Navigating BVI Annual Return filing

In business, compliance with all relevant regulations is not just a necessity; it is a cornerstone of successful operations. This article delves into an important aspect of company management needed to cope with the recently released regulatory regime - the British Virgin Islands Annual Return filing.

The rationale behind the regulatory change

The British Virgin Islands (BVI) authorities recently amended their primary Companies’ legislation, the BVI Business Companies Act. With some exceptions, these amendments require all BVI-registered companies to submit an annual financial return to their registered agent following the conclusion of each financial year starting from the financial year 2023. This change is designed to enhance the transparency and integrity of BVI’s business environment.

Who is required to file an Annual Return? Is there any exemption?

All BVI-registered entities are required to file an Annual Return, with certain exceptions.

A BVI-registered company is exempt from filing an Annual Return if it meets any of the following criteria:

• It is?listed on a stock exchange.
• It is?regulated under BVI financial services legislation?and provides financial statements to the BVI Financial Services Commission (FSC) as required.
• It submits its financial statements and annual tax returns to the?BVI Inland Revenue Department.

It is important to note that an exemption does?not apply?if the annual return is due?before?the liquidation process commences.

Decoding the Annual Return filing

Starting in 2023, companies are mandated to submit their Annual Returns to the registered agent in BVI within nine months of the end of their financial year. This procedure ensures the Board of BVI companies maintains current and accurate information.

Unless otherwise specified, companies are generally assumed to adopt the calendar year (i.e., 1 January to 31 December) as their standard reporting financial period for the Annual Return.

Please find the below examples of the financial year (Calendar / Non-Calendar) for the annual return filing deadlines for your reference:

1. Case 1: Calendar year–Company A's financial year is the calendar year (1 January to 31 December). Its first Annual Return must be submitted before 30 September 2024 for the financial summary from 1 January to 31 December 2023, i.e., nine months after the financial year-end.
2. Case 2: Non-Calendar year–Company B's financial year is from 1 April to 31 March. Its first Annual Return must be submitted before 31 December 2024 for the financial summary from 1 April 2023 to 31 March 2024, i.e., nine months after the financial year-end.

Annual Return format and filing

The BVI FSC has established a specific format for the annual return, which includes a?simple balance sheet?and a?profit-and-loss statement like a financial summary. Auditing this financial data is?not mandatory, and the annual return remains?confidential, which means it is not available for public consumption.

Registered agents are?not required?to submit the returns to any BVI regulatory body unless explicitly requested.? However, registered agents must inform the BVI Registry of Corporate Affairs about any entities that failed to submit their annual returns within 30 days after the company’s filing deadline.? Non-compliance may lead to financial penalties, and persistent non-compliance may result in the company being dissolved by the BVI Registrar of Companies.

Is Annual Return filing substituting Economic Substance Return filing?

No, the Annual Return and the Economic Substance filing are separate requirements for BVI-registered companies.

The Annual Return is a mandatory financial filing that includes a basic income statement and a balance sheet. It is adopted as the company’s financial year, usually within the calendar year. On the other hand, economic substance filing is a requirement introduced to address concerns about harmful tax practices.

It demands businesses show substantial economic activity and genuine substance; another filing deadline defaults under the Economic Substance (Companies and Limited Partnerships) Act if a company needs to align two fiscal year-ends. Therefore, filing an Annual Return differs from filing an Economic Substance filing, and companies must ensure they comply with both sets of requirements. Please consult with a professional advisor to understand these requirements and how they apply to your situation.

Our expertise at your service

At Acclime, we understand that these procedures can be complex and time-consuming. That is why we offer a range of services to assist companies with their Annual Return filing. From discussing financial year-end adoption, preparing board resolutions, drafting financial statements, and providing bookkeeping and accounting services, our team is here to help.

For more details about our service packages, please don’t hesitate to contact us. We are happy to provide you with the information you need to make the best decision for your company.