Under the Payroll Taxes Act, 2004, corporate tax, PayAs-You-Earn (PAYE) in come tax and any other income tax payable under the Income Tax Ordinance is applied at a 0% rate. Payroll tax is imposed on the following:
- Remuneration provided in cash or in kind by em ployers to employees and deemed employees
- Remuneration received in cash or in kind by self-employed persons
- Any benefits re ceived in cash or in kind by employees, deemed employees or self-employed persons as a result of his or her employment
Remuner ation is defined as the payment an employee receives for services rendered to his or her employer. The first USD10,000 of earnings is exempt from payroll tax. Persons receiving remuneration from a second employment are not entitled to the exemption of USD10,000 with respect to that remuneration because the exemption is granted only once.
Employers must pay the payroll tax, regardless of whether they withhold payroll tax from employee remuneration. Employers may withhold 8% of the remuneration of an employee and pay the amount withheld together with the balance of the tax due to the Department of Inland Revenue. Employers may not withhold payroll tax from the first USD10,000 paid to an employee in a tax year.
Individuals are not subject to tax on investment income in the British Virgin Islands.
Rates. The applicable rate of payroll tax depends on whether the employer is classified as a Class I employer or Class II employer.
Class I employers. For Class I employers, which include self-employed persons, payroll tax is imposed at a rate of 10%.
A Class I employer or self-employed person is one who meets the following conditions:
- Its annual payroll does not exceed USD150,000.
- Its annual turnover or gross receipts does not exceed USD300,000.
- The total of its employees and deemed employees does not exceed seven.
Class II employers. For Class II employers, which include self-employed persons, payroll tax is impos ed at a rate of 14%.
A Class II employer is an employer that does not satisfy all of the requirements for qualification as a Class I employer.
Capital gains. No tax is levied on capital gains. However, transfers of real property are subject to stamp duty at a rate of up to 4% of the sales price or market value of the property, whichever is higher. The rate of the duty is increased to 12% if the sale is made to a non-British Virgin Islander. British Virgin Islanders are persons who are born in the British Virgin Islands or who obtain “belonger” status, as defined by law.
Social security and health insurance
Social security. All employers and employees must contribute to the National Insurance Scheme. The total contribution rate is 8.5%; employers pay 4.5% and employees pay 4%. Contributions are based on the amount of weekly or monthly wages, up to maximum weekly wages of USD775 or to monthly wages of USD3,358. Consequently, the maximum annual contribution is USD1,814 for employers and USD1,612 for employees.
Health insurance. The British Virgin Island has implemented a new National Health Insurance (NHI) regime, effective from 1 January 2016. This regime requires employers and employees to pay 3.75% each on the employee’s monthly income. The maximum income on which NHI premiums is assessed is two times the upper wage limit for social security contributions, which equals USD6,717 per month. Consequently, the maximum monthly amount payable by employees and employers is USD252 each. Employees also must to contribute an additional 3.75% on behalf of an unemployed spouse.
Tax filing and payment procedures
The tax year is the calendar year. Employers and self-employed persons must pay the payroll tax within 21 days after the end of each month for which the tax is due. A failure to comply with this rule results in the imposition of a penalty of 5% on the outstanding tax. The Commissioner of Inland Revenue may request that a return of payroll or remuneration for a tax year be submitted to the Inland Revenue.
Married persons are taxed separately.
In general, all visitors may enter the British Virgin Islands if they meet certain requirements.
A person entering the British Virgin Islands to visit must satisfy the Immigration Officer at the port of entry that he or she satisfies all of the following requirements:
- He or she possesses a valid travel document.
- He or she does not intend to remain permanently in the British Virgin Islands.
- He or she has sufficient funds to support himself or herself, as well as any dependents, without working for the duration of his or her stay, and can meet the cost of return or onward travel. In general, a return ticket is required.
Citizens of the British Commonwealth, except Guyana and Jamaica, do not re quire visas to visit the British Virgin Islands.
All visitors to the British Virgin Islands are allowed entry without medical certification for 30 days. After the 30-day period expires, visitors can apply for an extension with the Department of Immigration.
Work permits and self-employment
Persons who are employed in the British Virgin Islands on a temporary or periodic basis must obtain temporary or periodic work permits (as applicable).
