The Mutual Legal Assistance (Tax Matters) (Amendment) Act, 2012 ("MLAT")FAQs:
Q: Why was MLAT enacted now?
A: It was in response to the Phase 1 Peer Review Report published in August 2011 on the BVI by the Global Forum on Transparency and Exchange of Information for Tax Purposes.
Q: When did MLAT come into effect?
A: On 12 November 2012.
Q: What does MLAT do?
A: Briefly, the record-keeping and record retention obligations for all BVI companies and limited partnerships were enhanced.
Q: Are these obligations very different from obligations which BVI companies had before?
Q: So what’s different now?
A: No. These new obligations are no more onerous than existing laws already stipulate. Prior to MLAT, section 98 of the BVI Business Companies Act, 2004 (the "BC Act") set out the key record keeping requirements for BVI companies, namely that a BVI company must keep records that are sufficient to show and explain its transactions and which will, at any time, enable the financial position of the company to be determined with reasonable accuracy. The Partnership (Amendment) Act, 2012 ("Partnership Act") applied these same record keeping requirements to BVI limited partnerships.
A: In a sentence, ‘financial records’ of the company must be maintained and held at a physical address for a minimum of 5 years.
These are the main changes in more detail:
1: Location: The records and underlying documentation of a partnership/company can be kept at any location. However, if these are not kept at the office of the partnership/company's registered agent, then the partnership/company must provide the registered agent with a written record of the physical address of the place(s) at which the records and underlying documentation are kept. If this location changes, the partnership/company must provide its registered agent with the physical address of the new location(s) within fourteen days of the change.
2: Records and Underlying Documentation: MLAT does not define "records and underlying documents." It does however state that these must be in such form as is sufficient to show and explain the partnership/company’s transactions and that they must (at any time) enable the financial position of the partnership/company to be determined with reasonable accuracy. Importantly, MLAT confirms that "records and underlying documentation" now includes accounts although it does not stipulate any accounting procedures that need to be adhered to (e.g. GAAP etc.). A partnership/company can therefore still use whatever accounting standards it determines appropriate for the jurisdictions in which it operates (provided all statutory requirements are met).
3: Duration: Previously there was no minimum time limit on how long these records needed to be maintained; now, the records and underlying documents must now be maintained for a minimum of five years.
Q: So what should a BVI company do about having ‘financial records’?
A: The BVI Association of Registered Agents (the "ARA") has however recently issued a recommendation that all BVI entities (including Private Investment Companies with significant activities) should now prepare financial statements to ensure they fully comply with MLAT. TMF Group endorses the ARA’s recommendation.
Q: Who decides where the physical location of these records will be kept?
A: (i) Review the Memorandum and Articles of Association of the BVI company including the first resolutions. If there is no specific provision made in these documents, then the directors should pass a resolution to ensure compliance with the company’s obligation.
(ii) Inform the registered agent immediately of the physical address at which the records are or will be kept.
Q: Does this obligation apply to a company in voluntary liquidation?
A: Yes. The obligation to have and keep the financial records, at a known physical address for a minimum of 5 years.
Q: How can TMF Group help you?
A: TMF Group offers a comprehensive range of corporate support services, including bookkeeping and accounts which adhere to the BC Act, the Partnership Act and MLAT. We can tailor these services to meet your specific needs. Please contact your local TMF Group office if you have any further questions or for more details on the products and services we offer.
TMF Group offers a comprehensive range of corporate support services, including bookkeeping and accounts which adhere to the BC Act, the Partnership Act and MLAT. We can tailor these services to meet your specific needs. Please contact your local TMF Group office if you have any further questions or for more details on the products and services we offer.