Guide to understanding the BVI's Financial Annual Return requirements

23 Oct 2023

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For some time, all BVI companies have been required to maintain records and underlying documents which (a) are sufficient to show and explain the company’s transactions, and (b) are reasonably accurate at all times in determining the company’s financial position. These requirements remain in effect. These records may be kept at the registered office of the company in the BVI, or at such other place as may be notified to the registered agent.

However, subject to limited exceptions, from 1 January 2023 BVI companies are now required to provide certain financial information to their registered agent on an annual basis in the form of a Financial Annual Return (the ‘Return’ or ‘Annual Return’), although, in practice, the first filings will not be due until 2024.

In this article, we examine the rationale behind the implementation of this requirement in the BVI, and provide you with key information in a detailed and summarised format to facilitate your understanding on the requirement and assist you in complying with this new requirement.

Background

As background, the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) requires jurisdictions “to ensure that reliable accounting records are kept for all relevant entities and arrangements.” The copies of accounting records and underlying documentation kept must relate to a company’s financial statements, balance sheet, profit and loss account with relevant schedules and annual reports.

The Global Forum requires that where records and underlying documentation are maintained outside of the jurisdiction, copies of such records and underlying documentation should, at least once a year, be filed by the company with its registered agent.

The BVI has introduced the Annual Return to address this requirement ensuring that competent authorities are able to access the necessary information within expected timeframes for international cooperation, without the need for full accounts to be filed at the Registry of Corporate Affairs.

What needs to be filed?

The form of the Return is a simple Income Statement and Balance Sheet. You can see a copy of the Return here.

The Return does not need to be audited and can be prepared under any of the recognised accounting standards. For our clients we use the International Financial Reporting Standards (IFRS).

When do Returns need to be filed?

The filing of Returns can commence from 1 January 2024 depending on the financial year end of each Company which will have 9 months after the end of its Financial Year to make the relevant submission. Therefore, if your BVI Company has a Financial Year End on 31 December 2023, filing of the return with the Registered Agent will need to take place before 30 September 2024.

Where a company's year-end was not previously determined or the current year end needs to be changed, such a decision should be recorded by the usual board resolution.

How will the filings be made?

As per the BVI Business Companies Act, the Return will need to be submitted with the Registered Agent of the BVI Company in question. Our clients will be able to submit their Return either through the specialised platform we have developed for our clients (Harneys Client Connect Portal) or through email and spreadsheets for bulk submissions.

Are there any exemptions?

The following entities are exempt from annual return filing requirements:

Listed entities
Entities regulated by the BVI Financial Services Commission which are already required to submit accounts
Entities which file annual tax returns and financial statements with the BVI Inland Revenue
Entities which are already in liquidation when their annual return is due

Are the Returns confidential?

Returns will not be filed at the Registry of Corporate Affairs (Registry) unless requested and details will not be publicly available. The Registered Agent is required to inform the Registry if they have not received the Annual Return within 30 days of the deadline.

How can Harneys help?

Harneys has a specialised Accounting Services department which is well versed and aware of the new regulation and is ready to assist you by offering:

Preparation of Accounting Records based on accounting documentation of the client company such as invoices, agreements, bank statements etc
Preparation of Annual Financial Returns
Preparation of unaudited Financial Statements under IFRS
Liaising with external auditors, providing them with everything they may need for their audit

Summary of important things to know:

The Annual Return is due for financial periods starting on 1 January 2023 or later.
The default first period end is 31 December 2023 (but it will be possible to use a different financial year end), after which the entity has 9 months to file the Annual Return with its Registered Agent.
Where the entity has a different financial year end the Annual Return will be due for the first financial period starting after 1 January 2023.
There are a small number of exemptions to this filing requirement – listed companies, companies which pay tax in the BVI and certain BVI regulated entities.
Companies which are in liquidation are also exempted from this requirement, provided the Annual Return was not already due prior to the commencement of the liquidation.
There are no prescribed accounting policies or principles that need to be followed and first submissions are expected in 2024.
Any major currency may be used for the Annual Return.
There is no need for Annual Returns to be audited.