majority of companies formed in the BVI for offshore purposes are
incorporated under the International Business Companies Act 1984 (see
below). However this law did not supersede the existing Companies
Law 1963, also known as Cap. 285, which is based on English law and
is used to form various types of company used by businesses trading
in the BVI, and also for certain other special purposes.
under the Companies Act 1963 are often referred to as 'CAC', 'CapCo',
or 'Cap. 285' companies. They can be private companies limited by
shares, by guarantee, or hybrid; or they can be unlimited, but that
is rare. Public companies can also be formed under the Act. For all
these types of company, Memorandum and Articles of Association must
be filed at the Companies Registry, along with the registration fee.
For companies limited by shares the Articles of Association can
follow the Memorandum - 'Table A' applies if no Articles are
Foreign companies can
re-establish themselves in the BVI without the necessity for
reciprocal arrangements in the original country of incorporation. An
IBC wishing to leave the BVI may do so.
international pressure, the BVI Government has legislated to
restrict bearer shares. The International Business Companies (Amendment)
Acts of 2003 and 2004 provide the legal framework for immobilising
bearer shares. The Acts came into force on 1 January 2005. The
Financial Services Commission (Amendment) Act of 2004 addresses the
regulatory framework for immobilising bearer shares, in particular
the rules governing custodians.
before 1 January 2005 will have until 31 December 2010 to comply
with the new rules. Companies formed after 1 January 2005 must
comply from their date of formation.
Those eligible to
apply as an “authorised” custodian will be service providers
licensed under any BVI financial services legislation, as well as
bodies corporate incorporated or formed outside the BVI that are not
resident in, and do not have a place of business in, the BVI. Those
eligible to apply as a “recognised” custodian will be investment
exchanges or clearing organizations that operate securities
clearance or settlement systems in a jurisdiction which is a member
of the Financial Action Task Force.
All applicants to be
“authorised” custodians will have to satisfy the Financial Services
Commission that they meet certain “fit and proper” criteria and have
the necessary systems in place for safe custody of their bearer
shares. For bodies corporate, the Commission will consider the
prudential regulation and anti-money laundering regulations with
which the bodies have to comply.
Commenting on the new bearer shares regime, Robert Mathavious,
Managing Director and CEO of the Financial Services Commission,
said, “These measures enable the BVI to comply with all
international standards, including the 40 anti-money laundering
recommendations of the Financial Action Task Force. They are the
result of close cooperation between the BVI private sector,
government and regulator.
A company issuing bearer
shares must provide the Custodian with:
- the full name of
the beneficial owner of the shares; and
- the full name of
any other person having an interest in that share or a statement
to the effect that no other person has any interest in the
2004 new Chief Minister Dr. D. Orlando Smith informed the country’s
Legislative Council that a two-year transition period will be put in
place to smooth the changeover to the proposed new Business
Companies Act, which will lower the income tax rate to 0% for both
local and International Business Companies.
The new legislation,
expected to take effect on 1st January 2005, has been drafted to
ensure the territory is fully compliant with the European Union (EU)
Savings Tax Directive and EU Code of Conduct on Business Taxation,
as required by the United Kingdom of all its Overseas Territories.
Under the transition
arrangements announced by Dr Smith, new incorporations will still be
possible under old legislation throughout 2005. Then, in 2006, new
incorporations must be made under the new Business Companies Act,
although companies already on the register will be permitted to
operate under the old IBC Act or Companies Act for an additional
year. By 1st January 2007, it is expected that all companies will
operate under the new legislation.
The Act requires
companies to use a registered agent to ensure compliance with the
new laws, and the government intends to launch an educational
initiative to raise awareness of the impending changes.
resident company limited by shares is usually formed for the
purposes of carrying on local business. It must:
- have two or more
- restrict the
transfer of its shares;
- not invite the
public to subscribe for its shares; and
- must not have
more than 50 members.
Residence depends on the
location of management and control; usually, if more than half of
the directors are resident in the BVI, then so is the company. If a
resident company carries on business in the BVI it must obtain a
Trade License, and will pay a license fee depending on whether the
shareholders are residents or foreigners. The fee due on
incorporation is $200 plus $15 for each $10,000 of nominal capital
in excess of $10,000. Annual registration fees are from $25 to
$10,000 depending on the gross value of the company's external
An ordinary non-resident company limited by
shares is subject to the same rules as a resident company; see
Offshore Legal and Tax Regimes
for details of the taxation of non-resident
companies. Fees on incorporation are as for resident companies; the
annual registration fee is $250.
Company Limited by Guarantee
Companies Act, a company limited by guarantee must have a minimum of
two members; the Memorandum of Association contains a statement of
the amount up to which the members guarantee the company's debts.
The Articles can provide for the members to have differing 'shares'
of the assets and liabilities.
