it has full access powers in
respect of all relevant information on the following basis:
The intention of enacting the MLAA was to comply with the terms of
the TIEAs (to be) concluded. This is reflected in section 3 of the MLAA.
Moreover, all TIEAs are implemented into the MLAA as a Schedule
and therefore become law. As the TIEAs oblige the Virgin Islands
to exchange all information foreseeably relevant to the domestic tax
laws of the requesting party, the access powers are not restricted to
only provide certain information.
In a judicial decision
14
it was observed that when Parliament is enact-
ing a statute [], the courts will assume that they had regard to the
provisions of the convention and intended to make the enactment accord
with the convention, and will interpret them [the statutes] accordingly.
132. In general, the TIEAs themselves do not contain a provision empower-
ing a contracting party to obtain information. It merely puts the obligation on
the contracting parties to obtain and exchange the information, but does not
provide any access powers to the Virgin Islands authorities. The latter needs
to be separately provided for, which is in fact what the Virgin Islands has done
through section 5(1) MLAA. The text of section 5(1) MLAA is very clear and
it is very difficult to see how it leaves room for an interpretation that the inten-
tion of the legislator takes precedence over the actual text. Not all information
is accessible through the use of this provision. Most notably, as noted above,
section 5(1) MLAA does not guarantee access to accounting information
(or, in fact, any information other than ownership information) in respect of
persons other than a bank, other financial institution, or any person acting
in an agency or fiduciary capacity including a nominee and trustee. As most
companies and partnerships will not be banks, other financial institutions, or
persons acting in an agency or fiduciary capacity, this could have a significant
impact on the Virgin Islands ability to obtain accounting information and
14. Court of Appeal in R v Chief Immigration Officer, Heathrow Airport & Anor, ex
parte Salamat Bibi [1976] 3 All ER 843.
other information that is foreseeably relevant for tax purposes and that is not
covered by section 5(1) MLAA.
133. It is noted that any information the registered agent of a company
or partnership is reasonably believed to have can be obtained. In fact, the
Virgin Islands has indicated that it has obtained accounting information in
respect of companies from registered agents under the MLAA. Nevertheless,
the provisions in the Virgin Islands law do not oblige the registered agent of
a company to keep full reliable accounting records of that company. While
under AML/CFT law, registered agents are required to keep records of due
diligence and identity, and of transactions where the registered agent is
involved, this does not necessarily comprise full accounting records (see
also element A.2). Thus the possibility to obtain information from regis-
tered agents of a company does not ensure access powers to obtain reliable
accounting information in all cases.
134. It is therefore recommended that the Virgin Islands ensures that its
competent authority be granted the power to obtain accounting records for all
relevant entities and arrangements and all other information that is foresee-
ably relevant for tax purposes.
Use of information gathering measures absent domestic tax interest
(ToR B.1.3)
135. The information gathering powers under the MLAA are not subject
to the Virgin Islands requiring such information for its own tax purposes. It
is noted that under the PTA (s. 17I) and the ITO (s. 58A), the Commissioner
of Inland Revenue has additional powers, including compulsory powers to
require any person to furnish information for the purposes of administering
these taxes.
Compulsory powers (ToR B.1.4)
136. According to section 5(3) MLAA the authorities may require the
requested information:
a. to be provided within such time as is specified in the notice;
b. to be provided in such form as the authorities may require; and
c. to be verified and authenticated in such manner as the authorities
may reasonably require.
137. This provides the authorities with the flexibility to comply with
a request for information in the manner which is most fit for the specific
request and as requested by the requesting party. How these powers are used
in practice will be assessed in the Phase 2 review of the Virgin Islands.
138. If a person fails to comply with a notice to provide information with-
out lawful or reasonable excuse, they are liable on summary conviction to a
fine not exceeding USD 5 000 or to imprisonment for a term not exceeding
two years, or both (s. 5(6) MLAA). It will be decided by the Court whether a
person indeed does have a lawful or reasonable excuse.
139. In addition to the penalties described above, the authorities may apply
to a Magistrate for a search warrant if a person fails to comply with a notice
to provide information or only partially complies. For a search warrant to
be issued without further inquiry, it shall be sufficient that the competent
authority give a certificate that the issue of a search warrant is required for
the purposes of complying with a request (s. 6(1) MLAA). The Magistrate
may authorise a named representative of the competent authority, together
with a police officer and any other person named in the search warrant:
a. to enter the premises specified in the warrant at any time within one
month from the date of the warrant;
b. to search the premises and take possession of any information appearing
to be information of a type in respect of which the warrant was issued or
to take, in relation to such information, any other steps which appear to
be necessary for preserving or preventing interference with them;
c. to take copies of, or extracts from, any information appearing to be
information of a type in respect of which the warrant was issued;
d. to require any person on the premises to provide an explanation of
any information appearing to be information of a type of which the
warrant was issued or to state where such information may be found;
and
e. to use such force as may be reasonably necessary to execute the warrant.
140. The procedure to obtain a search warrant seems to be such that it is
automatically issued where the competent authority gives a certificate that a
search warrant is necessary. In combination with the penalties which apply for
failing to comply with a notice to provide information, the Virgin Islands has
sufficiently strong compulsory powers to compel the production of information.
