Peer Review Report Phase 1 Virgin Islands (British)

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES
Peer Review Report Phase 1 Legal and Regulatory Framework

VIRGIN ISLANDS (BRITISH)
Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Virgin Islands (British) 2011
PHASE 1
August 2011 (reflecting the legal and regulatory framework as at May 2011)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes.
Please cite this publication as: OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Virgin Islands (British) 2011: Phase 1: Legal and Regulatory Framework, Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews, OECD Publishing. http://dx.doi.org/10.1787/9789264117754-en
ISBN 978-92-64-11774-7 (print) ISBN 978-92-64-11775-4 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda. Revised version, September 2011. Detail of revisions available at: http://www.oecd.org/dataoecd/22/62/48660562.pdf
OECD 2011
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2. Exchange of information mechanisms with all relevant partners . . . . . . . . C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 49 50 56 57 58 60
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK VIRGIN ISLANDS (BRITISH) OECD 2011
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 5
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 jurisdictions, 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 foreseeably 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 jurisdictions 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 monitoring 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.
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 international 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 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 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 authorities 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 fiduciary 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 foreseeably 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 transparency and exchange of information into 10 essential elements and 31 enumerated 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 element, 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 element need improvement; or (iii) the element is not in place. These determinations 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 examined 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 Islands1 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 currency 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 Ordersin-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 business. 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, companies 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 million.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 financial services world. 18. The financial services industry is regulated by a number of different laws which ensure that service providers operate in accordance with the requirements of financial and regulatory standards, apply corporate governance procedures and that money laundering and terrorist financing are prevented. 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 services, providing directors or officers and providing nominee shareholders. 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 administrator 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. 3. 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). 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 insurance 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 redemption 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 services 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 effective 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 standards for the exchange of information for tax purposes over the last decade. In 2002, the Virgin Islands committed to the international standards for transparency 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 information 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 purpose. 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 USD4 in assets, they represent an important part of the financial 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 arrangement. 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 partnerships 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 possible. 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 legislation 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 shareholders as its members. Their liability is limited to the amount unpaid (if any) on their shares. Specific sub-types include segregated portfolio 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 shareholders 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 portfolio (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 registered 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 conviction 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 management business. Company management is defined as: a. the formation of Virgin Islands companies, including the continuation 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 business to any person, taking into account the detailed requirements set out in the Regulatory Code. Persons who carry on company management business without 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 register 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 company (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 companies). 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 regulatory 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 information 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 register 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 holding 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 published 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] identifies 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 beneficial 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 company 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 information 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 mentions 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 individuals 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 foreign 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 shareholder 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 relevant 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 registered agent under the AML/CFT legislation, and identifying nominee shareholders 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 governed 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 interpretation 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 significant 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, sufficient 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 information6, 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 authorised 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 statement 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 custodian 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 ownership 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 services 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 persons 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 currently7 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 articles 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 information that must be verified by the registered agent in respect of the ownership 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 partnerships 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 partners. The annual tax return that has to be submitted by the general partnership 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, irrespective 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, protector 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 USD 50 000 or to imprisonment for a term not exceeding two years, or both. 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 trustee 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 beneficiary 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 license9. A total of 718 PTCs are currently registered in the Virgin Islands. 81. A company which acts solely as a bare trustee10 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 generally 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 professional, 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 engaging 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 provider 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. 10. A person holding a Class I license is licensed to carry on both trust business and company management business. A trustee acts as a bare trustee if he/she only conveys the trusts assets to the beneficiary (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 activities 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 assessment. 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 service 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, beneficiaries 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 information 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 provisions 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 ownership 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 contravenes 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 penalties 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 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. 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. Recommendations The Virgin Islands should clarify its laws to ensure availability of full ownership information where a company has issued bearer shares.
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 effective, 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 transactions 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 specification 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 management business, trust business, banking business, insurance business, financing business, money services business or investment business are required to obtain a license from the FSC to do so. In regulating these businesses, additional requirements to keep accounting records apply. The regulating laws11 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 notified 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 offence12. Under the Banks and Trust Companies Act and the Company Management Act, licensees are then liable upon summary conviction 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 summary 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. 12. Banks and Trust Companies Act (s. 17), Company Management Act (s. 17), Insurance Act (s. 52), Financing and Money Services Act (s. 19) and Securities and Investment Business Act (s. 17 and s. 59). 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 adequate and orderly records of all services provided to, and transactions undertaken 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 companies and limited partnerships. 102. Most Virgin Islands trusts will have a professional trustee or administrator, 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, however, 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 partnerships 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 carried 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 underlying 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 apply13 as described in paragraph 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 USD 25 000 or to imprisonment for a term not exceeding two years, or both.
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 legislation. 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 maintain 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 underlying 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 recommendations There is no consistent obligation for partnerships and trusts to keep reliable accounting records. Consistent requirements for companies, partnerships and trusts to keep underlying documentation are not in place. 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. Recommendations The Virgin Islands should ensure that reliable accounting records are required to be kept by partnerships and trusts in all cases. The Virgin Islands should ensure that underlying documentation is required to be kept by all relevant entities and arrangements. The Virgin Islands should ensure that 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 customers 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 securities 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 customer remitting the funds and compliance with paragraph (c); h. account files and business correspondence with respect to a transaction; 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 authority 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) information 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) information 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 fiduciary 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 competent 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 notification 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 similar 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 interpretation 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 purposes of complying with a request for information under a TIEA, all information 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 jurisdiction 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 interpreted 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 information 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 information 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 decision14 it was observed that when Parliament is enacting 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 empowering 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 intention 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 registered 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 foreseeably 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 without 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 authoritys 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 compelled 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 obtaining 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 subsisted, 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 committing 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 The element is not in place. Factors underlying recommendations 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. Recommendations The Virgin Islands should 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.
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 reasonable 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.
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 49
C. Exchanging Information
Overview
147. Jurisdictions generally cannot exchange information for tax purposes 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 effective 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 negotiation. 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 information. 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 information 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 information 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 restrictions, 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 information 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 information 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 relevance which is included in Article 1 of the OECD Model TIEA, set out below: The competent authorities of the Contracting Parties shall provide assistance 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, assessment 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 TIEAs15 (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 expeditions. 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 similar 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 criminality 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 information 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 information 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 official 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
Date the Virgin Islands sent notification 12 April 2010 11 February 2010
Jurisdiction Aruba Australia China (Peoples Rep.) Curaao 16 Denmark
Date of signing 11 September 2009 27 October 2008 7 December 2009 11 September 2009 18 May 2009
Date gazetted 1 April 2010 9 December 2010
Date of entering into force 19 April 2010 30 December 2010
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 remaining 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.

