In this article, we look at incorporation and banking in the British Virgin Islands. We first look at the different types of BVI companies and the advantages of incorporation in the BVI.
Next, we examine the jurisdiction’s offshore banking services, with information on how to set up a bank account in the BVI and what the advantages are.
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BVI – Country Overview
The British Virgin Islands (BVI) is a British Overseas Territory located in the Eastern Caribbean Sea consisting of four large and several smaller islands.
The island nation is famous for its excellent yachting sites, reef-lined beaches, and renowned diving spots.
BVI has a tiny population, just under forty thousand. However, what the country lacks in numbers, it makes up for in its natural beauty as well as a thriving financial services sector.
The tourism sector is the largest employer in BVI and makes up for half of the country’s revenue. While the offshore financial services sector is BVI’s second most prominent sector.
The country started marketing itself as an esteemed offshore financial jurisdiction and tax haven in the late 90s.
In 1984, BVI introduced International Business Companies Act. Since then, this small island nation has modeled itself as the most popular offshore financial center with the largest number of registered offshore companies among all offshore jurisdictions.
Since then hundreds of thousands of offshore companies have been set up in BVI.
For a country so small, this number of offshore companies is enormous.
This article will discuss how to form an offshore company in BVI. Then we will also take an in-depth look into the BVI bank account opening process.
British Virgin Islands Business Company
Corporate Legislation
A huge reason why BVI is such a popular jurisdiction for company registration is because of its corporate governance.
The country has introduced several bills strengthening its corporate structure, including registration, audit, and maintenance of foreign companies.
We already mentioned BVI’s 1984 Business Companies Act, which details the establishment, tax liabilities (or lack thereof), audit, and other matters related to a BVI business company.
In 2005, the country also abolished any remaining differences between an international business company and a local company.
Since then, whether your BVI company operates locally or internationally, it has the same rights and tax advantages. All companies also share the same Corporate Register and are regulated under the same law.
Unlike offshore tax havens like Vanuatu, which has earned its fair share of notoriety owing to its zero tax, zero reporting, and somewhat lax due diligence, BVI strives to operate according to international tax and corporate compliance rules.
In 2019, BVI made it mandatory for all BVI entities to prepare, report, and file economic substance declarations about their businesses annually. The Economic Substance (Companies and Limited Partnerships) Act was introduced in 2018 and became effective in 2019.
Types of BVI Companies
The BVI Business Companies Act allows the establishment of the following types of companies:
- Company Limited by Shares
- Restricted Purpose Companies
- Segregated Portfolio Company
- Company Limited by Guarantee
- Unlimited Companies
Among all the business structures mentioned above, a BVI Business Company Limited by Shares is the best option for foreign and local investors.
No matter which structure you go for, a BVI business company will always provide ease and a streamlined process to set up and operate your business activities.
Characteristics of a BVI Business Company
A BVI business company has been preferred by thousands of investors and entrepreneurs for decades owing to its quick registration process, streamlined incorporation, tax advantages, and increased confidentiality.
Here are some of the significant characteristics of a BVI business company.
Legal Structure
A British Virgin Islands company is a separate legal entity and entitled to the same powers as a natural person.
A BVI company is required to have at least one director, one shareholder, and one owner – all of whom can be one person. The director(s) and shareholder(s) could be of any nationality. Moreover, they could be natural persons or legal entities like corporations.
The company must have a registered address and an agent in the BVI.
A BVI Company’s structure is quite flexible and can be designed according to the company’s management requirements. There is also no minimum capital paid requirement.
Reporting Requirements
BVI companies are not obligated to prepare or file their financial accounts. However, the company must keep a detailed record of its cash inflows, outflows, assets, and liabilities.
Such records are not required to be kept in the BVI. Moreover, you don’t have to make these records public.
There are no auditing requirements. However, as mentioned earlier, all BVI entities conducting relevant activities according to the Economic Substance (Companies and Limited Partnerships) Act, must prepare, file, and report their annual economic substance declaration.
The relevant business activities are banking, insurance, wealth management services or any activity that requires an investment business license under the Securities and Investment Business Act, 2010, etc.
In BVI, your company’s Articles of Association are not required to explain the scope of your business activities. However, you may choose to do so depending on your business structure.
Increased Confidentiality
In a world where anonymity and privacy are often synonymous with shadiness, an offshore jurisdiction that is widely respected but still respects your confidentiality is as rare as it gets.
Company registration in the BVI requires all shareholders, directors, and beneficial owners to submit proof of identification to the Registered Agent. However, all this information stays confidential since the Register of Directors is not publicly available.