Secrecy provisions (ToR B.1.5)
141. The common law principle of confidentiality is recognised and applied
in the Virgin Islands. However, this principle is overridden by the powers of the
competent authority to obtain information pursuant to the MLAA. Section 8
MLAA specifically provides that where a person discloses information for
the purposes of a request (being a request received by the Virgin Islands), this
person shall be deemed not to commit an offence.
142. Section 5(2) MLAA specifically provides that the competent author-
itys powers to obtain information do not apply to items subject to legal
privilege. A definition of legal privilege can be found in the Evidence Act
and applies to information that may or may not be qualified as evidence in a
court case. Section 22 reads:
(1) Subject to this Act, a legal practitioner or his client shall not be com-
pelled to disclose any confidential communication, oral or written,
which passed between them directly or indirectly through an agent
of either, if such communication was made for the purpose of obtain-
ing or giving legal advice.
(2) Subsection (1) does not apply unless the communication was made
to or by the legal practitioner in his professional capacity or by the
client while the relationship of client and legal practitioner sub-
sisted, whether or not litigation was pending or contemplated.
(3) No claim of privilege shall be allowed if the communication between
a client and his legal practitioner was made for the purpose of com-
mitting a fraud, crime or other wrongful act.
143. This definition is in accordance with the standards. Although there
may not be a formal direct application of this definition to the MLAA, it can
be expected that where a person would rely on legal privilege in order not to
have to provide information under the MLAA, this definition will be used to
determine the validity of his or her claim in a court of law.
Determination
Factors underlying
The powers of the Virgin Islands
competent authority to obtain and
exchange information under an
information exchange agreement
applies only to (a) information held by
a bank or other financial institution,
or any person acting in an agency
or fiduciary capacity, including a
nominee or trustee, or (b) information
that relates to the beneficial
ownership of a company, partnership
or other person.
its competent authority has the power,
for the purposes of tax information
exchange, to obtain information
from any person that may be in
possession or control of information
that is foreseeably relevant to the
administration and enforcement of the
domestic tax laws of the requesting
jurisdiction.
B.2. Notification requirements and rights and safeguards
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information.
144. There is no requirement in the Virgin Islands domestic legislation
that the taxpayer under investigation or examination must be notified of a
request. The regular procedure to obtain information is described under B.1
and includes the issue of a notice to provide the information to the person
reasonably believed to have the information.
Not unduly prevent or delay exchange of information (ToR B.2.1)
145. The person who is issued a notice to provide the information has no
formal right of appeal, although section 5(6) MLAA provides for a penalty
for non-compliance only where that person does not have a lawful or rea-
sonable excuse, for example if this person can demonstrate that he neither
has the information nor is he required to have it. Where the person does not
comply with a notice, such person can be brought to Court and be charged
with failure to provide information as required to by notice. Alternatively, the
authorities may apply to a Magistrate for a search warrant as described under
B.1.4 in this report.
146. An exception to the issue of a notice to provide the information is
provided for in cases where the competent authority is of the opinion that
if a notice would be issued, it would not be complied with or the documents
or information to which the notice relates may be removed, tampered with
or destroyed (s. 6(1)(b) MLAA). In such cases, the competent authority may
apply to the Magistrate for a search warrant under the same procedures as
described under B.1.4 in this report.
Determination
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 49
C. Exchanging Information
Overview
147. Jurisdictions generally cannot exchange information for tax pur-
poses unless they have a legal basis or mechanism for doing so. In the Virgin
Islands, the legal authority to exchange information derives from its exchange
of information agreements, as soon as an Order by the Minister of Finance
has been provided for which gives effect to the MLAA for the specified
agreement. This section of the report examines whether the Virgin Islands
has a network of information exchange that would allow it to achieve effec-
tive exchange of information in practice.
148. The Virgin Islands has been and still is actively negotiating TIEAs,
having concluded 16 agreements since May 2009, and having 12 under nego-
tiation. A list of all signed agreements (22 in total) can be found in Annex 2,
and cover a range of relevant partners. The TIEAs contain all provisions
which allow the Virgin Islands to exchange all foreseeably relevant informa-
tion. Currently, nine of the TIEAs are in force. In respect of the other TIEAs,
it is recommended that the Virgin Islands quickly takes all steps necessary
for them to enter into force.
149. The confidentiality of information exchanged with the Virgin Islands
is protected by obligations implemented in the agreements, supplemented by
domestic legislation which provides for an oath of secrecy taken and observed
by all public officers and specific provisions to protect confidentiality of infor-
mation contained in a request for information received by the Virgin Islands.
This domestic legislation is supported by penalties for non-compliance.
150. Under all of the Virgin Islands TIEAs the contracting parties are not
obliged to provide information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or information
the disclosure of which would be contrary to public policy. There are also no
legal restrictions on the ability of the Virgin Islands competent authority to
respond to requests within 90 days of receipt by providing the information
requested or by providing an update on the status of the request.
50 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION
151. While the Virgin Islands information exchange agreements generally
allow for exchange of information to the international standard, shortcomings
identified in Part B of this report mean that the Virgin Islands may not be
able to comply fully with the terms of these agreements.
C.1. Exchange of information mechanisms
Exchange of information mechanisms should allow for effective exchange of information.