Date the Virgin Islands sent notification 12 April 2010 29 October 2010
Jurisdiction Faroe Islands Finland France Germany Greenland Iceland India Ireland Netherlands New Zealand Norway Portugal Sint Maarten 17 Sweden United Kingdom United States
Date of signing 18 May 2009 18 May 2009 17 June 2009 5 October 2010 18 May 2009 18 May 2009 9 February 2011 7 December 2009 11 September 2009 13 August 2009 18 May 2009 5 October 2010 11 September 2009 18 May 2009 29 October 2008 3 April 2002
Date gazetted 1 April 2010 1 April 2010 1 April 2010 23 December 2010 1 April 2010 1 April 2010 9 December 2010 1 April 2010 1 April 2010 1 April 2010 23 December 2010 1 April 2010 1 April 2010 Date unknown
Date of entering into force 15 April 2010 18 November 2010
28 February 2011
28 February 2011
15 April 2010
15 April 2010
13 April 2010 12 April 2010 Date unknown
16 May 2010 12 April 2010 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 necessary 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 agreement 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 The element is not in place. Factors underlying recommendations 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 legal and regulatory framework does not allow its competent authority to fully comply with the terms of its TIEAs due to limited access powers. Recommendations The Virgin Islands should take all necessary steps to bring its EOI agreements into force as quickly as possible.
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 agreements or negotiations with partners, in particular ones that have a reasonable expectation of requiring information from that jurisdiction in order to properly 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 negotiation 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 possibility 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 jurisdiction 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 recommendations The Virgin Islands has a network of EOI arrangements with relevant partners but they have not been given full effect through domestic law. Recommendations 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 confidentiality 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 information exchanged and limiting the disclosure and use of information received, which has to be respected by the Virgin Islands as a party to these agreements. 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 documents to such requests, and any other documents or communications reflecting 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 USD 10 000 or to imprisonment for a term not exceeding two years, or both. 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.
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 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. The DTC with Switzerland does not cover commercial secrets and includes a reservation for the contracting parties sovereignty and security in addition to their public policy.
183. Most of the Virgin Islands TIEAs18 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 provision 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 information would reveal confidential communications protected by attorneyclient 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 information 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-atlaw), 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.
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 provided in a timeframe which allows the tax authorities to apply the information 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 agreements19. 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 matters 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 information 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

