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BRITISH
VIRGIN ISLANDS EXECUTIVE SUMMARY
British
Virgin Islands Executive Summary
The British Virgin Islands are an English-speaking
Dependent Territory of the United Kingdom, located
in the Caribbean off Puerto Rico. The BVI is politically
stable; under the 1967 constitution, the Governor
represents the Queen and heads an Executive Council.
There is a 13-member elected Legislative Council.
Until
2005 the only significant tax in the BVI was income
tax, which applied to the relatively few local
companies and to individuals; there are customs
duties and some real estate taxes. The population
of 23,000
(2006)
is of mixed European and Caribbean origin. There
is minor tension between the settled population
and recently-arrived Caribbean economic migrants.
The economy is highly dependent on tourism, with
financial services also important. In 2004 the
government abolished income tax for companies
and individuals, replacing it with a 'payroll'
tax, shared between companies and employees.
While
there is no pressure for major constitutional
change, in 2002 the BVI Government said it wanted
to increase its establishment and asked for some
of the Governor's powers to be transferred over,
recognising the BVI's 'constitutional maturity
and prudential system of government'. At
the end of February 2007, the UK and the BVI government
successfully completed negotiations for a new
constitution for the islands. Described by Lord
Triesman, British Minister responsible for the
Overseas Territories, "as an important step
forward for the territory," the new constitution
devolves significant new powers to the BVI Government.
The local currency is the US Dollar, and there
are no exchange controls.
The
BVI introduced its outstandingly successful International
Business Company (IBC) in 1984, and by the time
the Act was superseded by the BVI Business Companies
Act 2004, which effectively removed the distinction
between 'offshore' and 'onshore' companies, well
over 600,000 had registered in the jurisdiction,
Hong Kong and Latin America being the main sources
of clients. The BVI has significant mutual fund
and captive insurance sectors. Banking activity
is, by design, quite minor. The BVI has tried
hard to exclude money-laundering, mostly with
success, and has a relatively good reputation.
In
2002 the BVI introduced a Financial Services Commission
to ensure independent and effective supervision
of financial institutions.
As from 1st July, 2005, the BVI, like other British
'dependent territories', was forced to apply the
EU's Savings Tax Directive, and chose to apply
a withholding tax (initially of 15%) to the returns
on savings paid to nationals of EU Member States.
The Directive does not apply to corporate entities.
The BVI is a reasonably cheap jurisdiction compared
to its local rivals, and has quite strong professional
services. The Government is responsive to the
needs of business, and its legislation is mostly
flexible and straightforward. There is an international
airport at Road Town; connections are mostly to
Puerto Rico.
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