The BVI: The Fiscal Paradise of Your Dream

The British Virgin Islands is one of the oldest and the most respectable offshore destinations that offers affordable or even zero taxes, a high-ranking confidentiality level, a straightforward company formation process, and plenty of other perks that are typically associated with overseas destinations. However, the pressure of global regulators is increasing, and all offshore jurisdictions […]

The British Virgin Islands is one of the oldest and the most respectable offshore destinations that offers affordable or even zero taxes, a high-ranking confidentiality level, a straightforward company formation process, and plenty of other perks that are typically associated with overseas destinations. However, the pressure of global regulators is increasing, and all offshore jurisdictions (not just the BVI) are required to amend their legislation to comply and avoid being blacklisted. In this post, we will take a look at the BVI as an attractive destination for international entrepreneurs seeking a reliable country to set up a legal entity and note some changes that have taken place recently.

Tax Advantages Provided by the BVI

Offshores are often associated with something illegal, like tax evasion. However, the BVI offers perfectly lawful opportunities to reduce your current fiscal pressure. The destinations that can help you with that are gradually disappearing, which adds to the convenience of the British Virgin Islands. Let’s take a look at its main features: 

  • The country’s official language is English, so you will not have to overcome a language barrier.
  • The destination can be easily accessed from European and North American countries. The postal services are provided on a high level, and telecommunication services will surely meet your expectations.
  • The British Virgin Islands have always been a destination where real owners of companies can keep their identities private. Unfortunately, this is no longer possible under the current circumstances. The BVI still offers a sufficient degree of confidentiality, but it is not as high, and you can no longer issue bearer shares. 
  • If your legal entity is not liable for any local taxes (this is true for the major part of non-resident entities), you will be under no obligation to file any tax returns to the local offices. Keep in mind, though, that you are still obliged to duly keep the accounting records and submit them to your registered agent.
  • Though the British Virgin Islands are not absolutely tax-exempt, many taxes are nonexistent, like inheritance tax, capital gains tax, or income tax. 
  • As regards the register of company directors, it is kept by local administration, but the data it contains are not available to the public. If you want an additional layer of protection, you are welcome to use the nominee services that are officially allowed. 
  • There exists a limited number of business activities that are under the obligation to make arrangements for economic substance in the BVI: insurance, banking, ship management, holding companies, and intellectual property companies. 
  • Business managers can reside in any country whatsoever.

Legal entities that are established in the British Virgin Islands are subject to taxation in other territories: either in the state where they generate income or in the jurisdiction of its owner’s tax residence. 

BVI: Taxation Peculiarities

If you have a foreign investment company, you will not be liable for the following taxes in the British Virgin Islands:

  • Tax on interests, dividends, and royalties
  • Tax on assets you keep in trusts
  • Inheritance tax
  • VAT
  • Capital gains tax
  • Profit tax

Keep in mind, though, that there are some taxes that foreign entities have to pay as complete tax exemption would be unsafe. The state was once on the blacklist (of non-cooperative countries) which did considerable damage to the local business landscape, and it plays safe to remain whitelisted. Therefore, there are a number of payments that foreign entities are obliged to make in 2024: 

  • On the whole, no property tax is payable in the BVI. And still, if a foreign legal entity or natural person buys real property in the islands, a 12% stamp duty is due (the charge for local residents equals 4%).
  • The stamp duty which a legal entity has to pay depends on the date on which it was established and the number of shares available. A company registration fee is due on a yearly basis to the local government. If your entity’s authorized capital does not exceed USD 50,000, you are required to pay a fee of USD 350. If the capital is larger than the specified figure, USD 1,100 a year will be due. 
  • The employer and the employee are accountable for the social security tax payment (the rate equals 4.5%).
  • If you hire local residents, a payroll tax will be due. The exact amount varies based on the salary amount and the entity’s annual turnover. Small businesses pay 10%, while larger ones that employ 7 people and more and have an annual turnover exceeding USD 300,000 pay 14%. The initial USD 10,000 is tax-exempt, and the employer is entitled to subtract no more than 8% from the worker’s salary. 

BVI Legal Framework: Recent Amendments 

The BVI Companies Act was modified a little more than 1 year ago, and we will look at several essential modifications that have taken effect: 

  • Economic substance is now a mandatory demand for some kinds of entities, such as limited liability companies and limited partnerships. This demand was introduced to create an opportunity for the state to remain a whitelisted destination by complying with global regulations on tax evasion. If offshore entities established in the BVI can prove that they have economic substance in another country, this demand is inapplicable to them. 
  • The meetings of the Board of Directors and the General Meetings of Shareholders can now be conducted using online means of communication, and participants can join it from any place across the globe.
  • Starting from January 01, 2024, all entities established in the British Virgin Islands are obliged to send their annual accounting reports to their registered agent.

What conclusion can we draw here? Well, the British Virgin Islands remains a recommendable tax haven despite the fact that the demands for legal entities have been tightened to a certain degree. It still offers attractive tax rates, and the regulations related to business still offer a high level of privacy you will hardly get elsewhere.

Interested in the British Virgin Islands? You can click on the above link to find more articles on this remarkable destination and get in touch with an expert to get professional advice free of charge. Use the live chat during business hours or any similar means of communication you find convenient. Selecting the most suitable jurisdiction for your business is an essential step, so we strongly recommend consulting a specialist before you make it.


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