British Virgin Islands: FATCA - Impending Deadlines For BVI Financial Institutions

This article provides a reminder of the impending deadlines and action that is required for those BVI entities that are classified as "Foreign Financial Institutions" for the purposes of FATCA. No action is required for BVI entities that are not Foreign Financial Institutions.

This update supplements our previous alert of 3 November 2014 entitled "Impact of FATCA on BVI entities". Please refer to that alert for a recap of the main provisions of FATCA and the equivalent UK regime (commonly referred to as "UK FATCA").

On 20 March 2015, the British Virgin Islands Government issued revised guidance notes regarding the Intergovernmental Agreements between the British Virgin Islands ("BVI") and the United States of America (the "US") and the United Kingdom (the "UK") to improve international tax compliance (the "Guidance Notes"). The Guidance Notes confirm that BVI Reporting Financial Institutions ("BVI RFIs") with reportable accounts will be required to enrol with, and carry out their FATCA reporting directly to, the BVI International Tax Authority (the "BVI Tax Authority").i

The BVI Government has now launched its online reporting system – the BVI Financial Account Reporting System (the "BVI Portal") - by which such BVI RFIs must enrol and report under FATCA. The BVI Portal can be viewed here.

The mechanism and format for reporting under UK FATCA has not yet been finalised. This alert therefore generally summarises the enrolment and reporting deadlines in respect of the intergovernmental agreement between the US and the BVI only. However, UK-resident non-domiciled individuals and any BVI RFIs (or their advisers) associated with such individuals should be aware of an imminent deadline for certain important elections to be made under UK FATCA, which is also discussed below.

Action required by BVI RFIs

BVI RFIs are reminded that 2015 is the first year in which they are required to report under FATCA. Reporting must be done through the BVI Portal to the BVI Tax Authority, which will share such information with the US Internal Revenue Service ("IRS"). BVI RFIs which are required to report under FATCA must:

• enrol with the BVI Portal by no later than 1 June 2015;
• and submit a report to the BVI Portal on any US reportable accounts by 30 June 2015 (which has been extended from 31 May 2015).

For subsequent years, the deadline for enrolment will be 1 April and the deadline for reporting will be 31 May in the relevant year.

Action that should have already been taken

Since 1 January 2015, all BVI RFIs which are not otherwise exempt from registration have been required to be registered with the IRS and to have a Global Intermediary Identification Number ("GIIN"). A GIIN is required to enrol via the BVI Portal, so BVI RFIs which do not already have one should obtain a GIIN now in order to meet the enrolment deadline. For more information on how to obtain a GIIN, please visit the IRS website.

BVI RFIs should also ensure that they have adequate due diligence mechanisms in place to identify reportable accounts and that they are ready to report such accounts by 30 June 2015.

How to enrol with the BVI Tax Authority

BVI RFIs are required to submit information to the BVI Tax Authority electronically via the BVI Portal. The application form to enrol for reporting through the BVI Portal is accessible here. The BVI Government has published a user guide to enrolling and reporting via the BVI Portal (the "User Guide"), which is also available at the link above.

In addition to requiring a GIIN from each BVI RFI, the enrolment process also involves submitting a letter appointing an authorised representative as the "primary user" of the BVI Portal (which, in the case of BVI RFIs which are companies, must be signed by a director of the company), together with contact details and a scan of the primary user's passport for the purposes of the relevant BVI RFIs FATCA compliance and identity verification.

Enrolment with the BVI Portal is a "one-time affair" and is only required the first time that a BVI RFI accesses the system to make a report. The application for enrolment must be approved by the BVI Tax Authority and – once approved – the primary user for that BVI RFI will receive an email with their username and password. A BVI RFI profile will also be created and the BVI RFI will be given an automated unique identification number. Each BVI RFI will have one primary user and will be allowed to have up to three secondary users. Once a BVI RFI is enrolled, the primary user will be able to add, update or deactivate those secondary users, using the "manage users" functionality in the system.

How to report to the BVI Tax Authority

The BVI Portal allows BVI RFIs to submit their FATCA filings on reportable accounts either by manually entering the information into an online form on the BVI Portal or uploading an XML file. Whether this information is entered manually or by uploading a file, the information submitted is then validated. The system will only accept XML filings that are in the correct format as stipulated by the US FATCA XML Schema. For further guidance on reporting and the acceptable XML format, please consult the User Guide and visit the following link.

"Nil returns" – nothing to declare?

The Guidance Notes confirm that BVI RFIs which do not have any reportable accounts for the purposes of FATCA are not required to enrol with the BVI Tax Authority or submit "nil returns". As enrolment is only required where a BVI RFI wishes to make a report, enrolment is not mandatory for such BVI RFIs.

However, we understand that, where an entity has not submitted a return for three or more years, the IRS may regard this as evidence of potential non-compliance and request the BVI RFI, through the BVI Tax Authority, to explain why there have been no filings. Accordingly, some BVI RFIs and their advisers are taking the view that it may nevertheless be "best practice" to enrol and submit a "nil return" to confirm that the entity has considered, and is complying with, its FATCA obligations.

In any case, looking ahead to 2016, it is to be expected that the number of BVI RFIs with no information to report to the BVI Tax Authority will reduce dramatically when reporting under both UK FATCA and also the OECD's Common Reporting Standard ("CRS"), which is a multi-jurisdictional regime for the reporting and automatic exchange of tax information developed by the OECD on similar lines to FATCA, come into force. The CRS will be the subject of a separate client alert to be published in the near future.

UK FATCA and alternative reporting elections for UK-resident non-domiciled Individuals

Enrolment and reporting for UK FATCA will commence next year and further BVI guidance is expected. The first date for reporting information to the BVI Tax Authority will be 31 May 2016. Whilst there may be some changes to the BVI Portal to reflect subtle differences between FATCA and UK FATCA, it is expected that most of the system functionality will remain the same.

However, BVI RFIs should note that, where a UK-resident non-domiciled individual ("RND") wishes to take advantage of the alternative reporting regime ("ARR") for RNDs for the UK tax year 2014-15, an election must be made by each of the relevant BVI RFI and the RND on or before 31 May 2015. The ARR offers an alternative reporting regime for RNDs, which may be attractive where RNDs are taxed in the UK on the "remittance basis". Any BVI RFIs and RNDs to which or to whom the ARR may be relevant should therefore seek advice from their primary UK tax advisers now, if they have not already done so.

Where an RND and the relevant BVI RFI wish for the ARR to apply, two elections will need to be made, by the BVI RFI and the RND respectively. For the UK tax year 2014-15, BVI RFIs and RNDs have until 31 May 2015 at the latest to make the relevant election, so the deadline is fast approaching.

An RND electing to apply the ARR must also complete a self-certification regarding their UK tax status by 28 February following the end of the relevant tax year (i.e., by 28 February 2016 for the tax year 2014-15).

Further Guidance

For further guidance on FATCA, UK FATCA, the CRS or any of the specific issues raised in this alert, please contact us or your primary FATCA advisers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.