The BVI is one the world s leading and respected offshore financial services jurisdictions and is by far the premier choice for offshore corporate domicile worldwide with its flagship product the BVI Business Company (BVIBC). Anchored by the "twin pillars" of its economy, tourism and financial services, it enjoys one the more prosperous economies of the Caribbean region. Tourism employs more people within the Territory, and the islands are considered to be one of the world's greatest sailing destinations, however financial services contributes more to the Government's revenues on an annual basis. There are a number of issues which you must consider when you are looking to set up your business in BVI. This document takes you through some of the common questions we come across and gives you practical information about the issues you need to consider. What type of Business Structure should we use? There are advantages and disadvantages to all of them, and there is no one correct answer, it is all dependent on your specific business circumstances and needs. A brief overview of the main structures is below: Establishment (a branch of your overseas business) Not a separate legal entity but an extension of the overseas parent company No limited liability or separate economic entity for BVI Operations There is zero rate for income tax in the BVI. Furthermore, there are no capital gains, capital transfer, inheritance or estate tax or death duties All foreign investors, including citizens of the UK, require a non-belonger land holding license to purchase property in the BVI. A foreign company can be licensed in the BVI under the BVI Business Companies Act Limited Company: Provides limited liability and can separately identify BVI operations Gives a perception of a local business, with longevity There is no statutory requirement to prepare financial statements, appoint auditors, or file a copy of financial statements with the Registrar of Companies, the Inland Revenue Department, or any other public official in the BVI, unless the Company is subject to specific licensing requirements laid down in other financial services legislation, such as Banks and Trust Companies Act, Company Management Act, Insurance Act, Financing and Money Services Act or Securities and Investment Business Act. Statutory provision require that the Company must keep certain information at the office of its registered agent, including copies of registers of members, register of directors and register of mortgages and charges, details of where the original registers are maintained and an imprint of the Company seal. The register agent is also required to adhere to strict money laundering procedures, including being able to produce evidence of identity and proof of address of those who own/control the entity.
Limited Liability Partnership: Partners have limited liability as specified in the memorandum of partnership Profits are allocated to partners who are then liable to pay Income Tax on these profits personally however note that there is currently a zero rate for income tax in the BVI What if we use BVI to set up our holding company? Trade Licenses Every person wishing to conduct business in the BVI must apply for and obtain a Trade License. An applicant must apply on standard form and submit all supporting documents. There is no application fee but there is a collection fee following approval, which is dependent on the type of business being licensed. A copy of the Trade License is typically required by banks in order to open a bank account. Work Permits A Work Permit must be obtained for every employee who is not born in the BVI, a Belonger or Naturalized Resident of the BVI, unless the employee possesses a work permit exemption. The Applicant Employer must submit its Trade License and organizational documents; i.e. M&A or equivalent, register of directors, register of members along with the standard application form. Employees must submit resumes, evidence of qualification such as degrees or certificates, medical records, and must submit to a medical examination upon entering the Territory. The Work Permit process is the principal means the Government of the BVI uses to monitor the immigration and employment of non-nationals. Typically a work permit will not be approved if there are nationals who have applied for the position and generally have equivalent qualifications as the non-nationals. Work Permits are issued for a year at a time and are non-transferable to other individuals. In addition, an individual cannot transfer to another job and maintain a previously issued permit. A new permit must be obtained for the new position. The range of fees for a work permit ranges from US$500.00 to a maximum of US$1,200.00 Incentives for Investors The Government provides incentives to encourage the growth and development of tourism and related industries and also to attract innovative and pioneering new industry. Incentives mainly provide for relief from custom duty and are contained in three Acts which are briefly described below:
Encouragement of Industries Act The Governor may declare an industry which is presently not being conducted in the Territory on a commercial scale, or at all, and for which there are limited manufacturing facilities in the Territory to be pioneer industry. This act provides for relief from custom duty for a period of five years on materials and articles imported for the construction and fitting out of the pioneer business. Pioneer Services and Enterprises Act The Governor may make a declaration that any business be determined a pioneer enterprise if satisfied that it is expedient and in the public interest to do so. Before making such a declaration, the Governor will consider the number of businesses already established or about to be established for the purpose of supplying a product in general demand and not produced in the Territory or a service in general demand and not obtainable in the Territory. The Act provides for relief from custom duty on materials and articles imported for constructing or equipping the pioneer business. Hotel Aid Act This act makes provision for granting relief from custom duty on building materials and equipment for constructing and fitting out a hotel. If a hotel which has received Hotel Aid is being sold the purchaser may apply to have the Hotel Aid transferred to the new entity. Taxation General Principles There are no capital gains, inheritance or wealth taxes in the BVI and the applicable tax rate on income in the BVI is zero. Employees of businesses operating in the BVI are subject to payroll tax as described below. Corporate Tax A BVI Business Company is exempt from BVI Income Tax. All dividends, interest, rents, royalties, compensations and other amounts paid by a BVI Company are also exempt from Income tax. Furthermore all capital gains realised are not taxable and there are no estate, inheritance or gift taxes. Finally all transactions such as transfers of assets, shares, debts etc are exempt from stamp duty with the exception of land transactions.. Individual Taxation Since 2005, the BVI has adopted a zero rated income tax regime for all individuals. Individuals employed in the BVI are now subject to payroll tax as described below.
