The British Virgin Islands is a British Overseas Territory located in the Caribbean, closely located to Puerto Rico. Unlike in other jurisdictions, the double taxation treaties in BVI (DTA) do not bring significant tax reductions because the location is already an offshore jurisdiction that imposes no corporate income tax on the profits derived by companies.
Our BVI company formation agents highlight the provisions of the DTA concluded between the United Kingdom and the British Virgin Islands as well as any other treaties that are in force.
Avoidance of double taxation in BVI
The British Virgin Islands and the United Kingdom have signed an agreement for the avoidance of double taxation and tax information exchange. This agreement applies to individuals, both natural and legal persons, who are residents of one or both jurisdictions. The Islands also has DTAs with Japan and Switzerland although in these two particular cases the double tax treaties are an extension of the UK DTA.
In the case of the United Kingdom, the DTA applies to the income tax and the types of income covered by the agreement include from pensions, Government services and the income of students. Where pensions are derived from one jurisdiction, they are only taxed in that location.
Some of the key elements of the treaty are summarized below:
- UK resident: an individual or company that is liable for tax in the UK based on residence; it does not include someone who is liable to tax in the UK solely for income or capital gains from therein;
- BVI resident: a natural or legal person who is liable to taxation under the British Virgin Islands law;
- double residency: when an individual is a resident of both locations, he is treated solely as a resident of the UK for the purpose of the DTA.
- double taxation elimination: when a resident of one of the states derives income that may be taxed by the other state, then this tax can be used as a deduction from the tax payable by that resident in his state of residence;
- exchange of information: the competent authorities of the signatory states shall exchange information as needed for the purpose of fulfilling the scope of the Agreement.
These elements should be understood in the context of the treaty and can be relevant for the overall tax treatment of a UK resident who is interested in BVI offshore company formation. United Kingdom residents who are interested in finding out more detailed information about the actual double taxation elimination can reach out to our agents.
One of our BVI company set up agents can help you with more information about the elimination of double taxation in those situations to which the DTA applies between the UK and the British Virgin Islands.
TIEA agreements in BVI
A Tax Information Exchange Agreement is signed between two signatory states in order to establish a regime for exchanging information on criminal and civil tax issues. The British Virgin Islands Government has signed a number of such treaties. Below, we list the countries with which these agreements are in place as well as some of their more important provisions. While these do not expressly refer to taxation, it is already mentioned that the BVI does not impose local taxes, as such, the existence of the TIEA agreements is just as important for investors as that of a Double Taxation Agreement.
The Tax Information Exchange Agreements signed by BVI are with the following countries: Aruba, Australia, Canada, China, Curacao, Czech Republic, Denmark, Faroe Islands, Finland, France, Germany, Greenland, Guernsey, Iceland, India, Ireland, Island of Man, Japan, the Netherlands, New Zealand, Norway, Poland, Portugal, Sint Marteen, South Korea, Sweden, the United Kingdom, and the United States. The first of these treaties were signed with the U.S. in 2006.
One of our BVI company formation agents can provide detailed information about the contents of these 28 TIEA, as needed.
When a signatory jurisdiction requests information about a company or individual in the BVI (for civil or criminal tax matters, as per the contents of the Agreement), the following information is to be filled in in a template submitted to the BVI authorities:
- Part 1: includes details on the party requesting the exchange of information and the issues in the relation to which the request is being made (assessment, investigation or prosecution of criminal tax matters or others).
- Part 2: support information on the individual under examination (last known address, identifying details, the company name, registration date, registered office – when known).
- Part 3: a section dedicated to any type of information that may be subject to legal privilege or that may be a business, trade, commercial or industrial secret.
- Part 4: indications on the timeframe during which the information is required and confirmation that the party applying for information would be able to impose the same if a similar request would be made by the BVI.
- Part 5: any other information that may be freely filled in, if relevant, in addition to the details already mentioned in the first four parts.
The document is to be signed and dates as needed. One of our agents can help interested individuals with additional information on the information that is to be filled in such a request form.
Taxation in BVI
British Virgin Islands company formation is a simple and straightforward process. A significant advantage for investors in the Islands is that there is no tax on income. This is the main reason why BVI has not entered into any other double tax treaties apart from the ones with the United Kingdom and its extensions.
The British Virgin Islands are a tax-free jurisdiction, thus the lack of double taxation agreements and, in contrast, the existence of a number of tax information exchange agreements. The BVI is on the OECD white list of countries, meaning that it is among those that have implemented the internationally agreed standards.
Our local tax lawyers in BVI can answer any questions about tax liability, local and international reporting regulations, foreign tax compliance, and other issues, in addition to the aforementioned double taxation matters. You can also rely on our experts in all other cases involving business and commercial law. We assist in a wide range of matters, and also provide solutions for complex commercial cases. Reach out to us as needed for complete information and assistance.
The Islands are an attractive offshore jurisdiction, particularly because of their tax neutrality and the generally attractive conditions for doing business. Many investors choose to open companies in the financial sector, as reflected by the following numbers issued by the Financial Services Commission (for the incorporations of Business Companies, foreign companies or private trust companies and continuations):
- – the number of companies incorporated in Q2 2018: 9.126.
- – companies incorporated in the first quarter of 2018: 9,798.
- – companies incorporated in Q2 2017: 7,621.
If you are interested in BVI company formation, please contact our agents for more advice and details about the actual company formation procedure.