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BRITISH
VIRGIN ISLANDS FORMS OF OFFSHORE OPERATION
- BRITISH
VIRGIN ISLANDS TAX TREATMENT OF OFFSHORE OPERATIONS
- BRITISH VIRGIN
ISLANDS TAXATION OF FOREIGN EMPLOYEES
- BRITISH VIRGIN
ISLANDS EXCHANGE CONTROL
- BRITISH VIRGIN
ISLANDS EMPLOYMENT AND RESIDENCE
The
BVI Business Companies Act has effectively removed
the distinction between offshore and onshore
companies, but the new legislation is expected
to be just as popular to 'offshore' investors
and clients. Prior to the BVI BC Act,
the main forms useful for offshore operations
in the British Virgin Islands were the International
Business Company, the various types of non-resident
Cap. 285 company, the International Limited
Partnership, and the Trust.
British Virgin Islands Forms of Offshore Operation
Under the 2004 Business
Companies Act, several different types of companies
can be incorporated including:
- Companies
limited by shares. Likely to remain the most
popular 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.
- Unlimited
companies not authorised to issue shares.
See
Forms of Company for
a fuller description of the 2004 BVI BC Act.
Under
the old IBC Act, offshore operations took place
within the following forms:
British Virgin Islands Tax
Treatment of Offshore Operations
See Domestic
Corporate Taxes for the general principles
of BVI corporate taxation. NB As from 2006, corporate
income tax in the BVI has been abolished (see
below).
Until 2006, offshore BVI companies were taxed
as follows (stamp duty exemptions remain in force):
- Non-resident
limited liability companies (whether limited
by shares, by guarantee or both, ie hybrid)
were exempt from income tax on foreign-derived
income, but paid BVI income tax at 15% on any
chargeable income derived locally or remitted
to the BVI.
- Resident
limited liability companies which obtained not
less than 90% of their net profit from trading
outside the BVI (known as offshore trading companies)
paid 1% income tax on their chargeable profits.
- International
Business Companies were exempt from income tax
and from stamp duty.
- International
Limited Partnerships were exempt from income
tax and from stamp duty.
- Trusts
without BVI beneficiaries, local land holdings
or business activities were exempt from income
tax and stamp duty.
Almost
all captive insurance companies, mutual funds
and foreign investors use the Business Company,
Limited Partnership or Trust formats; thus,
they were exempt from local taxation. License
fees are payable as follows in addition to registration
and incorporation fees (for which see Forms
of Company):
- Insurance
Companies: Application fee $500; Annual license
fee $1,000 (Credit Life Companies), $2,000
(LongTerm/General Companies);
- Mutual
Funds: Application fee $350 (Private and Professional
Funds), $500 (Public Funds); annual license
fees are the same.
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, has been drafted to ensure the
territory is fully compliant 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 has also disappeared. However, in
its place, a new payroll tax was is levied,
8% of which is paid by the employee. The first
$10,000 of income remains tax free.
Local firms are now required to pay annual licence
fees.
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British Virgin Islands Taxation
of Foreign Employees of Offshore Operations
There are no special rules applying to the foreign
or BVI employees of operations. See Domestic
Personal Taxes for the general principles
of individual taxation in the BVI, which also
apply to the resident employees of non-resident
entities. There are no special privileges or exemptions
for expatriate workers, indeed they pay higher
land taxes than BVI residents.
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British Virgin Islands Exchange
Control
The British Virgin Islands have no exchange controls.
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British Virgin Islands Offshore
Activities
The BVI BC Act 2004 has
removed the distinction between offshore and onshore
companies.
Under
the former legislation, International Business
Companies (and International Limited Partnerships)
were permitted certain local activities:
- Make
and maintain deposits with banks;
- Professional
contacts with solicitors, barristers, accountants,
book-keepers, trust companies, administration
companies, investment advisers etc (not to be
cynical, anyone who charges fees!);
- Prepare
or maintain books or records;
- Hold
meetings of directors or members;
- Hold
a lease of property to use as an office for
other permitted purposes;
- Hold
shares, or other securities, in another IBC;
- Hold
shares, or other securities, in a company owned
by a BVI resident or a BVI-incorporated company.
Non-resident Companies Act (Cap. 285) Companies
were permitted to do business locally but paid
income tax on the profits.
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British
Virgin Islands Employment and Residence
In order to work in the BVI, a work permit is
needed, except for 'Belongers', naturalised citizens
and holders of a certificate of residency. Work
permits are issued only when there is no suitable
local applicant for the job.
Under
a new labour code introduced in 2002, it was proposed
that 'non-belonger' workers in the Islands will
no longer be granted an initial work permit of
more than five years. Permits will be issued for
up to one year at a time and then be considered
for a renewal or an extension. A new five-year
limit will be introduced under which workers who
have held work permits for five years must leave
the BVI with their dependents and remain outside
the territory until they can be considered for
either re-employment or new employment. The proposals
were resisted by business interests.
In
order to lease or purchase land, non-Belongers
must obtain an Alien Landholding Licence. Applications
for a Licence must be accompanied by two personal
financial references, one bank reference, two
character references, police record, application
fee of $50 (individual) or $75 (company), and
licence fee of $150 (individual) or $200 (company).
Licences carry a 2 or 3 year commitment to develop
unimproved land.
In
December, 2004, the government outlined the details
of a new immigration policy framework in a bid
to clarify the rules surrounding applications
for residence and ‘belonger’ status. Then Chief
Minister Orlando Smith explained that the Board
of Immigration would make recommendations in 2005
concerning those who applied for residence status
before January 1 2003 and had lived in the territory
continuously for the last twenty years. In June,
2005, 92 of these individuals received residence
and belonger certificates.
Approvals
for those applying for residency status after
January 1 2003 are limited to no more than 25
persons per year. The government also stressed
that in all cases, individuals cannot be away
from the BVI for more than 90 days in any calendar
year if they want to qualify for residency status.
Smith
acknowledged that controlling immigration in the
territory represented a “very serious challenge”
for the government, and explained that a balance
must be struck between welcoming outsiders and
protecting the privileges afforded to BVI citizens.
However,
the issue of immigration reform has not yet been
settled conclusively, and in March 2008 Premier
and Minister of Finance Ralph O’Neal announced
in his budget speech that comprehensive immigration
reform would be a priority that year.
"We
will amend existing legislation to implement additional
control measures. Current legislation will be
reviewed to ensure compliance with international
laws, human rights and other conventions. As we
embark on the reform process, we will ensure citizen
participation by conducting regular consultations
with representatives of the community, advocacy
groups and other private sector organisations,"
he revealed.
As
part of this process, the government began that
year to streamline immigration procedures by creating
a "one-stop process" for obtaining entry
permits and work permits.
Further
details of the BVI's immigration and work permit
rules can be obtained from the Immigration Department
at:
341
Waterfront Drive,
Ashley
Ritter Building,
Road Town,
Tortola,
BVI
Tel: 1-284-494-4399
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