Factors underlying recommendations
Determination
Recommendations
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. 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 clarify its laws to ensure availability of full ownership information where a company has issued bearer shares.
The Virgin Islands should ensure that information that identifies the beneficiaries of a trust is available in all cases.
64 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Determination
Recommendations
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. Consistent requirements for companies, partnerships and trusts to keep underlying documentation are not in place. Except in limited cases pertaining to mutual funds or persons licensed to carry on financial services business, no minimum retention period to maintain accounting records and underlying documentation exists. 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) The element is not in 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) information that relates to the beneficial ownership of a company, partnership or other person. The Virgin Islands should 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. The Virgin Islands should ensure that reliable accounting records are required to be kept by partnerships and trusts in all cases. The Virgin Islands should ensure that underlying documentation is required to be kept by all relevant entities and arrangements. The Virgin Islands should 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)
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 65
Determination
Recommendations
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) The element is in place Exchange of information mechanisms should allow for effective exchange of information (ToR C.1) The element is not in 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 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 take all necessary steps to bring its EOI agreements into force as quickly as possible.
The Virgin Islands should 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. 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. The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received (ToR C.3) The element is in place
66 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Determination
Recommendations
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties (ToR C.4) The element is in place 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 outlined in respect of this Element will require legislative changes. As a consequence, 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 specifically named in the section. These amendments are consistent with current interpretation and application 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 framework 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
Type of EoI arrangement TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA TIEA Date entered into force 19 April 2010 30 December 2010 15 April 2010 15 April 2010 18 November 2010
Jurisdiction 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Aruba Australia China (Peoples Rep.) Curaao 21 Denmark Faroe Islands Finland France Germany Greenland Iceland India Ireland Netherlands New Zealand Norway Portugal
Date signed 11 September 2009 27 October 2008 7 December 2009 11 September 2009 18 May 2009 18 May 2009 18 May 2009 17 June 2009 5 October 2010 18 May 2009 18 May 2009 9 February 2011 7 December 2009 11 September 2009 13 August 2009 18 May 2009 5 October 2010
28 February 2011
15 April 2010
21.
See footnote 16.
70 ANNEXES
Jurisdiction 18 19 21 Sint Maarten 22 Sweden United Kingdom
Type of EoI arrangement TIEA TIEA DTC TIEA TIEA
Date signed 11 September 2009 18 May 2009 August 1963 29 October 2008 3 April 2002
Date entered into force 16 May 2010 1 January 1961 12 April 2010 10 March 2006
20 Switzerland 22 United States
sqldkfhj22
22.
See footnote 16.
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
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Commission takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisations statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members.
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 (23 2011 39 1 P) ISBN 978-92-64-11774-7 No. 58593 2011
Global Forum on Transparency and Exchange of Information for Tax Purposes
PEER REVIEWS, PHASE 1: VIRGIN ISLANDS (BRITISH)

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 jurisdictions which participate in the work of the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes. These standards are primarily reected 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, which has been incorporated in 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 foreseeably relevant information must be provided, including bank information and information held by duciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identied 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 jurisdictions 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 plus Phase 2 reviews. 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 approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the Global Forum for Transparency and Exchange of Information for Tax Purposes and for copies of the published review reports, please visit www.oecd.org/tax/transparency and www.eoi-tax.org.
Please cite this publication as: OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Virgin Islands (British) 2011: Phase 1: Legal and Regulatory Framework, Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews, OECD Publishing. http://dx.doi.org/10.1787/9789264117754-en This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.
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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Phase 1 Legal and Regulatory Framework

ISBN 978-92-64-11774-7 (print) ISBN 978-92-64-11775-4 (PDF)

ABOUT THE GLOBAL FORUM 5

About the Global Forum

Overview of the Virgin Islands

The financial services industry in the Virgin Islands

Taxation and international cooperation

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 15

Compliance with the Standards

16 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

A.1. Ownership and identity information

Companies (ToR A.1.1)

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 17

18 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Ownership information held by companies

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 19

Ownership information held by the registered agent

20 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Ownership information held by the authorities

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 21

22 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 23

24 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 25

Bearer shares (ToR A.1.2)

Data as at 18May 2011.

26 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Partnerships (ToR A.1.3)

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 27

Ownership information held by the authorities

Ownership information held by partnerships and its registered agents

28 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 29

Trusts (ToR A.1.4)

30 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Information held by the authorities

Information held by trustees and service providers

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 31

32 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Foundations (ToR A.1.5)

Enforcement provisions to ensure availability of information (ToR A.1.6)

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 33

34 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

A.2. Accounting records

General requirements (ToR A.2.1)

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Records to be kept for customers of licensees

Records to be kept under the AML/CFT legislation

Underlying documentation (ToR A.2.2)

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5-year retention standard (ToR A.2.3)

Except for mutual funds.

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A.3. Banking information

Record-keeping requirements (ToR A.3.1)

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B.1. Competent Authoritys ability to obtain and provide information

Ownership and identity information (ToR B.1.1)