British Virgin Islands: Offshore Legal and Tax Regimes
Tax Treatment of Offshore Operations
From 2006, corporate income tax in the BVI has been abolished (see below).
In October 2004 Chief Minister at the time, Orlando Smith informed the country's Legislative Council that a two-year transition period would be put in place to smooth the changeover to the proposed new Business Companies Act, which has lowered the income tax rate to 0% for both local and International Business Companies.
The new legislation, which took effect on 1st January 2005, was drafted to ensure the territory's full compliance with the European Union (EU) Savings Tax Directive and EU Code of Conduct on Business Taxation, as required by the United Kingdom of all its Overseas Territories.
Under the transition arrangements announced by Dr Smith, new incorporations were still possible under old legislation throughout 2005. From 2006, new incorporations must be made under the new Business Companies Act, although companies already on the register were permitted to operate under the old IBC Act or Companies Act for an additional year. From 1st January 2007, all companies were required to be operating under the new legislation.
The Act requires companies to use a registered agent to ensure compliance with the new laws.
Under the new legislation, the income tax system for employees also disappeared. However, in its place, a payroll tax is levied, 8% of which is paid by the employee. The first US$10,000 of income remains tax free.
Since 2007, local firms are required to pay annual licence fees.
Insurance companies and mutual funds must pay license fees in addition to registration and incorporation fees:
- Insurance Companies: Application fee US$500; Annual license fee US$1,000 (Credit Life Companies), US$2,000 (LongTerm/General Companies);
- Mutual Funds: Application fee US$350 (Private and Professional Funds), US$500 (Public Funds); annual license fees are the same.
Under the new legislation, the income tax system for employees has also disappeared. However, in its place, a new payroll tax is levied, 8% of which is paid by the employee. The first US$10,000 of income remains tax free.
Local firms are required to pay annual licence fees.