Throughout the 1990’s, the British Virgin Islands(BVI) earned a reputation as a tax haven, due to countless cases of tax evasion perpetrated in large thanks to the beneficial tax system and a financial system which allowed for complete privacy. Since 2005, the BVI is no longer a popular destination for tax evaders, as tax treaties with the U.S. allowed for total financial transparency and the EU’s Savings Tax Directive added an additional withholding tax to discourage saving.
To the uninformed, the BVI appears to be a dead end for asset protection and investment. However, savvy entrepreneurs recognize that this jurisdiction still offers major incentives to invest and holds several key advantages over similar jurisdictions. Specifically, by choosing BVI incorporation an offshore company, an entrepreneur can meet all of their business objectives in an efficient and legally compliant manner. Below is a description of the important aspects to consider when selecting a jurisdiction.
Location
The BVI is one of the world’s smallest countries, located near to Puerto Rico, in between the Caribbean and the Atlantic. However, BVI law allows for the company to be run through a virtual office from anywhere in the world. With the increased availability of high speed internet and high definition video conferencing, location is at most a minor hindrance.
Transport
This is another aspect that has fallen in importance due to technological improvements and beneficial policy. The majority of entrepreneurs manage their offshore companies from abroad and therefore, never deal with the transportation in the BVI. That said, the BVI has four airports, paved roads and ferries between each island, which makes traveling easy.
Culture
There are only around 25,000 British Virgin Islanders. The official language of the BVI is English and 99% of the population is literate.
Policy and Taxes
Policy concerning foreign investment and finance in the BVI has changed significantly over the past 10 years. The majority of legislation that made the BVI an ideal secrecy jurisdiction has been replaced with new treaties with the US and Europe that have allowed for greater transparency. The Organisation for Economic Cooperation and Development (OECD) named the BVI to their white list recently in recognition of the reform undertaken.
An International Business Company (IBC) is now the ideal choice for offshore entrepreneurs. This type of company is limited by shares and governed by legislation introduced in 1984. The BVI requires an IBC, or offshore company, to have at least 1 director and 1 shareholder, but there are no restrictions on the nationality or residency of either.
BVI policy restricts IBC’s so that they may not do business on the British Virgin Islands, with British Virgin Islanders, or in any industry requiring licensing. None of these restrictions are a problem though, as this means that entrepreneurs are restricted to 100% offshore business, which is completely tax exempt.
Current Business
Despite the change in regulations, the BVI continues to be a leading destination for offshore business with nearly 450,000 companies registered. Business is greatly benefited by the use of the US dollar as its official currency, which allows entrepreneurs to avoid foreign exchange fluctuations that plague businesses in jurisdictions with weaker currencies. BVI businesses are easy to run, as most activities do not require a license.
Company Incorporation
The process of incorporating a company in the BVI is generally simple and can be done relatively quickly. It is highly recommended to higher a firm specializing in global corporate services to ensure full legal compliance and maximum efficiency in the formation of the company.
IBC formation requires just a single shareholder and director, with no restrictions on foreigners. There is no requirement to keep financial accounts or for an annual audit, and the company formation process has no minimum capital requirement. General meetings held with shareholders and directors can be held entirely over the telephone or through video conferencing from anywhere around the world.
The climate towards traditional tax havens is changing and tax authorities are stepping up their efforts to curb tax evasion. In this unique climate, it is crucial that entrepreneurs recognize the importance of a jurisdiction that offers as much economic freedom as the BVI, while maintaining a good reputation with the OECD and tax authorities around the world. Engaging an experienced corporate services firm can assist in ensuring that proper planning is undertaken and legal obligations from the investors home country as well as the country where their company will be set up are met. The ease and convenience provided by the BVI allow it to remain an attractive incorporation option for many investors.