Set Up a Trust in BVI

Our BVI incorporation specialists can help you set up a trust in the British Virgin Islands.

What are the uses of a BVI trust?

A trust is an instrument that can be used for a number of purposes related to asset protection and planning. What’s more, the trust can also be used for tax minimization purposes.

These types of investment and asset protection vehicles can have charitable or non-charitable purposes, as defined below by our BVI company incorporation specialists. Regardless, their scope will be defined in the incorporation documents.

Our agents summarize the main purposes of a trust in BVI below:

• Asset protection and management: a settlor can choose to use the trust as an instrument to hold assets in a jurisdiction such as the British Virgin Islands that has political stability;
• Preservation: the trust may be used to guarantee the continuity of certain types of assets and for this purpose, the settlor may use the vehicle to guarantee that a business remains within the family;
• Succession planning: similar to the previous point, a trust is an instrument that can be used for dividing the assets of the settlor once he passes away;
• Heirship: as the assets can be distributed as specified by the settlor, the trust may be used for forced heirship purposes (if the laws in the settlor’s country of origin are rigid, the trust in BVI can be used for this purpose);
• Commercial: the trust can also be used for commercial purposes that include asset securitization schemes for receivables.

What types of trust can I open in the BVI?

The table below highlights the main characteristics of the two types of trusts in the British Virgin Islands. One of our BVI company formation agents can answer your questions in case you need more specific information and advice about these two types of trusts.

A trust can also be described as a charitable or a non-charitable one. For the first category, a fixed or discretionary trust may be used for a benevolent purpose such as poverty relief, education advancement, religious purposes, or any other purpose that would bring benefit to the public.

Non-charitable trusts are those that are not set up for benevolent activities and strictly related to the protection of assets. However, a trust in BVI should not be set up for a purpose that is immoral, unlawful, or contrary to public policy. Investors also have the option to create trusts that are part charitable and part non-charitable (provided that they comply with the conditions for lawfulness). In other cases, the purpose of the trust may be philanthropic although not charitable, such as a trust that promotes a certain political agenda. 

What are the parties to a trust created in the British Virgin Islands?

The trust is based on the cooperation and the relationship between three distinct parties:

1. The settlor: is the one who establishes the trust and whose assets will be managed and distributed in due time through this instrument; he can maintain a certain degree of control over the assets and has the power to appoint and dismiss trustees as well as to revoke the trust altogether; the trust may also be established by a legal person;
2. The trustee: is the one entrusted to legally hold the assets and manage them and is the one responsible for the administration of the trust; the relationship between the settlor and the trustee is a fiduciary one and the trustee shall only act in the best interest of the beneficiaries; the regime in BVI is a convenient one in as that there is no requirement for the trustee to be a resident;
3. The beneficiaries: are the ones who will enjoy the assets of the trust; they are family members or other individuals; a trust can be set up in such a manner that it will include more than one class of beneficiaries; moreover, the instrument allows the settlor to decide if the beneficiaries will be treated equally or preferentially; the one creating the trust also has the power to intervene and exclude beneficiaries from certain benefits or from future ones.

In some cases, a fourth party can take place in the management of a trust. This is the protector who presides over the trustees and can also have powers related to the appointment of new trustees or the exclusion of the beneficiaries. In a sense, the protector is an extension of the settlor and these two parties are also bound by a fiduciary duty. 

What law governs the creation of trusts in the BVI?

The Trustee Act is the main law that governs the creation of trusts. The Act of 1961 has been amended over the years, with a revised edition published as of 1 January 2020.

The Virgin Islands Special Trusts Act, with its amendments and revisions, is another law that governs the creation of the VISTA trusts (as their type was briefly described above).

The British Virgin Islands Financial Services Commission is the regulatory authority in charge of financial services providers in this jurisdiction (their licensing and control, along with the issuance and enforcement of relevant laws).

How do I appoint or remove a trustee?

Again, the Trustee Act is of reference for this particular subject. Trustees can be appointed or discharged at virtually any stage, and those who set up a trust in the BVI are not required to maintain the same trustee for the entire existence of their trust.

Trustees can be appointed through the Trust Deed or by Court. There are special cases in which no more than four trustees can be used.

Any new trustee appointed after the removal of their equal shall have the same powers, authority, and discretion vested through the trust instrument. For all purposes, the newly appointed trustee shall oversee the functioning of the trust as if they were originally appointed to this role.

A trustee may also express their wishes to be discharged from the trust. When this is the case, any co-trustees will take over, and a new appointment may or may not take place (if deemed unrequired), as per the trust instrument.

The Court may appoint a new trustee to substitute one who was accused of a felony, or if that person is deemed to be unsound of mind or bankrupt. Likewise, the Court has the power to appoint a new trustee if the initial one was a corporation that was dissolved or is in liquidation.

What are the duties and responsibilities of trustees?

The trustee has an important role, and they are required to observe certain duties, including statutory and fiduciary ones. Some of the most important duties of a trustee include the following:

• Act in good faith and in the best interests of the beneficiaries or the trust purposes, according to the terms of the trust;
• Control and manage the trust property;
• Observe the terms of the trust deed; an exemption may take place when the beneficiaries are all of full capacity and they agree to the actions of the trustee that may be against the terms of the trust deed;
• Refrain from delegating their powers to another trustee or third party unless expressly stated in the trust deed or unless authorized by a statute;
• Exercise due diligence and act prudently when administering the trust;
• Disclose any conflicts that may arise in relation to the trust;
• Not profit from the trust assets or property and not purchase trust property for personal use;
• Keep the needed records and accounts, in an accurate manner and as directed.

Some of the general powers of the trustee, under the BVI Trustee Act, include the following:

• Sell all or any part of the property of a trust, when the power of sale is awarded to the trustee; in order to accomplish this, the trustee may engage in the sale by himself or concur with another person;
• Sell or dispose of land, in part or in whole, whether the said division of land is horizontal, vertical or of another type;
• Postpone a sale, in certain cases;

A trustee can be an individual or a company authorized to act in this capacity by the Banks and Trust Companies Act 1990 (BTCA) or a private trust company (subject to the Regulations in force). The trust deed may include completions or additions to the duties mentioned above. Please keep in mind that the ones listed by our agents are the most important ones, applicable in most cases.

Our BVI company formation agents invite you to watch a video about BVI trusts:

What general compliance requirements must BVI trusts follow?

Trust records must be adequately kept, and this task falls within the scope of the trustee. The following rules apply:

• Documents and underlying trust documentation are kept for a period of at least five years;
  • The records must explain the trusts’ transactions;
  • Provide sufficient proof of the trust’s financial position (therefore, the documents must be accurate);
  • The sale and purchase of goods by the trust are to be documented;
  • The assets and liabilities of the trust must be updated accordingly;
  • Any amounts spent or received by the trust must be documented through receipts.

Trustees who fail to observe these record-keeping tasks are liable to a fine that may not exceed 1,000 dollars or, in serious cases, imprisonment that cannot exceed five years.

How is the trust taxed?

Trusts in the British Virgin Islands are exempt from taxation provided that the beneficiaries are not residents and that the trust does not engage in operations within the BVI. Our British Virgin Islands company formation agents can provide more details on the taxation principles as well as the payable duty for trusts. 

Contact us for more details about fiduciary services and trusts in BVI.