Limited by Guarantee has certain advantages, including that there is
no list of members on the annual return, and that control over
assets can be achieved without the use of shares; in some
jurisdictions, profits realised from such companies are classified
as capital gains rather than as income. Specialist advice is
required by anyone considering the use of a company limited by
limited by guarantee can be resident or non-resident, as for those
limited by shares. The fee payable on incorporation is $100, and
annual registration fees are as for companies limited by shares.
Hybrid 'Cap 285'
A hybrid company under the Companies Act
usually has a group of shareholding members which is distinct from
the group of guarantors. The shareholders can have 100% of the
voting power, and can execute a trust deed in respect of their
shareholdings; under the BVI's trust legislation (see
Law of Offshore)
a trust Protector can be appointed to oversee the trustees' actions.
The result, if the company is set up correctly (specialist advice
needed!), is to separate control and membership of the company from
beneficial interest, which is sometimes desirable.
companies can be resident or non-resident, as for companies limited
by shares. The fee payable on incorporation and the annual
registration fees are as for companies limited by shares.
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
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,
which immobilise bearer shares (see above) and impose record-keeping
requirements on professional intermediaries. Existing IBCs will be
able to amend their Memoranda of Association to state that they are
authorised to issue only registered shares and that these may not be
exchanged for bearer shares. They will be required to file this
statement with the BVI Registrar of Companies, along with a
declaration that they have no bearer shares in issue.
the International Business Companies (Amendment) Act 2003, from
December 31, 2004, all international business companies (IBCs)
located in BVI are required to establish and maintain a Register of
Directors, and must appoint their first director within 30 days of
the IBC's incorporation. Other statutory
requirements however remain minimal, and flexible:
Only one director and one shareholder are
directors and officers need not be resident in the BVI and there
is no stipulation as to their nationality;
- There is no
minimum capital requirement; shares may be either registered or
bearer and may be issued in any currency (bearer shares now have
to be deposited with an authorised intermediary, who must record
the identity of the beneficial owner);
- Accounts need
not be kept; however, if they are kept there is no requirement
for an audit;
- No returns are
needed of shareholders, directors or officers;
and directors' meetings need not be held in the BVI and can be
held by telephone;
- The Memorandum
and Articles of Association are the only documents to be held on
the public record.
IBC status is granted
subject to certain conditions:
- No business may
be transacted with residents in the BVI;
- No ownership
interest in real property in the BVI is permitted; property may
be leased for office use only;
- Banking or trust
business may be carried on only if an appropriate license is
- Likewise, a
licence is required to carry on insurance or re-insurance
- Engaging in the
business of company management or providing registered
facilities for BVI incorporated companies is not permitted.
IBCs are permitted to own
shares in other BVI companies, maintain bank accounts in the
jurisdiction and employ the services of local professionals. IBCs
are exempt from BVI taxes by statute.
It is usual to use a
registered agent in the BVI to incorporate an IBC (eventually it is
obligatory to appoint one anyway; there are about 70 of them,
licensed by the Government). Fees for incorporation of an IBC are
based on the company's authorised share capital. Normally, the
incorporation process takes no more than one day; however, for banks,
trust companies and insurers the process is lengthier .
fees are $300 for capital up to $50,000 and $1,000 thereafter. The
annual license fee is:
Up to $50,000
No authorised capital
Below $50,000 and some or
all of the shares have no par value
Partnerships are governed by the Limited Partnerships Act 1996; as
regards general partnerships this act reproduces almost exactly the
common law provisions of the English Partnership Act 1980, but the
clauses dealing with limited partnerships follow modern US Delaware
Formation of a limited partnership
is normally carried out by a registered agent (it is obligatory to
nominate one on formation in any event). The agent files the
Memorandum and Articles of Association with the Registrar of Limited
Partnerships, who issues a Certificate of Limited Partnership; the
partnership then exists; but if there is no certificate, the
partnership will be deemed to be a general partnership. The fee
payable on registration if $500 and there is an annual license fee,
The rights and limitations of
limited partnerships under the Act mirror those of the International
Business Company (see above); however the Act distinguishes between
local and international partnerships - local partnerships may
transact local business but are not tax-exempt, while international
partnerships are tax-exempt but barred from local business.
The BVI limited partnership
legislation was designed to facilitate the use of such vehicles in
investment and mutual funds. As is usual in limited partnerships,
there are one or more general partners with unlimited liability and
management responsibility, while limited partners are liable only to
the extent of their capital contributions, and their identity does
not need to be disclosed. It is possible for the same person to be
both a general and a limited partner in the same partnership. A
limited partner's interest in the partnership is assignable. There
are no minimum capital requirements or prescribed debt:equity ratios.
law of the British Virgin Islands is based on English trust law. The
Trustee Amendment Act 1993 (the "Amendment Act") updated the
original British Virgin Islands Trustee Act (itself largely based on
the English Trustee Act 1925).
The Amendment Act introduced a
fixed perpetuity period not exceeding 100 years, and has modern 'wait-and-see'
provisions to deal with interests that might vest outside the
perpetuity period. The Amendment Act also introduced purpose trusts.
