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Why British Virgin Islands?

More than 1 million offshore companies, the popularity of the Virgin Islands are not just the serenity, the beaches and the islands. According to a recent survey, British Virgin Islands (BVI) is the world’s largest contributor for offshore entities. 

A ‘go to’ pad for incorporation of companies for a long time now, the BVI can attribute this to neutral tax, cost-effectiveness & trade discretion. Popular for the highest degree of privacy, any party interested to know more about an offshore company will have to suffice with just the name of the company’s agent i.e. the local firm responsible for arranging incorporation and collecting the annual fees. Hopes of any other information from the agent are otiose.

The British territory consists of four larger islands - Tortola, Anegada, Virgin Gorda, and Jost Van Dyke and 32 smaller islands and islets, of which more than 20 are uninhabited.

Population
population
32,680
Currency
population
US Dollar
GNI Per Capita
population
US$ 42,300
Region
population
Caribbean
Political Overview
population
British overseas territory

Fiscal Advantages

  • Leading international corporate domicile
  • Competitive administration costs
  • Tax exemption for International business companies
  • No capital gains, gift or wealth taxes and no death duties
  • No exchange controls
  • An established trust law
  • Good communication worldwide
  • Minimum of bureaucracy and red tape


Regulatory Advantages

  • Benefits of a Company Limited by Guarantee comprise that
    • The members on the annual return aren't mentioned on the list
    • Assets can be controlled without using any shares
    • In some dominions, profits from such establishments are classified as capital gains rather than as income. (Specialist advice is required by anyone considering the use of a company limited by guarantee)
  • An agent appointed by the company, shall have no authority to amend the Memorandum or Articles


Limitations

  • Complex paperwork involved to incorporate a company
  • Difficult for a BVI company to obtain credit from a bank

Company Formation

As it is one of the most fast, easy and simple to understand, register and incorporate structure, about 460,000 companies have been registered in the BVI, based on the Q4 2014 statistics released by the BVI Financial Services Commission. 

Under the International Business Companies (Amendment) Act 2003, from December 31, 2004, all international business companies (IBCs) located in BVI are required to establish and maintain a Register of Directors, and must appoint their first director within 30 days of the IBC's incorporation. 

The Registry of Corporate Affairs (the “Registry”) is responsible for ensuring that entities doing business in and from within the Territory are duly registered. The incorporation of BVI Companies can take place within one business day though the time required to process the corporate books averages 2 to 3 days. The Registry also functions as the patents and trademarks registry, facilitating the registration of British Virgin Islands and UK trade and service marks and patents. 

Processing time can vary anywhere between 4 to 5 weeks although the registration may take just about 1 day.

Under the 1984 IBC Act, preceded by the 2004 Business Companies Act, just one corporate form was available, that of the company limited by shares. Under the new regime, several different types of companies can be incorporated, namely - 

  • Companies limited by shares, an admired form of BVI company
  • Companies limited by guarantee not authorised to issue shares
  • Companies limited by guarantee authorised to issue shares
  • Unlimited companies authorised to issue shares and
  • Unlimited companies not authorised to issue shares
  • A segregated portfolio company or A restricted purpose company
  • A corporate suffix is required for the Companies regulated by the Act.
    • Limited companies (including companies limited by guarantee) must end their name with either “Limited”, “Corporation”, “Incorporated”, “Societe Anonyme”, “Sociedad Anonima”, and their respective abbreviations such as “Ltd”, “Corp”, “Inc” and “S.A.”
    • Unlimited companies must end their name with either “Unlimited” or “Unltd”
    • Restricted purposes companies must end their name with the phrase “(SPV) Limited” or “(SPV) Ltd”
    • SPCs must have either “Segregated Portfolio Company”, or its abbreviation “SPC”, in the name immediately before one of the endings specified for limited companies
    • The name of a limited company that is a private trust company must end with the designation“(PTC)” placed immediately before one of the required endings
    • If required, the company number can be used as a name in the form “BVI Company Number 1234567 Limited”
    • A company can also have an additional name in foreign characters if approved by the Registrar
  • Under the Companies Act, a company limited by guarantee must have a minimum of two members. The Memorandum of Association contains a statement of the amount up to which the members guarantee the company's debts. The Articles can provide for the members to have differing 'shares' of the assets and liabilities
  • The 1996 Limited Partnerships Act governs British Virgin Islands Limited Partnership. A registered agent will file the memorandum and articles of association with the registrar of limited partnerships, who issues a certificate of limited partnership that validates the partnership, without which it will be considered as a general partnership. International partnerships are tax-exempt and barred from local business
  • The Virgin Islands Special Trust Act, 2003 (VISTA), the Virgin Islands has consolidated its position as the location of choice for international trust settlements and operations. VISTA has generated a substantial amount of interest from legal and corporate professionals and business entrepreneurs alike