152. The Virgin Islands is signatory to TIEAs with 21 jurisdictions (see
Annex 2). Also, a DTC applies between the Virgin Islands and Switzerland,
which is an extension of a former DTC (1954) between the United Kingdom
and Switzerland. This DTC contains a number of restrictions, of which the
most important ones are as follows. The DTC limits the exchange of infor-
mation to information as is necessary for carrying out the provisions of the
Convention, as opposed to for the administration of the domestic tax laws.
In addition, it does not contain a provision corresponding with Article 26(5)
of the OECD Model Tax Convention regarding bank information. Although
the Virgin Islands is able to exchange bank information on a reciprocal basis
in the absence of such provision, Switzerland is not. Because of these restric-
tions, the DTC with Switzerland does not allow the Virgin Islands to exchange
information in accordance with the international standard. The Virgin Islands
advised that it is currently in contact with Switzerland to negotiate an infor-
mation exchange mechanism that does allow for exchange of information in
accordance with the international standard. The current DTC with Switzerland
is not further considered in this section, which will focus on whether the
Virgin Islands TIEAs allow it to effectively exchange information.
Foreseeably relevant standard (ToR C.1.1)
153. The international standard for exchange of information envisages infor-
mation exchange to the widest possible extent. Nevertheless it does not allow
fishing expeditions, i.e. speculative requests for information that have no
apparent nexus to an open inquiry or investigation. The balance between these
two competing considerations is captured in the standard of foreseeable rel-
evance which is included in Article 1 of the OECD Model TIEA, set out below:
The competent authorities of the Contracting Parties shall provide assis-
tance through exchange of information that is foreseeably relevant to the
administration and enforcement of the domestic laws of the Contracting
Parties concerning taxes covered by this Agreement. Such information shall
include information that is foreseeably relevant to the determination, assess-
ment and collection of such taxes, the recovery and enforcement of tax claims,
or the investigation or prosecution of tax matters.
154. One variation which appears in most of the Virgin Islands TIEAs
15

(generally found in Article 5(5)(c) of the TIEAs) is that there is no obligation
to obtain or provide information in the possession or control of a person
other than the taxpayer that does not directly relate to the taxpayer. The
Virgin Islands advises that this language is meant to prevent fishing expedi-
tions. However, it is unclear how it would be determined in practice whether
information relates directly to the taxpayer or not. The extent to which this
rule prevents the effective exchange of information, if at all, will be assessed
in the Phase 2 review of the Virgin Islands. Notwithstanding this variation, all
of the Virgin Islands TIEAs are considered to meet the foreseeably relevant
standard.
In respect of all persons (ToR C.1.2)
155. For EOI to be effective it is necessary that a jurisdictions obligations
to provide information are not restricted by the residence or nationality of
the person to whom the information relates or by the residence or nationality
of the person in possession or control of the information requested. For this
reason the international standard for EOI envisages that EOI mechanisms will
provide for exchange of information in respect of all persons.
156. All TIEAs concluded by the Virgin Islands allow for exchange of
information in respect of all persons.
Obligation to exchange all types of information (ToR C.1.3)
157. Jurisdictions cannot engage in effective exchange of information if
they cannot exchange information held by financial institutions, nominees or
persons acting in an agency or a fiduciary capacity. Both the OECD Model
Convention and the OECD Model TIEA, which are primary authoritative
sources of the standards, stipulate that bank secrecy cannot form the basis for
declining a request to provide information and that a request for information
cannot be declined solely because the information is held by nominees or
persons acting in an agency or fiduciary capacity or because the information
relates to an ownership interest.
158. All TIEAs concluded by the Virgin Islands contain a provision similar
to Article 5(4) of the OECD Model TIEA, which ensures that the requested
jurisdiction shall not decline to supply the information requested solely
because it is held by a financial institution, nominee or person acting in an
agency or a fiduciary capacity, or because it relates to ownership interests in a
person.
15. Only the TIEAs with Australia, France, New Zealand, Portugal and the United
States do not contain this variation.
Absence of domestic tax interest (ToR C.1.4)
159. The concept of domestic tax interest describes a situation where a
contracting party can only provide information to another contracting party
if it has an interest in the requested information for its own tax purposes. A
refusal to provide information based on a domestic tax interest requirement
is not consistent with the international standard. Jurisdictions must be able
to use their information gathering measures even though invoked solely to
obtain and provide information to the requesting jurisdiction.
160. All TIEAs concluded by the Virgin Islands contain a provision simi-
lar to Article 5(2) of the OECD Model TIEA, which allows information to
be obtained and exchanged notwithstanding it is not required for a Virgin
Islands domestic tax purpose.
Absence of dual criminality principles (ToR C.1.5)
161. The principle of dual criminality provides that assistance can only be
provided if the conduct being investigated (and giving rise to the information
request) would constitute a crime under the laws of the requested country if
it had occurred in the requested country. In order to be effective, exchange of
information should not be constrained by the application of the dual criminal-
ity principle.
162. None of the TIEAs concluded by the Virgin Islands applies the dual
criminality principle to restrict the exchange of information.