BVI trusts are exempt from
registration under the Registration and Records Act, and trustees
are exempt from any need to file annual returns and from any other
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; see Offshore Legal and
Tax Regimes for further details. A trust duty of $50 is imposed
on each trust instrument subject to BVI proper law.
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
With effect from 1 March
2004, three new pieces of Trust Legislation came into force in the
- The Virgin Islands
Special Trusts Act (VISTA);
- The Trustee (Amendment)
- The Property (Miscellaneous
The Vista Act allows
trustees of VISTA trusts which hold a shareholding in a BVI
International Business Company to disengage the trustee from
management responsibilities. The use of trusts to cater for the
succession of shares in companies has historically been impeded by
the 'prudent man of business' rule of English trust law which is
designed to help preserve the value of trust investments. The new
legislation leaves the responsibility for managing the company to
the directors of the company.
The new Act applies only
where there is an enabling provision in the trust instrument. Where
the new Act applies, designated shares will be held on “trust to
retain” and the trustee’s duty to retain the shares as part of the
trust fund will have precedence over any duty to preserve or enhance
their value. It is also possible to amend existing trusts to allow
the provisions of the VISTA Act to apply to them.
The Act is confined to
shares in BVI International Business Companies and Companies Act
companies; and the trustee of a VISTA trust must be a company which
holds a licence to undertake trust business under the Banks and
Trust Companies Act, 1990.
The Trustee (Amendment) Act
makes a number of amendments to the BVI Trust law. These include:
new regulations improving the BVI's purpose trusts regime and some
amendments in relation to conflicts of laws provisions, including
robust, comprehensive and carefully crafted provisions protecting
BVI trusts (and dispositions to their trustees) against “forced
Trust duty has increased
from $50 to $100.
The Property (Miscellaneous
Provisions) Act provides that deeds executed by individuals no
longer need to be sealed.
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.
In September 2002, Chief Minister and Minister
of Finance, Ralph T O'Neal confirmed that the government was
seriously considering the abolition of both personal and corporate
income tax on the Islands.
explained that no pressure had been brought to bear on the BVI
government to impose a zero rate of income tax, as it stands, the
jurisdiction's current tax regime could come under fire for 'ring-fencing'
certain tax advantages; one of the criteria laid out by the OECD for
defining 'harmful preferental tax regimes'.
October 2004 new Chief Minister Dr. D. Orlando Smith informed the
country’s Legislative Council that a two-year transition period will
be put in place to smooth the changeover to the proposed new
Business Companies Act, which will lower the income tax rate to 0%
for both local and International Business Companies.
legislation, expected to take effect on 1st January 2005, has been
drafted to ensure the territory is fully compliant with the European
Union (EU) Savings Tax Directive and EU Code of Conduct on Business
Taxation, as required by the United Kingdom of all its Overseas
transition arrangements announced by Dr Smith, new incorporations
will still be possible under old legislation throughout 2005. Then,
in 2006, new incorporations must be made under the new Business
Companies Act, although companies already on the register will be
permitted to operate under the old IBC Act or Companies Act for an
additional year. By 1st January 2007, it is expected that all
companies will operate under the new legislation.
The Act will
require companies to use a registered agent to ensure compliance
with the new laws, and the government intends to launch an
educational initiative to raise awareness of the impending changes.
new legislation, the current income tax system for employees will
also disappear. However, in its place, a new payroll tax is to be
levied at a rate of 14%, 8% of which will be paid by the employee
and the remainder by the employee, although the first $7,500 of
income will remain tax free. However, the contribution for small
business, defined as those employing less than seven people and with
a payroll of less than $150,000 per year, will be only 2% whilst all
other businesses will contribute 6%.
local firms will be required to pay annual licence fees, whilst IBCs
will face a maximum 20% rise in their annual licence fees.
Income tax (now abolished) was levied on the chargeable income of
resident BVI Companies Act Companies. As applied to a company,
'resident' means that the management and control of its business is
exercised from the BVI. Normally, if more than half of the directors
are resident in the BVI, then so is the company. There are three
company is resident, in which case it paid income tax of 15% on
its world-wide chargeable income;
company is non-resident, in which case it paid 15% income tax on
its chargeable income arising in or remitted to the BVI; or
- the company
is resident but is an 'offshore trading company', meaning that
90% of its profits arise from activity conducted outside the
BVI, and it paid tax at the rate of 1% on its world-wide income.
Chargeable income was assessed after deduction of expenses; tax
credits are allowed on foreign tax paid in treaty countries and
certain other countries.
Taxation of Trusts
Trust income is exempt from tax if:
trust is created by or on behalf of a non-resident person; and
- owns no
land in the BVI; and
not carry on business in the BVI.
are no withholding taxes in the BVI. However, the BVI, like other
British 'dependent territories', will be forced to apply the EU's
Savings Tax Directive from 1st July, 2005, and has chosen to apply a
withholding tax (initially of 15%) to the returns on savings paid to
nationals of EU Member States. The Directive does not apply to