1. Validation of the Name
2. Certificate of Incorporation issued by the Registrar of Companies of the British Virgin Islands
3. Memorandum & Articles of Association, signed by the subscribers of the Company
4. Appointment of First Director
5. General Powers of Attorney (2)
6. Resolutions of the Director
7. Registers & Share Certificates
8. Statutory filings

Taxation, Laws & Regulations

No Income Tax in British Virgin Islands. Companies carrying out business outside BVI do not have to pay income tax or corporate tax in BVI. Also, BVI shareholders aren’t applicable to tax in BVI on any distributions or dividends paid to them plus no transfer tax on shares. Group funds held by BVI establishments are either used to finance other group establishments through injections of share capital or to fund acquisitions by members in the group without any issues of tax in BVI.

No.Type of TaxTax Rate
1Taxable incomeNo
2DividendsNo
3Capital GainsNo
4LossesNo
5RateNo
6SurtaxNo
7Alternative minimum tax No Foreign tax credit
8Participation exemption No Holding company regime
9No IncentivesNo
10Corporate Income TaxNIL
11Capital Gains Tax RateNIL
12Branch Tax RateNIL
13Withholding TaxNIL
14Payroll TaxPayroll tax is levied on both the employer (2% or 6% of the gross salary) and the employee (8%)
15Real property taxLand tax is levied at USD 50 per acre. Building tax is levied at 1.5% of the annual rental value
16Social securityThe employer must pay 4.5% of the employee’s salary, whereas 4% is paid by the employee (both are subject to a cap)

The BVI Business Companies Act, 2004 (BVI BC Act) entered into force on 1st January 2005. Under the BVI BC Act, companies incorporated under the British Virgin Islands (BVI) Companies Act are exempt from all taxes provided under the BVI Income Tax Ordinance. The BVI BC Act is essentially an amalgamation of the International Business Companies (IBC) Act and the BVI Companies Act, which contained a regime under which all domestic companies incorporated in the BVI were governed. In addition, on 1st January 2007, all International Business Companies on the companies register in the BVI were automatically reregistered under the BVI BC Act and, consequently, the IBC Act was repealed in full. 

All Business Companies (BC's) are statutorily exempt from BVI taxes. However, such companies must pay an annual license fee. In general, a BC may not transact business with persons resident in the BVI or own interests in real property located in the BVI unless it obtains the relevant trade license from the BVI government. In addition, a BC may not carry on business as a bank, trust company, insurance company or reinsurance company without a license from the BVI Financial Services Commission. 

A highly regarded legal framework makes BVI populous for incorporation of a company. The legal system is based on the English common law that provides a modern outlook with a proven track record and trusted with prudent current legislation. 

British Virgin Islands Financial Services Commission is an autonomous regulatory authority accountable for the regulation, supervision and inspection of all financial services in and from within the BVI. 

Every individual wishing to form a company in BVI needs to apply through a standard form to obtain a licence. It is granted for one year, renewed annually at the end of each calendar year, each licence expires on 31st December, including in the first year of business.

The Annual renewal fee to the BVI Government is payable once a year (starting from the second year after the incorporation) and due on the following dates:

  • For companies incorporated between the 1st of January & 30th of June, the fee is due before 31st May
  • For companies incorporated between the 1st of July and 31st of December, the fee is due before 30th November


Failure to pay the Government Annual fee on or before the due date will result in the accrual of penalties payable to Government in addition to the Government Annual fee, as follows:

(a) If the Government Annual fee is paid before the expiration of two months after the due date, the penalty payable will be 10% of the Government Annual fee due; or
(b) If the Government Annual fee is paid after the expiration of two months after the due date, the penalty payable will be 50% of the Government Annual fee due

Immigration & Visa Requirements

All non-residents, including British citizens, require a passport to enter the BVI, except that Canadian and US citizens, they need only a birth certificate, certificate of citizenship or voter registration card. 

Visas are given for up to six months stay provided that there is a return or onward ticket and evidence of sufficient funds. 

Work permit holders are free to travel in and out of the BVI without any restrictions, as long as their work permits are valid. Foreign nationals who work in the BVI and require a visa as well must ensure that their visas are kept up to date, to avoid problems on re-entering the BVI.

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