The only publicly available company document in the BVI is the Memorandum and the Articles of Association. However, these usually don’t contain the identity details of the directors, etc., providing an extra layer of confidentiality.
The country is a part of several information-sharing global authorities like Tax Information Exchange Agreements (TIEA) and CRS.
Note, however, that BVI doesn’t automatically share information under TIEA regulation. According to the agreement, the country can only confirm the information the foreign government already has and would not provide any additional information.
However, banking information is treated differently and shared automatically under FATCA and CRS regulations.
Tax Advantages
The best advantage of starting an offshore company in BVI is the lack of taxes. BVI companies don’t have to pay taxes on income or capital gains.
The same applies to dividends, interest, rents, royalties, compensations, and other expenses paid by a company. The only tax liability comes in the form of 8% payroll taxes for companies that employ local employees.
A BVI business company is also exempt from stamp duty on transactions relating to transferring any property, assets, shares, debt, or securities.
However, land-ownership transactions are subjected to stamp duty ranging from 4% to 12%.
How to Set Up a BVI Business Company?
Register Company Name And Type
You must first register your company name in the Registrar of Companies. Your company name must not be similar to an existing BVI company. The Registrar dictates a list of words that must not be a part of your company name.
You must also select an entity type supported by the country’s legislation. The best practice is to select a business structure that best serves your requirements.
Submit Your Application
After that, you will need to apply with supporting documents, including the Memorandum and the Article of Association. You will also need to provide certain information about your business, directors, shareholders, and other key roles, such as passport copies and proof of address for all shareholders.
Apply For A Business License
You must apply for a business license as a sole trader or a registered business. Your business structure, sector, and scope will define how easy, or complex this step may prove to be. Some business activities may result in additional scrutiny and due diligence.
Open A Bank Account
Once you get your business license, you must open a BVI bank account (it doesn’t necessarily have to be in the BVI). After setting up a corporate bank account in BVI, your company is ready to run its operations seamlessly. British Virgin Islands banks are no strangers to offshore banking. So, whether you choose a local or foreign bank, expect to deal with professionals well-versed in offshore corporate affairs.
Stay On The Right Track
The government of BVI has been trying for years to move away from the tax haven label since, in today’s world, it brings along much-unwanted attention – from both the authorities and from prospective clients who might damage the jurisdiction’s reputation. .
In BVI, after setting up a company, compliance is paramount.. Whether it’s your economic substance declaration or CRS regulation, you must comply at all times with the relevant authorities to ensure a smooth ride onward.
Still, the country makes compliance very easy for you with no annual returns, audited reports, tax filing, or annual general meetings.
BVI Banking – Opening a Bank Account in the British Virgin Islands
Opening a bank account is a crucial part of BVI company registration. It’s also critical for managing finances and carrying out the operations of our business smoothly.
The BVI Financial Services Commission manages financial services, such as banking, insurance, etc., and its providers in BVI.
BVI may be a famous offshore financial center and offer tons of tax advantages, but it’s far different from OFCs like Vanuatu, currently having issues with the EU, or indeed with jurisdictions on the OECD blacklist.
BVI runs a tight ship, and that’s why the country only has six commercial banks and one restricted license bank.
First Caribbean International Bank is a popular choice among foreigners for setting up accounts for their offshore companies.
As with any credible bank, BVI banks also require a set of documents to open a corporate bank account. The more detailed and accurate your records and the information within is, the easier and hassle-free your bank account opening journey will be.
Documents Required to Open a BVI Bank Account
- Bank account application forms
- Bank statements
- Bank reference letter
- Certified copies of passports and address proofs of all directors/shareholders
- Business plan, activities, and scope
- Business trading proofs (sales/purchase orders, invoice…)
- Certified copies of BVI company documents
- Government certification of company good standing status.
The list mentioned above includes only the generally required documents. You may be asked to submit more documents depending on the nature of your business structure and activities.
Should You Consider British Virgin Islands Incorporation?
In a world where there seems to be only two options – high-tax countries or zero-tax shady “tax havens”, BVI walks a very fine line of being compliant yet offering incorporation ease, enhanced privacy and plenty of tax advantages.
BVI strives to honor all regulations by global tax and financial compliance authorities CRS, OECD, and FATCA.
That’s why the companies set up in BVI don’t usually face issues that other notorious tax havens experience.
Want to set up shop in BVI? We’ve helped over 2000 clients acquire personal and financial freedom offshore through tailored strategies. Reach out to us, and we’d love to do the same for you.
