British Virgin Islands : Offshore Industry

The British Virgin Islands have a very good reputation in the offshore business industry. Indeed, for the last 25 years, offshore company formation and other type of offshore activities have been welcomed by the Government which has developed a well-structured regulation in order to avoid money-laundering and criminal activity. The offshore banking industry has not been encouraged in the BVI. But the formation of BVI IBC’s (BVI offshore company) has been one of the most important on a worldwide point of view. The BVI offshore company is used in investments and financial holding structures, and also in trust management. The BVI has also developed mutual funds and captives. The last main offshore business activity in the BVI is the yachting.

The British Virgin Islands, as many other offshore jurisdictions, has been put under pressure from the OECD and FATF by making the regulatory regime stricter. On the first January 2009, the BVI established an entity which would be able to have an independent regulatory role, the Financial Services Commission (FSC). The creation of the FSC leaded to the establishment of the BVI Finance Centre in October 2002 which goal was to promote the BVI as an important international financial services centre.

British Virgin Islands Banking

In order to avoid money-laundering, the BVI decided not to encourage the offshore banking industry. The BVI authorized the establishment of international banks in a small quantity. We can count nine different banks in BVI.
Recently, the business community put some pressure on the Government in order for them to allow offshore banks in more important numbers. Therefore, the Government will now be more willing to accept new applications from top banking institutions
It is the banks and Trust Companies Act 1990 which regulates the banks which are supervised by the Banking and Fiduciary Division of the Financial Services Commission.

British Virgin Islands other offshore business sectors.

The BVI IBC’s, which have made the BVI very famous, were used as asset protection vehicles. Most of the time, BVI offshore company will be associated to a trust or will be used in order to hold different types of  asset such as shares.
In 1998 the Mutual Funds Act 1996 came into force in the BVI. At the beginning of 2006, there was an increase of 46% in the number of professional funds in the BVI compared to the beginning of 2005. However, there was a decrease of 11% with regards to the private funds. In the first quarter of 2006, the professional funds would represent 58% of the active funds; there was 33% of private funds and 9% of public funds.
In order to be considered as public, the fund will need to be divided into “ordinary” mutual funds sold to the public and “selective” mutual funds sold on a selective basis through intermediaries
In order to be considered as private, a fund will need to be sold to no more than 50 (private) investors.
In order to be considered as professional, a fund will need to be sold to individuals with net worth over $1m or to market professionals.
One major element of the offshore business in the BVI is the Trust Management. At the beginning, the trust was only used by wealthy people, but it is now used as a technique of asset protection in many countries. Trusts in the BVI are based on common law and are regulated by the Trustee Ordinance 1961 which has been modernized and updated by the Trustee (Amendment) Act 1993. This new legislation and the flexible BVI offshore company (BVI IBC) created the possibility for the BVI trust to have clients which were not only interested in tax avoidance but also in the efficiency of the management of the asset that will be involved.
The next offshore business branch which is very important in the BVI is the yachts registration. It is possible to transfer the Port of registry to Road Harbour if they were already under British registration. With regards to the foreign-registered yachts, they will need to show evidence of their prior registration and of its cancellation. Most of the time, a BVI offshore company will be used in order to conduct the chartering operations.

British Virgin Islands Double Tax Agreements.

The BVI have double tax treaties with Switzerland, Japan and the UK. The BVI had to enter into different Tax and Information Exchange Agreements (TIEA) since the OECD recommenced to put pressure on certain jurisdictions. The major threat was to be considered as an uncooperative tax haven. In 2009, seven different countries signed double tax agreements with the BVI. The different countries which have signed a TIEA with the BVI are the followings: United States of America (in April 2002), Australia (in October 2008), the UK (few days after the one with Australia), Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden (in May 2009) and France in June 2009.The BVI is planning to expend their network of TIEA with other countries such as Germany, Austria, Brazil, Mexico, Argentina and Canada. Most of the time, the TIEA provides for full exchange of information on request in case of criminal and civil tax matters. This would allow a mutual legal assistance in criminal matters.

More information about this jurisdiction : Demography - Economy - Types of company