Indian Income Tax Department issued guidelines related to British Virgin Islands

Indian Income Tax Department has asked its field officers to be specific when requesting information from the BVI authorities, and provide prompt replies to their queries. This was done in connection with growing number of information requests that are pending with the British Virgin Islands, which is the most popular location for offshore accounts of Indian businesses. The Income Tax Department said the replies must be given within 15 days to make the process faster.

On May 12, an internal guidance to officers was issued by the Department, concerning requests for exchange of information made to BVI, asking the officers not to opt for ‘Request to refrain from notifying the taxpayer’ in the proforma. Such request should be made only if its is essential and can be justified by documentary evidences.

It is only in some exceptional cases when the request can be made without notifying the taxpayer/holder – when the information is very urgent, and prior notification of the taxpayer will delay supply of information and thus be against the interests of investigation.

The guidance also gives some background on the procedure for BVI company incorporation and shareholding/directors rules for BVI companies, highlights that the details of shareholders of BVI company remain not publicly available, and cites legal provisions in BVI on “keeping shares registered in the name of nominee and not in the name of actual owner”.

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