Taxation in the BVI

Corporate Taxation in the British Virgin Islands

It is not a secret that the BVI is extremely popular as an offshore haven offering outstanding tax benefits to non-residents. The BVI is among those fifty countries in the world which are admitted as offshore centres. It is considered to be the most popular tax haven, along with such jurisdictions as Panama and Seychelles. BVI is extremely popular as an offshore haven offering outstanding tax benefits to non-residents.

BVI Business Companies are exempt from the BVI income tax, from tax on dividends, interest, royalties, compensations and other amounts paid by a company; also they are exempt from all the capital gains, estate, inheritance, succession or gift tax with respect to any shares, debt obligations or other securities of the BVI IBC's. The companies are exempt from any kind of stamp duties relating in any way to its assets or activities, with an exception for land-ownership transactions in the BVI: in that case stamp duty remains payable.

The IBC has no liability to tax of any kind in the British Virgin Islands. Accounts neither need to be audited nor filed with any government offices.

Double Taxation Agreements

The main objective of double tax avoidance treaties is to remove or reduce the level of taxation on certain transactions, which can take place between residents of both member countries. The British Virgin Islands do not belong to those: this is a typical non-treaty offshore jurisdiction with zero corporation and income taxes, so there is not much amounts to reduce and consequently less interest to other countries to conclude a double tax avoidance treaty. Double Taxation Agreements between the United Kingdom and Japan and Switzerland extend to the British Virgin Islands but do not generally apply to IBC's.

BVI Income Tax

Income tax (now abolished) was levied on the chargeable income of resident BVI Companies Act Companies. As applied to a company, 'resident' meant that the management and control of its business was exercised from the BVI. Normally, if more than half of the directors are resident in the BVI, then so is the company. There were three possible cases:

• the company was resident, in which case it paid income tax of 15% on its world-wide chargeable income;
• the company was non-resident, in which case it paid 15% income tax on its chargeable income arising in or remitted to the BVI; or
• the company was resident but was an 'offshore trading company', meaning that 90% of its profits arise from activity conducted outside the BVI, and it paid tax at the rate of 1% on its world-wide income.

Chargeable income was assessed after deduction of expenses; tax credits were allowed on foreign tax paid in treaty countries and certain other countries.

BVI Withholding Tax

There are no withholding taxes in the BVI. However, the BVI, like other British 'dependent territories', was forced to apply the EU's Savings Tax Directive from 1st July, 2005, 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.

BVI Taxation of Trusts

Trust income is exempt from tax if:

• the trust is created by or on behalf of a non-resident person; and
• owns no land in the BVI; and
• does not carry on business in the BVI.

Coddan provides tax advice to clients working in all areas of the BVI economy including financial services, construction, property, communication, manufacturing, retail, distribution, IT and internationally traded activities.

Coddan tax department also provides the following tax services: Corporate and Individual taxation; Personal & Business Tax planning; Tax advice & compliance; Preparation and submission of tax returns for individuals and companies; International tax planning.

Please contact us for more information. If you have any queries, please call us during business hours and speak to one of our highly trained incorporation specialists. You can call us by phone 800-081-1510 or + 44 (0) 207.935.5171, or make an initial consultation request.