Exchange of information in both civil and criminal tax matters
(ToR C.1.6)
163. Information exchange may be requested both for tax administration
purposes and for tax prosecution purposes. The international standard is not
limited to information exchange in criminal tax matters but extends to infor-
mation requested for tax administration purposes (also referred to as civil
tax matters).
164. All of the TIEAs concluded by the Virgin Islands cover both civil and
criminal tax matters.
Provide information in specific form requested (ToR C.1.7)
165. In some cases, a Contracting State may need to receive information
in a particular form to satisfy its evidentiary or other legal requirements.
Such forms may include depositions of witnesses and authenticated copies
of original records. Contracting States should endeavour as far as possible to
accommodate such requests. The requested State may decline to provide the
information in the specific form requested if, for instance, the requested form
is not known or permitted under its law or administrative practice. A refusal
to provide the information in the form requested does not affect the obligation
to provide the information.
166. All of the TIEAs concluded by the Virgin Islands allow for informa-
tion to be provided in the specific form requested. In addition, section 5(3)
(b) MLAA provides the Virgin Islands authorities with the power to ask any
information to be provided in such form as may be required.
In force (ToR C.1.8)
167. Exchange of information cannot take place unless a jurisdiction has
exchange of information arrangements in force. Where such arrangements
have been signed, the international standard requires that jurisdictions must
take all steps necessary to bring them into force expeditiously.
168. When a TIEA has been signed by the Virgin Islands, the procedure
of bringing it into force encompasses the publication of the text in the offi-
cial Gazette. The Virgin Islands generally sends a letter to the TIEA partner
notifying them that the ratification procedure in the Virgin Islands has been
finalised after publication in the official Gazette. The following table shows
the status of the signed TIEAs:
16
Jurisdiction Date of signing Date gazetted
Date the Virgin
Islands sent
notification
Date of entering
into force
Aruba 11 September 2009
Australia 27 October 2008 1 April 2010 12 April 2010 19 April 2010
China
(Peoples Rep.)
7 December 2009 9 December 2010 11 February 2010 30 December 2010
Curaao
16
11 September 2009
Denmark 18 May 2009 1 April 2010 12 April 2010 15 April 2010
16. Following the dissolution of the Netherlands Antilles on 10 October 2010, two
separate jurisdictions were formed (Curaao and Sint Maarten) with the remain-
ing three islands (Bonaire, Sint Eustatius and Saba) joining the Netherlands as
special municipalities. The TIEA concluded with the Kingdom of the Netherlands,
on behalf of the Netherlands Antilles, will continue to apply to Curaao, Sint
Maarten and the Caribbean part of the Netherlands (Bonaire, Sint Eustatius and
Saba) and will be administered by Curaao and Sint Maarten for their respective
territories and by the Netherlands for Bonaire, Sint Eustatius and Saba.
Jurisdiction Date of signing Date gazetted
Date the Virgin
Islands sent
notification
Date of entering
into force
Faroe Islands 18 May 2009 1 April 2010
Finland 18 May 2009 1 April 2010 12 April 2010 15 April 2010
France 17 June 2009 1 April 2010 29 October 2010 18 November 2010
Germany 5 October 2010 23 December 2010
Greenland 18 May 2009 1 April 2010
Iceland 18 May 2009 1 April 2010
India 9 February 2011
Ireland 7 December 2009 9 December 2010 28 February 2011 28 February 2011
Netherlands 11 September 2009 1 April 2010
New Zealand 13 August 2009 1 April 2010
Norway 18 May 2009 1 April 2010 15 April 2010 15 April 2010
Portugal 5 October 2010 23 December 2010
Sint Maarten
17
11 September 2009
Sweden 18 May 2009 1 April 2010 13 April 2010 16 May 2010
United Kingdom 29 October 2008 1 April 2010 12 April 2010 12 April 2010
United States 3 April 2002 Date unknown Date unknown 10 March 2006
169.
17
Of the 21 TIEAs signed, 10 are in force. Of the 11 agreements which are
not in force, 8 were signed (almost) two years ago and 5 were gazetted more than
one year ago, leaving only the notification as the final step for the Virgin Islands
to bring the TIEAs into force (which of course also requires the notification
of its treaty partners). The Virgin Islands has not yet sent notifications to their
treaty partners where all internal formalities required to bring the agreement
into force, are complied with, even in cases where the Virgin Islands internal
procedures have been finalised more than one year ago. These delays can have
important consequences for effective exchange of information, notably with
respect to the application of the agreement to civil tax matters, where the TIEAs
will generally only apply for taxable periods beginning after the TIEA comes
into force. It is recommended that the Virgin Islands quickly takes all steps nec-
essary for the agreements to enter into force.
17. See footnote 16.
Be given effect through domestic law (ToR C.1.9)
170. For information exchange to be effective, the parties to an exchange
of information arrangement need to enact any legislation necessary to comply
with the terms of the arrangement.
171. The MLAA was enacted to allow the Virgin Islands to comply with its
exchange of information agreements. An Order of the Minister of Finance has
to be provided for in order for this Act to be effective in respect of an agree-
ment as specified in such Order. Orders have been provided for in respect of
all TIEAs currently in force, and also for most of the TIEAs signed.
172. As identified in Part B of this Report, the powers of the Virgin Islands
competent authority to obtain information that is foreseeably relevant for tax
purposes is limited, which prevents the Virgin Islands from fully complying
with the terms of its TIEAs.
