Corporate tax in British Virgin Islands

Summary

Corporate Income Tax Rate (%) 0
Capital Gains Tax Rate (%) 0
Branch Tax Rate (%) 0
Withholding Tax (%) 0

Taxes on corporate income and gains

The BVI Business Companies Act, 2004 (BVI BC Act) entered into force on 1 January 2005. Under the BVI BC Act, companies incorporated under the British Virgin Islands (BVI) Companies Act are exempt from all taxes provided under the BVI Income Tax Ordinance. The BVI BC Act is essentially an amalgamation of the International Business Companies (IBC) Act and the BVI Companies Act, which contained a regime under which all domes­tic companies incorporated in the BVI were governed. In addi­tion, on 1 January 2007, all International Business Companies on the companies register in the BVI were automatically reregis­tered under the BVI BC Act and, consequently, the IBC Act was repealed in full.

All Business Companies (BCs) are statutorily exempt from BVI taxes. However, such companies must pay an annual license fee (see Section C). In general, a BC may not transact business with persons resident in the BVI or own interests in real property loca­ted in the BVI unless it obtains the relevant trade license from the BVI government. In addition, a BC may not carry on business as a bank, trust company, insurance company or reinsurance company without a license from the BVI Financial Services Commission.

Payroll tax

Payroll tax is imposed on every employer and self-employed person who carries on business in the BVI. The tax rates are 10% for Class 1 employers and 14% for Class 2 employers. The tax is applied to the remuneration paid or deemed to be paid, 8% of which may be reclaimed and paid by the employees or deemed employees. Class 1 employers are those meeting the following conditions:

  • Payroll during the financial year that does not exceed USD150,000
  • Annual turnover that does not exceed USD300,000
  • A total of seven or less employees and deemed employees

All employers not falling within the Class 1 category are deemed to be Class 2 employers.

The first USD10,000 of actual remuneration paid to an employee, deemed employee or self-employed person is exempt from tax.

Fees and stamp duties

The following table summarizes the fees and stamp duties pay­able in the BVI.

Nature of fees and duties Rate
Annual license fees
BCs incorporated under the BVI BC Act,
With authorized share capital of
Up to USD50,000 or foreign-currency
equivalent or authorized to issue up
to 50,000 shares
USD350
Exceeding USD50,000 or foreign-currency
Equivalent or authorized to issue more
than 50,000 shares
USD1,100
Restricted Purpose Company USD5,000
General banking license USD50,000
Restricted Class I banking license USD32,000
Restricted Class II banking license USD32,000
Insurance company license Up to USD10,000
Class I trust license USD16,000
Class II trust license USD14,000
Class III trust license USD12,000
Restricted Class II trust license USD1,000 to USD3,000
Restricted Class III trust license USD500
Stamp duties, on various instruments and
Transfers of ownership
Real estate, on higher of consideration
Or market value
Sales to belongers (individuals born in
the BVI or those granted BVI status
And BVI companies that are at least 67% owned by such persons and do not have any non-belongers as directors)
4.00%
Sales to non-belongers 12.00%
Other instruments and transfers 0.2% to 5%

Miscellaneous matters

Foreign-exchange controls. The BVI does not have any foreign-exchange control regulations.

European Union Savings Tax Directive. As a result of the BVI’s status as a British Overseas Territory, it is required to comply with the requirements of the European Union (EU) Savings Tax Direc­tive (the Directive). Banks and other paying agents in the BVI must exchange certain information pertaining to EU residents.

Under the Mutual Legal Assistance (Tax Matters) (Automatic Exchange of Information) Order, 2011, effective from 1 January 2012, the former 35% withholding option under the Directive is no longer applicable because the BVI transitioned to the auto­matic exchange-of-information option instead of the withholding-tax option under the Directive. This order provides that BVI-based paying agents are no longer subject to the withholding tax option as a means of complying with the Directive. Instead, BVI institu­tions must disclose the minimum information to the BVI Inland Revenue, which in turn complies with the information-exchange policy under the Directive.

On 24 March 2014, the EU revised the Directive to strengthen the existing rules on exchange of information on savings income. The principal changes to the Directive are the following:

  • A look-through approach based on “customer due diligence,” which prevents individuals from circumventing the Directive by using an interposed legal person located in certain non-EU countries
  • Enhanced rules aimed at preventing individuals from circum­venting the Directive by using an interposed legal person located in an EU member state
  • Extending the scope of the Directive to include financial prod­ucts that have similar characteristics to debt claims
  • Inclusion of income obtained through undertakings for collec­tive investment in transferable securities authorized by Directive 85/611/EEC (UCITS)

Tax treaties

Although the United Kingdom’s double tax treaties with Japan and Switzerland have been extended to the BVI, these treaties are not used in practice. The BVI has not entered into any other tax treaties. However, the BVI has entered into tax information ex­change agreements with Canada, China, Japan and the United States and with 22 European countries including France, Germany, Ireland, the Netherlands and the United Kingdom.

On 28 November 2013, the BVI and the United Kingdom signed an intergovernmental agreement (IGA) to enable the exchange of information for tax purposes, including on an automatic basis.

On 30 June 2014, the BVI and the U.S. Treasury signed and re­leased a Model 1 IGA for the implementation of the US Foreign Account Tax Compliance Act.

Proposed new tax

The BVI government has indicated an intention to introduce a compulsory national health care system. The initial proposals indicated that such a system might be funded by a 7.5% tax, split evenly between resident employees and employers. It remains to be seen whether the proposal will be implemented in its current form.