A legal entity means a company and a limited partnership as defined in the Act. It does not include an entity that is tax resident outside of the BVI and entities without legal personality such as such as certain forms of limited partnerships or trusts.

The activities are:

1. Banking business; 2. Insurance business; 3. Fund management business; 4. Financing and leasing business; 5. Headquarters business; 6. Shipping business; 7. Holding business; 8. Intellectual property business; and 9. Distribution and service center business.

Entities which are deemed to be carrying such activities and which cannot demonstrate tax residenceoutside the BVI are now subject to the economic substance requirements as established by the Act. Summarily, depending on the nature and scale of the relevant activity, the entities must show that they have an adequate number of employees, expenditures and physical premises in the BVI for the core income generating activity.

With regards to Holding Businesses, which have been defined in the Act as pure holding entities carrying out no other activity than holding equity participations in other entities and earning dividends and capital gains, they are subjected to reduced economic substance requirements.

Article 8 of the Law provides the following with regards to reduced Economic Substance requirements: (2) A pure equity holding entity, which carries on no relevant activity other than holding equity participations in other entities and earning dividends and capital gains, has adequate substance if it (a) complies with its statutory obligations under the BVI Business Companies Act, 2004 or the Limited Partnership Act, 2017 (whichever is relevant); (b) has adequate employees and premises for holding equitable interests or shares and, where it manages those equitable interests or shares, has adequate employees and premises for carrying out that management.

Entities must assess their status, in other words they must determine whether they fall within the classification of a legal entity as above and if so, then to determine if it is conducting or if it intends to conduct one of the activities mentioned above. The non-compliance with the obligations may carry on both criminal and financial sanctions.