British Virgin Islands tax system: audit, reporting and optimization of taxation of BVI companies and individuals: VAT, income tax and capital gains
Basic taxes (briefly)
|Personal tax||Not charged unless the individual is an employee of a BVI company|
|Corporate tax (in detail)||No - for offshore companies|
|Capital gains tax. Details|
|Other taxes||Payroll tax for companies employing local employees, Real estate taxes|
|Government fee||350 USD|
|Stamp duty||on real estate transactions 12% (for non-residents), 4% (for residents)|
International tax agreement
|UK (Switzerland, Japan)|
|Australia, United States, Canada, China, Czech Republic, Denmark, Faroes, Finland, France, Germany, Greenland, Guernsey, Iceland, India, Ireland, Japan, Netherlands Antilles, Netherlands, New Zealand, Norway, Poland, Sweden, United Kingdom|
BVI Business companies are exempt from any taxation, regardless their source of income. The only tax existing in the BVI is payroll tax for companies employing local working force; the current rate is 8%, first $10 000 are tax exempt.
Annual government fee
The BVI company must pay an annual fee to the government, depending on the maximum volume of shares permitted to issue and the date of incorporation of the company.
- Companies with a share capital up to US$50,000 pay US$350 per year. Companies with a share capital more than US$50,001 pay the sum of US$1,100 per year.
Stamp duty is levied at a rate of 12% on real estate transactions for non-BVI citizens. The rates are lower for the citizens of the BVI - 4%.
Capital Gains Tax
Taxation of Trusts
Trust income is exempt from tax if:
- the trust is created by or on behalf of a non-resident person; and owns no land in the BVI; and does not carry on business in the BVI.
Personal Income Tax
BVI income tax is not levied, unless the individual is an employee working for the BVI.
Foreign exchange control
Payroll taxes. Social Security
Payroll tax and social contributions are paid by the self-employed and employers doing business in the BVI. The payroll tax rate is 10% for small companies and up to 14% for large employers. 8% of the remuneration can be reimbursed at the expense of employees. The first 10,000 USD is not subject to payroll tax. Social contributions are paid at a rate of 4% by employees and at a rate of 4.5% by employers.
Real Estate Taxes
For citizens and companies of the BVI, land tax is levied at the rate of 3 USD per year for the first acre and 1 USD for each subsequent acre. For foreign citizens, this tax is 50 USD per year for each first half acre and 150 USD for the second half acre and 50 USD for each subsequent half acre of land. Real estate tax is 1.5% per annum of the estimated annual rental amount of real estate.
Double Tax Treaties
The British Virgin Islands signed a double taxation treaty with the United Kingdom, and thus the BVI was covered by such treaties between the United Kingdom and Switzerland and Japan. In 2009, the British Virgin Islands signed Bilateral Information Exchange Agreements (TIEA) with 7 Nordic countries - Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden. The BVI and the Nordic countries have also signed commercial agreements for the avoidance of double taxation for air and water transport companies and individuals. To date, the British Virgin Islands has one Double Taxation Agreement with Switzerland and 22 Information Exchange Agreements (TIEA) with various countries: Australia, Great Britain, Germany, Guernsey, Greenland, Denmark, Iceland, India, Ireland, Canada, China, Netherlands, Netherlands Attila, Norway, Poland, USA, Faroe Islands, Finland, France, Czech Republic, Sweden, Japan.
The country has joined the Hague Convention, which abolishes the requirement for legalization of foreign official documents and replaces it with the Apostle stamp.
The British Virgin Islands Companies Act provides for minimum financial reporting obligations. BVI business companies are not required to prepare or file financial statements, annual reports or other types of reports. The exception is private, professional and government funds, as well as all licensed entities. There is no requirement to prepare or file income tax returns, either. However, all BVI business companies are required to maintain accounting records to the extent that will explain the company’s operations and will reflect the financial position of the company.
Requirement to keep underlying documentation
The legislation (Mutual Legal Assistance (Tax Matters) Act, 2012) enshrines the obligation to keep accounting records and underlying documentation for at least 5 years from completion of the relevant transaction. Documents reflecting the activities of the company must be kept at the office of its registered agent or elsewhere in or outside the BVI as determined by the directors of the company. Under the Business Companies Act, a failure to comply with the requirement to keep accounting records and underlying documentation is punishable by a fine of USD 50,000. In cases of failure to produce accounting records and documentation as part of an international request under one of the BVI tax information exchange agreements, the fine is up to USD 100,000; in addition to the fine, the law provides for imprisonment of up to 5 years.
As a general rule, the BVI does not impose an obligation to audit and submit financial statements to supervisory authorities, and the financial statements are not publicly available. However, all private, professional and public funds and all licensed entities ("Licensees") under the Securities and Investment Business Act, 2010 ("SIBA") and the Mutual Fund Regulations, 2010 ("Funds") are required to appoint an auditor to audit their financial statements, unless expressly exempt from this requirement. All funds and licensed entities must submit audited accounts to the Financial Services Commission (“Commission”) within six months of the end of the financial year. A failure to comply results in an administrative fine.
Country by Country Reporting
All entities resident for tax purposes in the British Virgin Islands, whether it is an Ultimate Parent Entity, a Surrogate Parent Entity or any other BVI entity that is part of an multinational group (Multinational Entity), must submit filings with the International Tax Authority. A multinational entity group (MNE group) means a group that:
- includes two or more entities the tax residence for which is in different jurisdictions, or includes an entity that is resident for tax purposes in one jurisdiction and is subject to tax in relation to the business conducted through a permanent establishment in another jurisdiction, and is not an excluded MNE group.
Taxes of BVI
|Min. rate for corporate tax||No|
|Capital gains tax||No|