Determination
Factors underlying
Although 21 TIEAs concluded by
the Virgin Islands, to date 10 have
been ratified and entered into force.
Of the other 12 agreements, 8 were
signed almost two years ago and in
the case of 7 TIEAs the Virgin Islands
only needs to send a notification to
its treaty partner, meaning that not all
steps have been taken by the Virgin
Islands to bring them into force.
The Virgin Islands should take all
necessary steps to bring its EOI
agreements into force as quickly as
possible.
The Virgin Islands legal and
regulatory framework does not allow
its competent authority to fully comply
with the terms of its TIEAs due to
limited access powers.
The Virgin Islands should amend its
legal and regulatory framework in
order to be able to fully comply with
the terms of its TIEAs.
C.2. Exchange of information mechanisms with all relevant partners
The jurisdictions network of information exchange mechanisms should cover
all relevant partners.
173. Ultimately, the international standard requires that jurisdictions
exchange information with all relevant partners, meaning those partners
who are interested in entering into an information exchange arrangement.
Agreements cannot be concluded only with counterparties without economic
significance. If it appears that a jurisdiction is refusing to enter into agree-
ments or negotiations with partners, in particular ones that have a reasonable
expectation of requiring information from that jurisdiction in order to prop-
erly administer and enforce its tax laws it may indicate a lack of commitment
to implement the standards.
174. As at 23 March 2011, the Virgin Islands has signed 21 TIEAs to the
standard. The Virgin Islands first TIEA was signed in 2002 (in force since
2006) with one of its main trading partners, the United States. The treaty
partners of the Virgin Islands include:
3 of its main trading partners;
14 OECD member economies;
7 jurisdictions which are members of the G20; and
19 Global Forum member jurisdictions.
175. The Virgin Islands authority to negotiate and conclude agreements
is based on the constitutional mandate of the United Kingdom. The current
mandate is laid down in a letter of entrustment and it comprises the nego-
tiation of TIEAs with members of the G20, OECD and EU, as well as all
jurisdictions which are on the OECDs white list of jurisdictions which have
substantially implemented the international standard. There is also a possibil-
ity to grant ad hoc entrustments where another jurisdiction has requested to
negotiate an agreement with the Virgin Islands.
176. Comments were sought from the jurisdictions participating in the
Global Forum in the course of the preparation of this report, and no juris-
diction advised the assessment team that the Virgin Islands had refused to
negotiate or conclude an EOI agreement with it.
Determination
The element is in place, but certain aspects of the legal implementation
of the element need improvement.
Factors underlying
The Virgin Islands has a network
of EOI arrangements with relevant
partners but they have not been given
full effect through domestic law.
The Virgin Islands should ensure it
gives full effect to the terms of its EOI
arrangements in order to allow for
full exchange of information to the
standard with all relevant partners.
The Virgin Islands should continue
to develop its EOI network with all
relevant partners.
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate
provisions to ensure the confidentiality of information received.
Information received: disclosure, use, and safeguards (ToR C.3.1)
177. Governments would not engage in information exchange without the
assurance that the information provided would only be used for the purposes
permitted under the exchange mechanism and that its confidentiality would
be preserved. Information exchange instruments must therefore contain confi-
dentiality provisions that spell out specifically to whom the information can be
disclosed and the purposes for which the information can be used. In addition
to the protections afforded by the confidentiality provisions of information
exchange instruments, jurisdictions with tax systems generally impose strict
confidentiality requirements on information collected for tax purposes.
178. All of the exchange of information agreements concluded by the
Virgin Islands contain a provision ensuring the confidentiality of informa-
tion exchanged and limiting the disclosure and use of information received,
which has to be respected by the Virgin Islands as a party to these agree-
ments. In addition, all public officers in the Virgin Islands are required to
take and observe an oath of secrecy as part of their contract of service with
the Government. A breach of the oath is a misconduct for which a person may
be disciplined under the General Orders for the Public Service of the Virgin
Islands.
All other information exchanged (ToR C.3.2)
179. Confidentiality rules should apply to all types of information
exchanged, including information provided in a request, background docu-
ments to such requests, and any other documents or communications reflect-
ing such information.
180. Besides the general secrecy provisions for public officers (see C.3.1),
section 9(1) MLAA secures the confidentiality of information provided in
a request for information received by the Virgin Islands and precludes that
such information will be supplied to any other persons except in case it is in
accordance with the agreement under which the request has been received.
Any person in violation of this provision is liable to a fine not exceeding
181. To comply with a request for information, confidential information
will usually have to be disclosed to relevant authorities or other persons. As a
provision supplementing section 9(1), section 8 MLAA specifically provides
that in case a person discloses such information for the purposes of a request
(being a request received by the Virgin Islands), this person shall be deemed
not to commit an offence.
Determination
C.4. Rights and safeguards of taxpayers and third parties
The exchange of information mechanisms should respect the rights and
safeguards of taxpayers and third parties.