Trust Taxation A key feature of BVI Trusts is that income received by a trust or beneficiary in accordance with the provisions of the trust are not subject to the income tax regime. Withholding Tax There are no withholding taxes applicable on interest earned or dividends paid by BVI Business Companies. There is also no mandatory requirement to withhold tax on any payment due to non-residents under an agreement for services. If the services are performed in the BVI then work permit fees and payroll taxes may apply. Payroll Tax Every employer who conducts business within the BVI is required to pay payroll taxes on: (i) Remuneration paid by them to every employee (ii) Deemed remuneration paid by them to every deemed employee for services rendered by the employee or deemed employee wholly or mainly in the BVI whether or not the remuneration is paid in the BVI A self-employed person is also required to deduct payroll tax on their remuneration. A partner in a partnership carrying on business in the BVI is a deemed employee of that partnership if they render services and, otherwise than as employee, participate in the income of the partnership. Likewise, a shareholder of a company which is carrying on business in the BVI is a deemed employee of that company if they render services to the company and, otherwise than as an employee, participate in income of the company. Remuneration is broadly defined to include wages, salary, leave pay, bonus, gratuity, money paid under a profit-sharing scheme, severance pay, residential rent and other benefits inkind. There are different rates of payroll tax applicable depending on the status of the employer. For Class 1 Employers who are smaller organizations which meet the following three criteria in the relevant financial year. Payroll cost do not exceed US$150,000 Turnover does not exceed US$300,000 Total number of employees does not exceed seven A payroll tax rate of 10% applies wherein 8% is deducted from the employee s salary and 2% is paid by the employer after an initial tax free income level of $10,000 per employee..
Every employer or self employed person who does not meet the Class 1 Employer criteria is automatically a Class 2 Employer. Class 2 Employers are liable to pay payroll tax at the rate of 14% where 8% is deducted from the employee s salary and 6% paid by the company after the initial tax free level has been surpassed. Value Added Tax (VAT) There is no VAT or sales tax in the BVI. Import Duties Import duties and levied on goods imported into the BVI at rates up to 20%. Stamp Duty Stamp duty is payable on real estate acquisitions at the rate of 4% for belongers and 12% for non-belongers. Social Security Social Security is a cumpulsory and statute mandated insurance plan into which employers, employees and self-employed persons contribute. Contributions are based on the level of income, subject to a predetermined maximum insurable earnigs rate. The máximum rate changes annualy in order to maintain parity with and account for increases in the Consumer Price Index Private employees 8.5% of insurable earnings - Employees contribute 4% - Employers contribute 4.5% Civil servants contribute 7.5% of insurable earnings - Civil servants contribute 3.5% - Government contribute 4% Self-employed persons contribute 8.5% of insurable earnings The Social Security Scheme was designed to provide a partial income replacement for working age persons when certain contingencies arise. The following benefits are provided under the scheme to qualified persons: Sickness Maternity Employement injury Invalidity Age Funeral Survivor s
In addition on the retirement of an individual, the Social Security Scheme also provides a pension benefit until the death of the individual. Pensions The BVI Labour Code provides that an employer shall make provision for retirement benefits to be paid to his or her permanent employees by means of a pension scheme, an annuity, provident fund or other form of retirement scheme which may be contributory. National Health Insurance Effective late 2015 a National Health Insurance program will be introduced in the BVI which will require employers to deduct 3.75% from their employees salaries and provide a matching contribution of 3.75% up to a máximum salary level of US$77,200. The goal of this scheme is to provide access to and financial coverage for health care services to residents of the BVI. To discuss your requirements please contact the International Office on +44 (0) 1245 449266 or email us directly. Kreston International Kreston International Limited is a global network of independent accounting firms. Offering reliable and convenient access to efficient and seamless advisory and assurance services through member firms located around the globe, Kreston: Is ranked the 13th largest accounting network in the world Covers 104 countries Has 700 offices Has a resource of 21,000 professional and support staff. Our members are accustomed to working together to deliver cohesive international solutions to ensure clients receive the highest quality of expertise available in their respective countries. Beyond assurance, quality and experience, clients will enjoy the unique synergy that stems from the trusted relationships that Kreston members have created globally and which support the consistent delivery of exceptional international service. This information is provided for guidance only and is not a substitute for professional advice. Neither Kreston International Limited nor its member firms accept any liability for any loss arising as a result of actions taken or not taken based on the information contained in this document. The information in this document was prepared as at 30 June 2015.