Base Erosion and Profit Shifting (BEPS) relates to instances where the interaction of different tax rules leads to arrangements used to achieve no or low taxation by shifting profits away from the jurisdictions where the activities creating those profits takes place.
As a member of the Inclusive framework on BEPS, the Virgin Islands has committed to implement the minimum standards of the 15 Measures created to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.
All jurisdictions that are members of the Inclusive framework will participate in a peer review process, which allows members to review other members tax systems, identify and remove elements that presents a BEPS risk. Peer reviews the BEPS minimum standards that are essential to ensure effective implementation of the BEPS package.
See below for the minimum standards and other standards implemented in the Virgin Islands.
Action 5 – Harmful Tax practices
To counter harmful tax practices Action 5 of the BEPS actions plans commits the Forum on Harmful Tax Practices (FHTP) to revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontaneous exchange on ruling related to preferential regimes , and on requiring substantial activity for any preferential regimes.
For more information on Action 5 – Harmful Tax Practices, please visit the OECD’s website
For more information on how the Virgin Islands has implemented Action 5 Click Here
Action 6 – Prevention of Tax Treaty abuse
Over the last decades, bilateral tax agreements, concluded by nearly every jurisdiction in the world, have served to prevent harmful double taxation and remove obstacles to cross-border trade in goods and services, and movements of capital, technology and persons. This extensive network of tax agreements has, however, also given rise to treaty abuse and so-called “treaty-shopping” arrangements.
Treaty shopping typically involves the attempt by a person to indirectly access the benefits of a tax agreement between two jurisdictions without being a resident of one of those jurisdictions. There are a wide number of arrangements through which a person who is not a resident of a jurisdiction that is a party to a tax agreement may attempt to obtain benefits that a tax agreement grants to a resident of that jurisdiction.
Taxpayers engaged in treaty shopping and other treaty abuse strategies undermine tax sovereignty by claiming treaty benefits in situations where these benefits were not intended to be granted, thereby depriving jurisdictions of tax revenues.
In this regard the British Virgin Islands has not signed any complying instruments.
For additional information on Action 6 – Prevention of Tax Treaty Abuse please visit the OECD’s website
Action 12 – Mandatory disclosure Rules
Action 12 recognises the benefits of tools designed to increase the information flow on tax risks to tax administrations and tax policy makers. As such Action 12 includes recommendations regarding the design of mandatory disclosure rules for aggressive or abusive transactions, arrangements, or structures.
The recommendations provide the necessary flexibility to balance the need for better and more timely information with the compliance burden for taxpayers.
For additional information on Action 12- Mandatory Disclosure Rules please visit the OECD’s website
Action 13 – Country by Country Reporting
Country-by-Country Reporting (CbC Reporting) applies to all large multinational entities (MNEs)with annual consolidated group revenue equal to or higher than EUR 750 Million in a fiscal year. MNEs are required to prepare a CbC Report containing information relating to the global allocation of the group’s income and taxes, together with indicators of the location of economic activity within the group. This report will be exchanged with tax authorities in these jurisdictions where the group has operation.
For more information on how the CbCR has been implemented in the Virgin Islands and how information can be submitted Click here.
Action 14 – Mutual Agreement Procedure
As cross-border business and international labour mobility continues to be commonplace in a 21st century global economy, disputes relating to which jurisdictions can tax what types of income inevitably arise on occasion.
Many tax treaties between jurisdictions contain a MAP provision providing for a process used to resolve such disputes. Article 25 of the OECD Model Tax Convention provides a mechanism, independent from the ordinary legal remedies available under domestic law, through which the competent authorities of the Contracting States may resolve differences or difficulties regarding the interpretation or application of the Convention on a mutually-agreed basis. This mechanism – the mutual agreement procedure – is of fundamental importance to the proper application and interpretation of tax treaties, notably to ensure that taxpayers entitled to the benefits of the treaty are not subject to taxation by either of the Contracting States which is not in accordance with the terms of the treaty.
Despite the widespread existence of this provision in tax treaties, further effort is needed to ensure that access to MAP is available and that MAP cases are resolved within a reasonable time-frame and implemented quickly.
For information on Action 14 – Making Dispute Resolution Mechanisms More Effective please visit the OECD’s website