Exceptions to requirement to provide information (ToR C.4.1)
182. The international standard allows requested parties not to supply
information in response to a request in certain identified situations. In line
with the standard, under all of the Virgin Islands TIEAs the contracting par-
ties are not obliged to provide information which would disclose any trade,
business, industrial, commercial or professional secret or trade process, or
information the disclosure of which would be contrary to public policy. The
DTC with Switzerland does not cover commercial secrets and includes a res-
ervation for the contracting parties sovereignty and security in addition to
their public policy.
183. Most of the Virgin Islands TIEAs
18
contain an addition to Article 7(6)
of the OECD Model TIEA. The Virgin Islands TIEAs do not only allow for
declining a request for information where the information would be used to
administer or enforce a provision of the requesting jurisdictions tax law which
discriminates against a national of the requested party, but also where a provi-
sion of the tax law discriminates against a resident of the requested party if it
is in the same circumstances as a resident of the requesting party. This means
that no obligation to exchange information would exist, for example, where the
requesting party intends to use this information to administer a withholding
tax on a Virgin Islands resident, while such withholding tax does not exist for
residents of the requesting party. For international tax purposes, tax rules that
differ only on the basis of residency are universally accepted (see for example
Article 24(1) of the OECD Model Tax Convention and its Commentary, and
the Commentary on Article 7(6) of the OECD Model TIEA).
184. The reason for introducing this provision is to make it absolutely clear
that persons holding a certificate of residence of the Virgin Islands are covered
by this provision, as they are also covered by the definition of national in the
Virgin Islands TIEAs. The Virgin Islands confirmed that it has no intention to
apply the provision differently from the international standard. Nevertheless,
the provision has the potential to impede the effective exchange of information
in certain cases (see the example above) and it is recommended that the Virgin
Islands clarifies its position in any future agreements. The extent to which this
provision prevents the effective exchange of information will be assessed in
the Phase 2 review of the Virgin Islands.
185. An information request can be declined where the requested infor-
mation would reveal confidential communications protected by attorney-
client privilege. However, limitations generally apply to this privilege. This
is reflected in Article 7(3) of the OECD Model TIEA, which can be found in
many of the Virgin Islands TIEAs. Three of the Virgin Islands TIEAs (with
France, Germany and Portugal) only contain a provision stating that there is no
obligation to provide items or information subject to legal privilege, but do
not define this phrase. The TIEA with Portugal contains in addition a provision
equivalent to Article 7(3) of the OECD Model TIEA. Without a definition, the
Virgin Islands will rely on domestic law. Reference is made to section B.1.5 of
this report for an analysis of the Virgin Islands domestic law on this issue.
186. Under the TIEAs with Australia and New Zealand the phrase infor-
mation subject to legal privilege is defined as follows:
(i) communications between a professional legal advisor and a client
made in connection with the giving of legal advice to the client;
18. Only the TIEAs with Australia, China (Peoples Rep.), France, Ireland, New Zealand,
Portugal and the United States do not contain this addition.
(ii) communications between a professional legal advisor and a
client or any person representing the client or between such an
advisor or the client or any such representative and any other
person made in connection with or in contemplation of legal
proceedings and for the purposes of such proceedings; and
(iii) information enclosed with or referred to in such communications
and made:
(A) in connection with the giving of legal advice; or
(B) in connection with or in contemplation of legal proceedings
and for the purposes of such proceedings,
when the information is in the possession of a person who is entitled
to possession of it. Information held with the intention of furthering
a criminal purpose is not subject to legal privilege, and nothing in
this Article shall prevent a professional legal advisor from providing
the name and address of a client where doing so would not constitute
a breach of legal privilege;
187. The TIEA with the United States contains a similar provision. This
definition appears to include information enclosed within a communication
between an attorney or client and any other person (who is not an attorney-at-
law), which would be beyond the exemption for attorney client privilege under
the international standard. As the Virgin Islands domestic legislation contains
a definition of the term legal privilege which is in accordance with the
international standard (see section B.1.5), it is likely that information can be
provided in all cases prescribed by the international standard in this respect.
Determination
C.5. Timeliness of responses to requests for information
The jurisdiction should provide information under its network of agreements
in a timely manner.
Responses within 90 days (ToR C.5.1)
188. In order for exchange of information to be effective it needs to be pro-
vided in a timeframe which allows the tax authorities to apply the informa-
tion to the relevant cases. If a response is provided but only after a significant
lapse of time the information may no longer be of use to the requesting
authorities. This is particularly important in the context of international
cooperation as cases in this area must be of sufficient importance to warrant
making a request.
189. There are no specific legal or regulatory requirements in place which
would prevent the Virgin Islands responding to a request for information by
providing the information requested or providing a status update within 90
days of receipt of the request, which is the standard and the rule laid down in
almost all of the Virgin Islands exchange of information agreements
19
.
190. As regards the timeliness of responses to requests for information,
the assessment team is not in a position to evaluate whether this aspect is
in place, as it involves issues of practice that are dealt with in the Phase 2
review.
Organisational process and resources (ToR C.5.2)
191. The Virgin Islands Ministry of Finance is responsible for all mat-
ters regarding tax, including the exchange of information in tax matters.
The competent authority with respect to the exchange of information under
the Virgin Islands TIEAs is the Financial Secretary or a person or authority
designated by him. A review of the Virgin Islands organisational process and
resources will be conducted in the context of its Phase 2 review.
