Tax Haven BVI For The Best Offshore Services

The British Virgin Islands as a tax haven are characterized by a competitive judiciary framework and an advanced electronic corporate filing system.

One of the BVI’s major achievements as a tax haven is the establishment of the BVI Business Companies Act, 2004. This Act replaced the IBC Act of 1984, putting in place a consolidated framework for the incorporation of companies in the BVI, while integrating improved features which give the BVI a competitive edge as a leading financial services center.

Under the Business Companies Act, the BVI allows for the formation of seven corporate forms, namely, companies limited by shares, companies limited by guarantee that are authorized to issue shares, companies limited by guarantee that are not authorized to issue shares, unlimited companies that are authorized to issue shares, unlimited companies that are not authorized to issue shares, restricted purposes companies and segregated portfolio companies.

Each of these entities provides a safe and legal means by which business can be conducted and is designed to accommodate the financial and or personal needs of its owners. The company limited by guarantee and authorized to issue shares, in particular, is referred to as a “hybrid” entity, which is flexible for structuring transactions since it combines equity and guarantees membership. On the other hand, companies limited by guarantee that are not authorized to issue shares are particularly useful for non-profit activities such as sports organizations and charities and are “pure” guarantee companies with many uses. The formation of an unlimited company that is not authorized to issue shares is relatively simple and only requires the filing of the Memorandum of Association with the BVI Registrar of Corporate Affairs. Meanwhile, restricted purposes companies are restricted to conducting specific types of activities as outlined in their Memorandum, are limited by shares and basically used in structured finance and securitization transactions. Segregated portfolio companies are limited to businesses offering insurance and mutual funds services. Under the 1984 IBC Act, the company limited by shares was the only corporate of entity available for usage, but continues to be the most versatile, least complex and most popularly used company.

The BVI Business Companies Act has cemented the BVI’s profile as a premier tax haven as it reaffirms the Territory’s zero tax policy on all local, offshore and foreign companies formed and or operating within the BVI. The Act levies no income tax, capital gains, inheritance and estate taxes, thus enabling businesses to broaden their horizons and function with competitive advantage. Tax exemption also applies to all interest, compensations, dividends and royalties earned with respect to shares, debts and other corporate securities, while, with the exception of transactions pertaining to land-ownership, all transfer transactions of security, debt obligations, property and shares are free from stamp duty.

As a tax haven, the British Virgin Islands are well equipped with a state of the art online filing system whereby formation documents may be electronically incorporated and signed by the Registrar of Companies, thus allowing for the formation of business companies within one working day. The Virtual Integrated Registry and Regulatory General Information Network (VIRRGIN) provides a quick and efficient means for company registration and has contributed to the level of efficiency and competitiveness that the BVI have been able to attain over the past decade as an important financial services center.

In addition to this, the BVI has enacted a series of legislations and amendments that continue to ensure that offshore policies are updated and compliant with international standards. Some of the acts passed include:

  • Financial Services Commission Act, 2001
  • Financial Services Exemptions Regulations, 2007
  • Anti-Money Laundering and Terrorist Financing Code of Practice, 2008
  • Anti-Money Laundering Regulations, 2008
  • Non-Financial Business (Designation) Notice, 2008
  • Insolvency Act No. 5 of 2003
  • Insolvency Code Practice
  • Insurance Regulations, 1995
  • The Company Management Act, 2003 & 1990
  • Virgin Islands Special Trusts Act, 2003

The use of the U.S dollar as the official currency of the BVI also removes all possibilities of exchange controls as business transactions can be comfortably conducted. Despite the BVI’s tax haven status and popularity as a prominent offshore services center, the islands have succeeded in maintaining a low profile and unblemished reputation. This is a part result of Britain’s strict demand for the implementation of strict international offshore policies based on standards established by the European Commission.

One of the BVI’s tax haven key features is the fact that BVI Business Companies are guaranteed absolute confidentiality as information relating to the shareholders, beneficial owners and directors do not form part of public record and are unavailable to the public. Such information is held only by registered agents, who are required by law to safeguard the personal details of their clients. As in classical offshore jurisdictions and tax havens, in the BVI, only the Memorandum and Articles of Association are filed with the Registrar of Corporate Affairs.