Introduction
The British Virgin Islands (BVI) are a British overseas territory, part of the British West Indies, lying about 60 miles east of Puerto Rico. There are about 50 islands in the BVI, many of them uninhabited. Tortola is the main island; other islands include Virgin Gorda, Jost Van Dyke, and Anegada. The total land area is 153 km2 . The 2005 estimated population stands at 22,016. English is the official language and ethnic groups include West African British, Portuguese, Multiracial, East Indian and Others.
Business Environment
The BVI have an excellent business infrastructure with good tele-communications; this coupled with the widespread use of the English language and a legal system largely based on English law makes the island a very convenient and effective business base. The very large numbers of offshore companies, trusts, insurers and mutual funds on the islands are supported by a well-developed and diverse professional services sector.
To do business in the BVI (as distinct from establishing an offshore trust or company) a Trade License is required from the Trade and Investment Promotion Department. The application form is accompanied by a financial statement, police record, two business references (for the individual or the company applying) and financial details of the proposed business.
Economic Environment
The economy of the BVI is one of the most stable and prosperous in the Caribbean.
It is highly dependent on tourism which generates an estimated 45% of the national income.
Livestock is the most important agricultural activity. Poor soils limit the ability to meet domestic food requirements.
In the mid-1980s, the Government began offering offshore registration to companies and incorporation fees now generate substantial revenues. To date nearly 50% of the Government’s revenue comes directly from license fees for offshore companies, and considerable further sums are raised directly or indirectly from payroll taxes relating to salaries paid within the trust industry sector (which tends to be higher on average than those paid in the tourism sector). By year-end 2000, roughly 400,000 companies were on the offshore registry.
Taxation
The British Virgin Islands generally appears on most lists of recognized tax havens. In the British Virgin Islands there is no capital gains or capital transfer tax, no inheritance tax, and no sales tax or VAT. The main tax for resident companies is income tax; there are also stamp duties on certain transactions, and property taxes. IBC are exempt from income tax and stamp duty.
The only real tax burdens imposed in the jurisdiction are:
• Payroll tax on employees within the Territory.
• Stamp duty, which usually only applies to transfers of land, and transfers of shares in companies which own land.
• Customs import duty.
• Land tax and house tax.
• EU withholding tax on interest payments to individuals resident in the EU who have not elected to exchange information.
• Various minor ancillary taxes and permit fees.
Banking
Because of traditionally close links with the United States Virgin
Islands, the British Virgin Islands has used the United States dollar as its currency since 1959.
The December 2001 enactment of the Financial Services Commission Act, 2001 established the British Virgin Islands Financial Services Commission as an autonomous regulatory authority responsible for the regulation, supervision and inspection of all financial services in and from within the BVI. The Commission oversees all regulatory responsibilities previously handled by the government through the Financial Services Department. The Banking and Fiduciary Division ensures that all banks and corporate service providers operating in and from the BVI comply with international regulatory standards, established best business practices and relevant BVI laws.
The legal requirement for obtaining a banking license in the Virgin Islands is governed by the Banks and Trust Companies Act, 1990. Section 3 of this Act provides that no person or company incorporated in the Virgin Islands shall carry on banking business from within the Virgin Islands, unless that person or company has obtained a license under this Act.
Offshore Banking
Offshore operations may take the following forms: Non-Resident Private Company Limited by Shares; Non-Resident Private Company Limited by Guarantee; Non-Resident Hybrid Company; International Business Company; International Limited Partnership and the Trust.
The International Business Company is the most widely used vehicle for offshore operations in the BVI; it normally takes the form of a private company limited by shares. The governing legislation is the International Business Companies Act 1984, updated by the International Business Companies (Amendment) Act 1990 and the International Business Companies (Amendment) Acts of 2003 and 2004.
As with many other jurisdictions IBC status is granted subject to certain stipulations:
• Local business activities are prohibited;
• No ownership interest in real property in the BVI is permitted, property may be leased for office use only;
• Banking or trust insurance or re-insurance business may be carried on only if an appropriate license is issued;
• Engaging in the business of company management or providing registered facilities for BVI incorporated companies is not permitted.
IBCs are permitted to own shares in other BVI companies, maintain bank accounts in the jurisdiction and employ the services of local professionals.
