When thinking about offshore company formation, British Virgin Island incorporation (BVI incorporation) may sound strange to many. Nevertheless, incorporate in BVI offers considerable benefits in terms of not only financial matters but also incorporating procedures. This article by Ace Global Accounts will highlight 5 key benefits of BVI incorporation.
While many benefits of BVI incorporation are common to several other jurisdictions (English language, absence of currency exchange controls, US dollar as a currency, stable democracy, common law legal system with final appeal to the Privy Council in London), a number of others are not.
The British Virgin Islands (BVI) is located near Puerto Rico, in between the North Atlantic Ocean and the Caribbean Sea, covering a land area of about 151km2, making it the 219th biggest country in the world. If you decide to incorporate in BVI, remote-controlled operation is not a matter of concern. Virtual office technologies and legislation make it possible to operate a BVI business smoothly from just about anywhere in the world.
Given that the majority of entrepreneurs and companies conducting offshore business through the British Virgin Islands’ jurisdiction do not actually operate or live on the islands, BVI transport options are generally irrelevant in the company’s business decisions. That being said, the British Virgin Islands is accessible by plane, as there are 4 airports on the BVI, of which 2 have paved runways. There are paved roads within the BVI and another transport option for moving between the islands is by ferry, which complements the benefits of BVI incorporation.
- Tax Policy
The “British Virgin Islands tax haven” has come about through the creation of a very simple set of corporate taxation rules that offer a highly beneficial taxation system. Particularly, upon your BVI incorporation, you will have to pay:
- 0% corporate tax
- 0% capital gains tax
- 0% profit tax
- 0% gift tax
- 0% sales tax / Value Added Tax
- 0% inheritance tax
- No stamp duty except for land transactions in the British Virgin Islands itself
Salaries paid to employees employed by an off-shore company established in the BVI tax haven are taxed at 8% for the employee, the remaining percentage up to 12% or 14% for the employer for any salaries above $12,000.
The relative simplicity of these tax regulations along with the low tax rates explain why British Virgin Islands has become one of the most popular places for offshore company formation. The BVI tax haven also offers another important benefit – relative privacy of details regarding financial transactions as well as corporate incorporations. This allows companies to configure their own corporate structure without harmful interference or risk of competitors gaining access to undue information.
- Current Business
The British Virgin Islands is a major center for offshore business activities, with over 400,000 companies on its Companies Registry. Onshore, tourism is the main driver of the BVI economy, contributing to about 45% of total GDP (CIA World Factbook 2009). The BVI is an extremely stable jurisdiction and one of the most prosperous of Caribbean economies. This is reinforced by the US dollar being the official currency on the BVI, which can significantly reduce foreign exchange fluctuations for certain companies.
Running a BVI offshore business is generally simple, given most activities do not require licensing.
- Company Incorporation
Incorporating in BVI is relatively simple and can be done efficiently with the aid of specialized professional services firms, which helps ensure compliance with the law and an overall smooth process for starting the business.
The most common business structure for an offshore company in the BVI is as an IBC – International Business Company, for which the main requirements are to have one director and one shareholder.
A BVI IBC is not required to keep financial accounts, but if it does, there is no requirement for an annual audit. Furthermore, there are no minimum capital requirements when you incorporate in BVI and shareholder / director meetings may be held anywhere in the world, even via telephone.
In conclusion, British Virgin Islands is an extremely popular choice for offshore company formation. Having the possibility of 100% tax exemption and no legal requirements to be tied down to a particular location of business, company setup in the BVI is not only a logically beneficial choice for incorporation, but also an extremely easy and convenient one.