Work permits for foreign nationals are issued by the Labour Department for specific positions with specific employers if the positions cannot be filled locally. The permits are usually valid for one-year periods. However, on expiration, they may be submitted for renewal. Temporary work permits are issued to persons to enter and work in the British Virgin Islands for a single period not exceeding three months. Periodic work permits are issued to persons to enter and work in the British Virgin Islands for short periods within a one-year period.
Individuals in the following categories are not required to obtain work permits:
- Expatriate government employees from other territories who possess a letter from the British Virgin Islands’ government offering them employment.
- Expatriates married to local men and women for at least three years. However, they must apply to the Ministry of Labour for this exemption.
- Children of expatriates who have completed their primary and secondary education in the British Virgin Islands.
- Individuals entering the British Virgin Islands to provide volunteer services. They are issued an exemption on application to the Ministry of Labour.
In general, an applicant cannot reside in the British Virgin Islands during the period during which his or her work permit application is being processed. Approval of work permits may be issued within six to eight weeks if all of the appropriate documentation is in order when it is submitted to the Labour Department.
A person coming to the British Virgin Islands for the purpose of employment must produce the following documents at the port of entry:
- A letter issued to his or her prospective employer by the Labour Department approving employment in the British Virgin Islands together with all documents stipulated in the letter. The possession of such a letter does not absolve the holder from complying with visa or immigration requirements.
- A certificate of good health from the country where the applicant lived before arrival.
- A recent Police Certificate of Character, issued by the police department in the applicant’s country of residence or any other country where the applicant has lived since becoming 18 years old.
- Evidence of a return travel booking to the applicant’s country of origin.
- Two passport-size photos.
Applicants wishing to establish businesses in the British Virgin Islands must obtain the following:
- Trade licenses from the Chief Minister’s Office
- Work permits from the Labour Department
- Documents required for permanent residence
- Entry permits from the Immigration Department
Annual and permanent residence
Permanent residency is reserved for those individuals who have lived in the British Virgin Islands continuously for 20 years or more, and who qualify after normal screening processes. Applicants for permanent residence must satisfy the same requirements at the port of entry as other visitors (see Section E).
If a person does not satisfy the 20-year requirement, he may instead apply for permission to reside in the British Virgin Islands. Permission to Reside is effectively an entry permit that is renewable from year to year. A successful application involves establishing to the Chief Immigration Officer that the applicant is of good character and, more importantly, has sufficient funds to support himself or herself and any dependents while in the British Virgin Islands. This requirement may be satisfied by producing bank statements, a statement of pension entitlement or any other evidence that the applicant has funds adequate for this purpose. The holders of this status are not eligible for work permits and cannot legally work in the British Virgin Islands.
An application for permission to reside must be submitted to the Chief Immigration Officer of the Immigration Department and must be supported by the following:
- Evidence that the applicant wishes to make the British Virgin Islands his or her home
- Evidence of financial support for the applicant and any dependents
- Evidence of marriage, if applicable
- Evidence of birth
- Photograph of applicant and any dependents
- A certificate of good health from the country of embarkation
- Two copies of a Police Certificate of Character, one from the applicant’s country of birth and one from his or her country of residence prior to arrival
- Immunization records for children
- School transcripts for children
- Application to ministry of education for children
Family and personal considerations
Marital property regime. No community property or other similar marital property regime is in effect in the British Virgin Islands.
Driver’s permits. An expatriate cannot drive legally in the British Virgin Islands using his or her home country’s driver’s license. The British Virgin Islands does not have driver’s license reciprocity with any other countries. A foreign national must obtain a temporary three-month driver’s license from the Department of Motor Vehicles in the British Virgin Islands. To obtain the temporary license, proof of a current valid driver’s license from the expatriate’s home country must be provided to the Department of Motor Vehicles. On expiration of the temporary driver’s license, the applicant may apply for a permanent driver’s license within one month by presenting his or her work permit, documents of residency or certificate of land ownership, and taking a written and road test within one month of residing in the British Virgin Islands. A visitor may apply for a three-month temporary license by providing a valid foreign license and passport to prove that he or she is not a resident. Expatriates now must now take both written and road tests to obtain a permanent driver’s license.