The British Virgin Islands ("BVI") and the People's Republic of China ("PRC") have concluded a bilateral Tax Information Exchange Agreement ("TIEA") which will allow for exchange of information in relation to direct taxation. It does not cover indirect taxation and does not apply to Hong Kong, Macau or Taiwan. It is anticipated that the TIEA will have effect from the BVI 2011-12 tax year. 

The TIEA has been welcomed by the financial services industry in the BVI and further demonstrates the willingness of the BVI to implement measures reflecting the OECD principles of transparency and exchange of information on tax matters.  

The BVI is the first significant offshore financial centre to enter into such an agreement with the PRC. It was able to negotiate certain concessions with the PRC government which will assist in developing further investment into the PRC through BVI vehicles and preserve the position of existing investments. No restrictive tax measures will be applied to BVI companies for so long as the TIEA is in force and it has been agreed that there will be no "fishing expeditions". 

The BVI continues to be the second largest investor into the PRC. It is anticipated that the entry into the TIEA will maintain the BVI's strong position as provider of vehicles both for inbound investment and for the listing of PRC businesses on stock exchanges throughout the world.