Absence of restrictive conditions on exchange of information
(ToR C.5.3)
192. There are no specific legal and regulatory requirements in place
which impose restrictive conditions on the Virgin Islands exchange of infor-
mation practice. However, the assessment team is not in a position to evaluate
whether this aspect is in place, as it involves issues of practice that are dealt
with in the Phase 2 review.
Determination
The assessment team is not in a position to evaluate whether this
element is in place, as it involves issues of practice that are dealt with in
the Phase 2 review.
19. The TIEAs with Portugal and the United States and the DTC with Switzerland
do not provide for a specific time period within which a(n initial) response to an
information request is required.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 63
Summary of Determinations
and Factors Underlying Recommendations
Determination
Factors underlying
Jurisdictions should ensure that ownership and identity information for all relevant entities
and arrangements is available to their competent authorities (ToR A.1)
The element is in
place, but certain
aspects of the legal
implementation of
the element need
improvement
It is not clear under the Virgin
Islands Anti Money Laundering
legislation whether service
providers are required to
identify all beneficial owners
or only certain owners.
Consequently, full ownership
information may not be
available where a company
has issued bearer shares.
The Virgin Islands should
clarify its laws to ensure
availability of full ownership
information where a company
has issued bearer shares.
It is only in relation to trusts
which the trusts service
provider regards as presenting
a higher level of risk in
terms of money laundering
or terrorist financing, that
beneficiaries with a vested
right in the trust have to be
identified.
ensure that information that
identifies the beneficiaries
of a trust is available in all
cases.
64 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Determination
Factors underlying
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities
and arrangements (ToR A.2)
The element is not in
place
There is no consistent
obligation for partnerships
and trusts to keep reliable
accounting records.
ensure that reliable account-
ing records are required to
be kept by partnerships and
trusts in all cases.
Consistent requirements for
companies, partnerships
and trusts to keep underlying
documentation are not in
place.
ensure that underlying
documentation is required to
be kept by all relevant entities
and arrangements.
Except in limited cases pertain-
ing to mutual funds or persons
licensed to carry on financial
services business, no minimum
retention period to maintain
accounting records and under-
lying documentation exists.
ensure that all relevant
entities and arrangements
maintain accounting records
and underlying documentation
for a period of at least five
years.
Banking information should be available for all account-holders (ToR A.3)
The element is in place
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information) (Tor B.1)
place
The powers of the Virgin Islands
competent authority to obtain
and exchange information
under an information exchange
agreement applies only to
(a) information held by a bank
or other financial institution, or
any person acting in an agency
or fiduciary capacity, including a
nominee or trustee, or (b) infor-
mation that relates to the ben-
eficial ownership of a company,
partnership or other person.
ensure that its competent
authority has the power,
for the purposes of tax
information exchange, to
obtain information from
any person that may be in
possession or control of
information that is foreseeably
relevant to the administration
and enforcement of the
domestic tax laws of the
requesting jurisdiction.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 65
Determination
Factors underlying
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information (ToR B.2)
Exchange of information mechanisms should allow for effective exchange of information
(ToR C.1)
place
Although 21 TIEAs concluded
by the Virgin Islands, to date 9
have been ratified and entered
into force. Of the other 12
agreements, 8 were signed
almost two years ago and
in the case of 7 TIEAs the
Virgin Islands only needs to
send a notification to its treaty
partner, meaning that not all
steps have been taken by the
Virgin Islands to bring them
into force.
The Virgin Islands should take
all necessary steps to bring
its EOI agreements into force
as quickly as possible.
The Virgin Islands legal and
regulatory framework does not
allow its competent authority to
fully comply with the terms of
its TIEAs due to limited access
powers.
amend its legal and regulatory
framework in order to be able
to fully comply with the terms
of its TIEAs.
The jurisdictions network of information exchange mechanisms should cover all relevant
partners (ToR C.2)
The element is in
place, but certain
aspects of the legal
implementation of
the element need
improvement
The Virgin Islands has a
network of EOI arrangements
with relevant partners but they
have not been given full effect
through domestic law.
ensure it gives full effect
to the terms of its EOI
arrangements in order to
allow for full exchange of
information to the standard
with all relevant partners.
continue to develop its EOI
network with all relevant
partners.
The jurisdictions mechanisms for exchange of information should have adequate provisions
to ensure the confidentiality of information received (ToR C.3)
66 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Determination
Factors underlying
The exchange of information mechanisms should respect the rights and safeguards of
taxpayers and third parties (ToR C.4)
The jurisdiction should provide information under its network of agreements in a timely
manner (ToR C.5)
The element is not
assessed
The assessment team is not in
a position to evaluate whether
this element is in place, as it
involves issues of practice that
are dealt with in the Phase 2
review.
ANNEXES 67
Annex 1: Jurisdictions Response to the Review Report
20
The Virgin Islands is grateful for the support that it has received from
the Assessors and the Secretariat in producing this Report to date. We accept
the findings of the Peer Review Group and are resolved to submit a prompt
follow-up in order for a Supplementary Report to be considered by the PRG
at its next meeting.
A.2 Accounting Records
The Virgin Islands recognises that effecting the recommendations out-
lined in respect of this Element will require legislative changes. As a conse-
quence, the Virgin Islands has undertaken to review its current legislative
regimes governing the entities concerned as per the recommendations and
to prescribe the minimum period of record retention as currently exists for
AML/CFT purposes.
