One of the attractive places to set up offshore companies in the British Virgin Islands (BVI). This guide will cover the important information you need to know before registering a company in the BVI.
A Brief History of the British Virgin Islands (BVI)
The British Virgin Islands are located about 80 kilometers off the coast of Puerto Rico. Today, the BVI is renowned for setting up offshores companies and corporate trusts, with more than 500,000 foreign business currently being incorporated in the BVI.
The International Business Companies Act that was enacted in 1984 opened up BVI as an offshore financial center. The implementation of the Act formed International Business Companies (IBCs) within BVI’s territories. Currently, the jurisdiction operates as a semi-autonomous territory allowing IBCs to become the de facto business unit for foreign individuals and entities that want to incorporate a business in BVI.
The common and business laws in BVI are overseen by the UK. However, as an established and recognized business hub, BVI enjoys freedom for setting its own laws on the incorporation of companies and taxation of companies.
Companies Operating Outside BVI enjoy Low Taxation Requirements
The tax system in the BVI is territorial, which means that no corporate taxes are effected on IBC incorporated in BVI but running their business operations abroad. Such companies are excluded from taxation of items like capital gain, income, sales, customs duties, inheritances, profits, royalties, interests, and dividends.
The BVI government collects taxes from IBCs on business elements that are run locally, including the hiring of local staff and business activities conducted in any of the BVI islands. The point of revenue collection by the government is during IBC registration, which usually attracts higher fees than companies incorporated in onshore jurisdictions.
The BVI keeps a Tax Information Exchange Agreement (TIEA) with other jurisdictions, instead of Double Tax Agreements (DTAs). This is because it does not impose withholding tax and the TIEA requires BVU to disclose information related to tax as and when other jurisdictions request such information.
The BVI is not allowing to ratify or sign international corporate tax conventions because it is a British Overseas Territory. This means that BVI conventions follow that of the UK, which may also ratify conventions that extend to the BVI.
Setting Up a Business in BVI is Straightforward
Setting up an IBC in the BVI is relatively easy and does not require one to fulfill tons of requirements. A new IBC will only require to name at least one director of the company and one shareholder, both of which can be of any nationality to get incorporated. No legal requirements are set for annual meetings, and they can be held from anywhere in the world.
An IBC can issue its shares in any currency, or choose to issue of consideration instead of cash. The shares can have or not have value to a maximum of 50,000 shares, with additional fees charged for shares above this amount. In addition, an IBC is not required to file its annual accounts or audit its accounts.
The process of dissolving an IBC in the BVI is quite easy, although the creditors may apply for reinstatement of a struck-off company. Theoretically, the liquation process of a company is complicated. However, in practice, the registrar may strike off companies that have not renewed their registration for a given period without taking any further actions agents them if there are no mitigating factors. However, the company records need to be kept for several years if the company is dissolved in this manner.
The structure of companies in BVI is straightforward, easy to set up and run. Business entities are allowed to have corporate bank accounts and engage in international banking transactions. Other benefits of setting up a company in BVI include access to a strong and legal professional that facilitate the process of registering a business and the presence of leading International Law firms that facilitate legal matters.
The BVI Boasts of a Record of Confidentiality
When it comes to confidentiality of business information, the BVI is one of the most renowned places. Currently, no requirements are set for making information about the beneficial owner of a company public. Only the registered agent of the IBC is required to access such information. A company can also use the nominee director and shareholder to add an extra layer of privacy on the information about the ultimate beneficial owner. This is as long as the company keeps documents like a declaration of trust that reflect the real company owner. At the time, the Register of Directors is the only record made available to the public.
The only time the registered agents of the business are required to disclose information about the ownership of a company in the BVU is when a lawful request is made, like in the case of a TIEA that is issued by another jurisdiction.
The BVI Trust Structures also offer a layer of confidentiality of the IBC owners. The VISAT trust in the BVI is a Private Trust Company (PTC), which was set up to be a Trustee of Trust that owns an IBC. PTC enables IBC owners to manage their assets and the company by themselves. In other words, the VISTA Trust helps settles who want to retain the control of the management of their company and do not want to be accountable to the trustee for their actions.
Corporations Diversity in the BVI and Trust Structures
The BVI has some of the most diverse corporation structures in the world. When incorporating an IBC, it can be registered with any of the following suffixes or names:
• Sociedad Anonima (S.A.)/Societe Anonyme
The BVI also allows registration of company names in Chinese (Mandarin), making the country one of the most popular offshore choices for Taiwan, China, and Hong Kong investors. When it comes to corporate trust, non-charitable purpose trusts are offered in the BVI to purpose benefits rather than persons. The aim of purpose trusts is to hold private trust company shares or other forms of trust in which the assets are held for a given purpose and not a legal person.
Incorporation Costs and Annual Renewal
When you set up a company in the BVI, you will save on tax filing and annual reporting requirements. However, you will need to pay an annual fee for the company to stay in good standing.
As from 1 January 2018, the fees for incorporating and maintain an IBC in the BVI with a maximum of 50,00 0 shares was increased to US$450 yearly from the previous fee of US$350. However, the non-requirement of having a resident director or a local company secretary makes the option of setting up an IBC in the BVI cost effective, especially for those who wish to hold their asset or companies that engage in trading investments.
Improving BVI Reputation
As much as ensuring the confidentiality of IBC is one of the strengths of BVIs as an option for setting up an offshore company, this commitment has seen companies and individuals using the secrecy provided to evade and avoid tax. For this reason, BVI regulators have been working to restore the reputation of the country, especially after the leak of Panama Papers. This has seen a series of anti-money laundering amendments and regulations being implemented.
The OECD ratings of the BVI has recently improved, indicating that the country is now largely complaint in providing information on request.
Few Banking Options
The banking sector in the BVI is limited to only three banks that serve the entire territory. For IBCs that want to open bank accounts, they need to have accrual business operations in the BVI with local staff or open an offshore bank account in another jurisdiction like Singapore that recognizes BVI structures.
Opening a bank account in the BVI will require a personal visit to the bank and a face-to-face meeting in order to comply with the Know-Your-Customer (KYC) requirements. Compared to Singapore, the territory is not ideal to open and maintain a bank account unless you physically live there. On the contrary, Singapore allows you to open and maintain a bank out even if you do not physically live in Singapore.
Making a Decision Whether to Register a Company in BVI
Several benefits make the BVI a viable option when considering to set up an offshore company, especially for investment holding or passive business activities. Setting up the company is easy and straightforward, a variety of business structures are available, and the tax system used is territorial. However, if you are looking for a place to set up a well regulated and recorded structure, the BVI is less suitable and you may need a renowned jurisdiction for trading, like Singapore.
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