British Virgin Islands Offshore Company Formation (BVI)

The BVI follows English common law and has adopted its standard business formations. The ordinary resident company limited by shares is usually formed for the purposes of carrying on local business. An ordinary non-resident company limited by shares is subject to the same rules as a resident company. Companies limited by guarantee can be resident or non-resident. A public company formed under the Companies Act is similar to a private company limited by shares except that it must have 5 or more members, and the restrictions listed above do not apply. Limited partnerships, Trusts and the International Business Company, which are exempt from all BVI taxes and stamp duty (save for registration and annual license/franchise fees) even though the administration of an IBC may be from within the BVI.

There are now more than 500,000 IBCs, with Hong Kong and Latin America the main source of clients. The great majority of existing IBCs have been formed as asset protection vehicles, quite often in tandem with trusts, either to hold shares or other types of asset. The BVI have an excellent business infrastructure with good telecommunications; this coupled with the widespread use of the English language and a legal system largely based on English law makes the island a very convenient and effective business base. The very large numbers of offshore companies, trusts, insurers and mutual funds on the islands are supported by a well-developed and diverse professional services sector and the Government is responsive to the needs of business. Its legislation is mostly flexible and straightforward with regulatory structures to avoid money-laundering and other criminal activity.

It is a relatively cost effective jurisdiction and the incorporation process can take no more than one day; however, for banks, trust companies and insurers the process is lengthier.

Offshore operations may take the following forms: Non-Resident Private Company Limited by Shares; Non-Resident Private Company Limited by Guarantee; Non-Resident Hybrid Company; International Business Company; International Limited Partnership and the Trust.

The International Business Company is the most widely used vehicle for offshore operations in the BVI; it normally takes the form of a private company limited by shares. The governing legislation is the International Business Companies Act 1984, updated by the International Business Companies (Amendment) Act 1990 and the International Business Companies (Amendment) Acts of 2003 and 2004.

As with many other jurisdictions IBC status is granted subject to certain stipulations:

Trusts

Trust Management has been a major activity in the British Virgin Islands for 30 years or more. Originally the Trust was used primarily by wealthy individuals from the major common law countries, but it is now accepted as a major technique of asset protection in all parts of the world. Trusts in the BVI have a basis in common law, The trust law of the British Virgin Islands is based on English trust law. BVI Trusts are formed under the Trust Ordinance 1961 (based on the English Trustee Act 1925), as updated and amended by the Trustee Amendment Act 1993.

Since the 1993 Act, there is no requirement for registration of trusts in the BVI, and there is no public disclosure of information regarding trusts and trustees are exempt from any need to file annual returns and from any other reporting requirements. Trust duty of $50 is payable on each trust instrument, which is achieved by buying and affixing stamps, creating no record. The Amendment Act introduced a fixed perpetuity period not exceeding 100 years.

The majority of BVI trusts are exempt from all taxes provided there are no beneficiaries resident in the BVI, and that the trust does not conduct any business in the BVI or own any land in the jurisdiction. The Amendment Act provided for the appointment of a 'protector of trust', effectively a supervisor of the trustee(s), and also managing and custodian trustees. A company offering trust services must obtain a licence under the Banks and Trust Companies Act 1990 and conform to various conditions.

In 2003 the BVI enacted legislation implementing proposals made by the Society of Trust and Estate Practitioners (STEP) to reform trust law in the BVI. Three separate statutes will modernise BVI trust law. Further, the BVI Special Trust Act creates the “VISTA” trust. The Act allows a person to set up a trust to hold shares of an underlying BVI international business company without the usual constraints of English trust law.

Taxation

In the British Virgin Islands there is no capital gains or capital transfer tax, no inheritance tax, and no sales tax or VAT. The main tax for resident companies is income tax; there are also stamp duties on certain transactions, and property taxes. IBC are exempt from income tax and stamp duty.

Banking

Banks are regulated under the Banks and Trust Companies Act 1990, and supervised by the Inspector of Banks, Trusts and Company Managers. Banks are licensed in three categories: A General Banking License permits all forms of banking activity; A Class 1 Restricted Banking License permits international business only; A Class 2 Restricted Banking License permits the conduct of banking business only with counterparties named in the licence.

The banking sector has been limited to a small number of international banks as part of the jurisdiction’s determination to exclude money-laundering. There are currently 7 banks in the BVI, including Barclays Bank and Chase Manhattan.

Employment Law

Labour regulation in the BVI is very light. There are no or trade unions in the BVI. Most pay bargaining is carried out directly between employers and employees. There is legislation setting a low minimum wage.

In order to work in the BVI, a work permit is needed, except for 'Belongers', naturalised citizens and holders of a certificate of residency. Work permits are issued only when there is no suitable local applicant for the job.

BVI Geography, People Culture

The BVI is approximately 153 square kilo meters (59 square miles); Tortola, 54 square kilo meters (21 square miles); Anegada, 39 square kilo meters (15 square miles); Virgin Gorda, 21 square kilo meters (8 square miles) with a sub-tropical climate. The population of 19,000 is of mixed Black (90%), White, Chinese, Indians, Portuguese, Middle- East origin. English is the official language, Spanish is also spoken Literacy: 98.2% of the total population.

Immigration and Residency

All non-residents, including British citizens, require a passport to enter the BVI, except that Canadian and US citizens need only a birth certificate, certificate of citizenship or voter registration card.

Visas are given for up to six months stay provided that there is a return or onward ticket and evidence of sufficient funds.

Legal and Political System

The Government of the British Virgin Islands is a constitutional democracy with the Executive Authority vested in, Queen Elizabeth 11 this democracy operates through parliamentary and ministerial systems. The Parliament or Legislative Council has thirteen representatives elected for a maximum of four years via a mixed system of nine districts and four country-wide. The government has three branches: the Executive Council, the Judiciary and the Legislative Council.

The Governor, as the representative of the Queen, has special responsibility for the Courts, the Public Service, the Police, and Foreign Affairs.

The Executive Authority of The Virgin Islands is vested in the Governor, who, as the Queen's representative, exercises these powers on her behalf either directly or through officers subordinate to him. While he retains personal responsibility for certain functions, the Executive Council which advises him in the execution of all other executive powers may be considered in those respects as the highest policy-making body in the territory. The Executive Council, which is established by section 14 of the Virgin Islands (Constitution) Order 1976, is charged with the general direction and control of the Government of The Virgin Islands and is collectively responsible therefore to the Legislative Council.

Elections in 2003 saw a victory by the National Democratic Party.

BVI Economy

The BVI economy has grown and undergone significant changes over the past decade. In particular, the tourism sector has expanded noticeably, as well as the offshore business sector. The two export sectors now account for more than 70% of gross national product, 65% of all incomes from employment, and 75% of Central Government’s recurrent revenue, annually. Our economy diversified from tourism into offshore financial services.

Through the last decade the British Virgin Islands have seen stable growth, the economy has been transformed into a fullly fledged international trade centre with strong public sector leadership and investment. Past policies provided an environment conducive to private