B.2 Competent Authoritys ability to obtain and provide information
The Virgin Islands Legislature had on 13th July, 2011 amended the
Mutual Legal Assistance (Tax Matters) Act, 2003 through the Mutual Legal
Assistance (Tax Matters) (Amendment) Act whereby the central authority
is now specifically mandated to deal with any matter that is the subject of a
request in a manner as would be consistent with and satisfy the requirements
of a TIEA, notwithstanding anything to the contrary that may be contained
in the MLAA. Such act by the central authority shall be treated as a power
the Authority has by virtue of [the] Act to exercise (new section 3 (4)). This
effectively gives the TIEAs precedence over the provisions of the Act and
any power that is required to be exercised by virtue of any TIEA may be
exercised as if the power had been granted under the Act.
20. This Annex presents the Jurisdictions response to the review report and shall not
be deemed to respresent the Global Forums views.
68 ANNEXES
In addition, section 5 of the MLAA has been amended to expand the
scope of the listings in subsection (1) (i) to include any other person or
entity. Thus the access powers exercisable by the central authority under
section 5 are in relation to all persons therein identified, including any other
person or entity (as well as all companies and partnerships) that are not spe-
cifically named in the section.
These amendments are consistent with current interpretation and appli-
cation of the law in relation to all requests for assistance in tax matters with
regard to all persons and entities and in respect of any information (including
accounting records). However, it is to be noted that the amendments to the
MLAA now provide the necessary clarity to the Virgin Islands legal frame-
work to ensure a clear power to access and exchange information on tax
matters. It should also be noted that the Virgin Islands Legislature has also
amended the FSCA in sections 32 and 33C to give unequivocal recognition to
the FSCs mandate to act on the basis of a request for information from any
central authority acting in accordance with an enactment. This includes the
central authority under the MLAA.
C.1. Exchange of information mechanisms
The Virgin Islands will swiftly complete all its internal procedures in respect
of the few TIEAs it has not done so and expects that the respective treaty
partners will have been notified by the time this report is published.
Finally, the Virgin Islands reaffirms its commitment to continue participating
fully in the Peer Review process, carry out necessary reforms to its existing
tax information exchange framework and render necessary assistance in
accordance with the terms of the TIEAs.
ANNEXES 69
Annex 2: List of all Exchange-of-Information Mechanisms
in Force
Bilateral agreements
Exchange of information agreements signed by the Virgin Islands as at
May 2011, in alphabetical order:
21
Jurisdiction
Type of EoI
arrangement Date signed
Date entered into
force
1 Aruba TIEA 11 September 2009
2 Australia TIEA 27 October 2008 19 April 2010
3 China (Peoples Rep.) TIEA 7 December 2009 30 December 2010
4 Curaao
21
TIEA 11 September 2009
5 Denmark TIEA 18 May 2009 15 April 2010
6 Faroe Islands TIEA 18 May 2009
7 Finland TIEA 18 May 2009 15 April 2010
8 France TIEA 17 June 2009 18 November 2010
9 Germany TIEA 5 October 2010
10 Greenland TIEA 18 May 2009
11 Iceland TIEA 18 May 2009
12 India TIEA 9 February 2011
13 Ireland TIEA 7 December 2009 28 February 2011
14 Netherlands TIEA 11 September 2009
15 New Zealand TIEA 13 August 2009
16 Norway TIEA 18 May 2009 15 April 2010
17 Portugal TIEA 5 October 2010
70 ANNEXES
Jurisdiction
Type of EoI
arrangement Date signed
Date entered into
force
18 Sint Maarten
22
TIEA 11 September 2009
19 Sweden TIEA 18 May 2009 16 May 2010
20 Switzerland DTC August 1963 1 January 1961
21 United Kingdom TIEA 29 October 2008 12 April 2010
22 United States TIEA 3 April 2002 10 March 2006
sqldkfhj
22

ANNEXES 71
Annex 3: List of all Laws, Regulations
and Other Relevant Material
Commercial laws
BVI Business Companies Act, 2004
Segregated Portfolio Companies Regulations, 2005
Partnership Act, 1996
Trustee Ordinance, Cap. 303, as amended by the Trustee (Amendment) Act,
2003
Virgin Islands Special Trust Act, 2003
Regulatory laws
Financial Services Commission Act, 2001
Financial Services (Administrative Penalties) Regulations, 2006
Financial Services (Exemptions) Regulations, 2007
Regulatory Code, 2009
Company Management Act, 1990
Banks and Trust Companies Act, 1990
Insurance Act, 2008
Financing and Money Services Act, 2009
Securities and Investment Business Act, 2010
Public Funds Code, 2010
Mutual Funds Regulations, 2010
Anti-money Laundering Regulations, 2008
Anti-Money Laundering and Terrorist Financing Code of Practice, 2008
72 ANNEXES
Taxation and international cooperation laws
Income Tax Ordinance, Cap. 206
Payroll Taxes Act, 2004
Mutual Legal Assistance (Tax Matters) Act, 2003
Handbook on International Co-operation and Information Exchange:
a guide for law enforcement officials and regulators, April 2007

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