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CBDT issues norms for request of information from British Virgin Islands
May, 17th 2016

Subsequent to the leaked Panama Papers, tax authorities have issued new norms for requests for Exchange of Information from the British Virgin Islands.

The new guidelines that list out the process for incorporating companies and system of shareholding in the British Virgin Islands are expected to improve efficacy and efficiency in sharing of information.

“British Virgin Islands (BVI) is one of the most important jurisdictions for India from the point of Exchange of Information (EOI) relationship… A lot of requests are likely to be made to the BVI in near future in view of the investigations being carried out in the Panama Papers,” said the recent guidelines issued by the Central Board of Direct Taxes (CBDT) to field formations.

The Income Tax Department has already sent notices to those named in the Panama Papers.

Noting that there are over 100 licensed registration agents in BVI who can incorporate companies, the CBDT has said that they can also register and incorporate companies abroad in jurisdictions such as Singapore, Cayman Islands, Hong Kong, and Mauritius.

The agents know the client and beneficial owner of the new company and also sign the initial company formation paperwork on the client’s behalf. “The client does not have to sign any incorporation documents for a business company,” said the circular. The CBDT has also highlighted some interesting and unique features of shareholding in companies incorporated in the BVI, noting that they are not required to state their authorised capital or make public the details of shareholders.

“A very important feature to keep confidentiality about shareholding is ‘keeping shares registered in the name of nominee and not in the name of actual owner’,” it noted.

The CBDT has also said that in Exchange of Information (EOI) requests the name of the company as well as the company number should be correctly identified.

It has also stressed that while making the initial EOI request all the relevant facts and background of the case are clearly brought out and the relevance of information for the purposes of administration and enforcement of Indian tax laws is spelt out in sufficient detail.

It has also said that all pending clarifications that the BVI has sought on EOI requests should be sent by May 31.

Experts said the earlier guidelines were vague and general in nature. “These guidelines will surely help the field officer understand the structuring of BVI companies, ask the right questions and thereby making the EOI request more efficient and effective,” said Rakesh Nangia, Managing Partner, Nangia & Co.

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