British Virgin Islands: Executive Summary

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- BRITISH VIRGIN ISLANDS EXECUTIVE SUMMARY

British Virgin Islands Executive Summary

Until 2005 the only significant tax in the BVI was income tax, which applied to the relatively few local companies and to individuals; there are customs duties and some real estate taxes. The population of 25,380 (2011 est) is of mixed European and Caribbean origin. There is minor tension between the settled population and recently-arrived Caribbean economic migrants. The economy is highly dependent on tourism, with financial services also important. In 2004 the government abolished income tax for companies and individuals, replacing it with a 'payroll' tax, shared between companies and employees.

While there is no pressure for major constitutional change, in 2002 the BVI Government said it wanted to increase its establishment and asked for some of the Governor's powers to be transferred over, recognising the BVI's 'constitutional maturity and prudential system of government'. At the end of February 2007, the UK and the BVI government successfully completed negotiations for a new constitution for the islands. Described by Lord Triesman, British Minister responsible for the Overseas Territories, "as an important step forward for the territory," the new constitution devolves significant new powers to the BVI Government. The local currency is the US Dollar, and there are no exchange controls.

The BVI introduced its outstandingly successful International Business Company (IBC) in 1984, and by the time the Act was superseded by the BVI Business Companies Act 2004, which effectively removed the distinction between 'offshore' and 'onshore' companies, well over 600,000 had registered in the jurisdiction, Hong Kong and Latin America being the main sources of clients. The BVI has significant mutual fund and captive insurance sectors. Banking activity is, by design, quite minor. The BVI has tried hard to exclude money-laundering, mostly with success, and has a relatively good reputation.

In 2002 the BVI introduced a Financial Services Commission to ensure independent and effective supervision of financial institutions.

As from 1st July, 2005, the BVI, like other British 'dependent territories', was forced to apply the EU's Savings Tax Directive, and chose to apply a withholding tax (initially of 15%, rising to 20% on July 1, 2008) and 35% from July, 2011 to the returns on savings paid to nationals of EU Member States. The Directive does not apply to corporate entities.

The BVI is a reasonably cheap jurisdiction compared to its local rivals, and has quite strong professional services. The Government is responsive to the needs of business, and its legislation is mostly flexible and straightforward. There is an international airport at Road Town; connections are mostly to Puerto Rico.

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