Up until the US invasion in 1989, Panama was the premier off-shore jurisdiction but the BVI came to prominence after that event. The British Virgin Islands (BVI) is often called the grandfather of all IBCs. IBC stands for “international business company,” originally from the International Business Companies Act of 1984 in the British Virgin Islands. It has since been copied—with slight variations—across many jurisdictions.
For so many international entrepreneurs, the BVI is now the go-to jurisdiction for an offshore company. When asked why the BVI? Most entrepreneurs would probably say that it’s because it’s a well-known or popular jurisdiction. Almost a synonym for an offshore company. But is it worth it?
How does it work
The United Kingdom in general and the City of London in particular, has long been considered a global financial center. Today London is rivaled only by New York City as far as financial hub cities go. This helps explain the popularity of the BVI. On one hand this overseas territory is a part of the United Kingdom. On the other hand, it is a semi-autonomous region which allows it to craft its own unique laws and financial regulations.
Companies and wealth managers who choose to offshore to the BVI get to enjoy the reputation and supervision of the United Kingdom, while also tapping into favorable offshoring regulations. English is the official language, it uses the US dollar and is an ideal location for Americans looking to offshore.
- Taxation – There is no corporate tax in BVI. The only taxes are in practice only paid by locally run companies with local employees. If you incorporate in BVI and have no local operations, you may not need to pay these taxes.
- Public Records – Companies owned by nonresidents rarely register for the public records. The government does not know who the directors and shareholders of companies are. That information stays with the registered agent, which is bound by law to only disclose the information under a lawful request such as through a DTA or a Tax Information Exchange Agreements (TIEA).
- No Taxes but Accounting Requirements remain – The BVI has no corporate income tax, customs duties, wealth tax, or VAT. Nevertheless companies are required to maintain proper records and prepare annual accounts. Accounts do not have to be filed and auditing is not required, but copies of the accounts must be held available for inspection.
- Only 1 Director and 1 shareholder is needed. Can be a corporate shareholder and any nationality is allowed.
- No minimum capital requirements.
- Costs – Costs are generally higher than in other IBC jurisdictions, but nonetheless highly competitive. It’s rare to find BVI incorporation fees under $1,000 USD. Expect something closer to $1,500-$3,000 with a high-quality, reputable service provider. Annual renewal fees are around $800 to $1,200 in most cases.
- Restricted activities – The following activities are not permitted for IBCs to be undertaken: offering banking or investment services to third parties; offering gambling, betting or casino services; offering insurance or reinsurance services; offering trust services to third parties.
- Reputation – The BVI’s international reputation has been impacted by recent high profile and controversial cases of tax evasion and suspected money laundering. In addition, there has been some unfavorable ratings by organizations like the OECD.
- Complicated – Setting up an IBC in the British Virgin Islands is a bit more complicated than some other offshoring hubs. All activities conducted must be legal in both your home country, and the BVI. The compliance screening usually comes up with follow up questions and the business details have to be clearly outlined. Some providers demand a full business plan.
- Offshore Banking in BVI – The banking sector in BVI is very small. Accounts are almost always opened remotely or by visiting the bank in another country. Some banks often insist on a personal visit if there is no introducer or intermediary.
Changes that have come into effect on 1 January 2023 in respect of companies in the BVI
Bearer Shares are discontinued in the BVI. Any bearer shares issued by a BVI company are now inactive with no rights and must be redeemed or exchanged for registered shares. Failure to do so can result in a fine of $50,000.00.
Register of Members
The Register of Members of a BVI company must now specify the nature of voting rights to shares, unless the same has been specified in the company’s Memorandum & Articles of Association.
Resignation of Registered Agent
Prior to 1 January 2023, where a registered agent intends to resign it was required to give the company 90 days within which to appoint a new registered agent, that time has been reduced to 60 days.
Filing of Annual Returns
A BVI company must file an Annual Return with its registered agent no later than 9 months from the end of the fiscal year. This does not apply to regulated and listed companies or companies that file annual reports with the BVI Inland Revenue Department.
Registered agents are obligated to notify the Commission should a company fail to file the annual return.
A company which is part of a group may rely on the group accounts for their submission.
The returns will not be made public.
Register of Directors
The Register of Directors of a BVI company must now include the details of alternate directors unless that alternate director is already a director of the company.
The Register of Directors of Companies will also be available when searches are conducted, thus being publicly available. The register of members continues to remain private.
Continuation Out of the BVI
A company which wishes to continue out of the BVI must now prior to continuation advertise in the BVI Gazette and on its website if it has one, notice of its intent to transfer. The Notice must also be sent in writing to its members and creditors. The notice must include the intended jurisdiction.
The company must also file with the Registrar a copy of the notice of intent confirming that notice has been provided as per the above.
A company can rescind the notice of intent by filing the same with the Registrar.
Strike Off/Dissolution of Companies
Dissolution of a Company is now automatic on the striking off of the company from the register of companies. Dissolution takes effect on the date the strike off is published in the BVI Gazette.
An aggrieved party may challenge the strike off/dissolution within 30 days of the strike off/dissolution.
This is only applicable to companies struck off after 1 January 2023 and were not voluntarily liquidated.
A company may be restored by making an application to the Registrar of Corporate Affairs for permission to be restored upon meeting certain criteria and serving the Financial Secretary. If the criterion for restoration is met then the application is approved, and the Company can then file a restoration application.
Companies will have 5 years to make such an application.
Restoration of Companies which were Voluntarily Liquidated
Companies which were voluntarily liquidated and seeking to be restored must apply to the Court.
Deemed Resignation of Registered Agent
Where a company is struck off/dissolved, the registered agent of the company is deemed to have resigned on the date of strike off/dissolution. Any application to restore the company must include a consent and declaration from a valid registered agent in the BVI prior to restoration.
Liquidators for Voluntary Liquidation
A qualified BVI resident must be appointed as liquidator or one of the liquidators of any company intending to enter voluntary liquidation. BVI liquidator will be obligated to hold all liquidation and underlying documents of the company. Voluntary liquidators appointed before 1 January 2023 can continue to act on existing liquidations until they conclude.
Companies Currently Struck Off (prior to 1 Jan 2023)
Companies which are currently struck off, or were struck off prior to 1 January 2023, must be restored on or before 30 June 2023. If the 10-year period that the company would have had before it is dissolved ends after 30 June 2023 then the company must restore by 30 June 2023. If the 10-year period would end on a date before 30 June 2023 the company must be restored on that date. If a company fails to be restored before 30 Jun 2023 or the earlier date, the company shall become a dissolved company whether the notice of its strike off is published or not.
If a company fails to be restored during that period it must apply to the court to be restored and in addition to all other fees, will be subject to a penalty of $5,000.00 unless the application is being made by a party other than a former member, director or liquidator.
Companies Currently Dissolved (prior to 1 Jan 2023)
Companies which are currently dissolved whether for non-payment of fees or voluntarily liquidated must apply to the courts within 5 years from 1 Jan 2023 to be restored or if the 7 years which they previously had to restore would be prior to 31 December 2027 then the company must apply to be restored on that date.
In addition to the above changes there has been an increase in government fees. Please see new fees below for the more common transactions:
Incorporation and Renewal of Companies
- 50,000 Shares or Less – $550
- More than 50,000 Shares – $1350
- Guarantee Companies – $550
- Private Trust Companies (50,000 Shares or less) – $1500
- Private Trust Companies (more than 50,000 Shares) – $3000
- Restrictive Companies – $8000
- Foreign Company (registration) – $550
Late fee penalty for annual fees for foreign companies 10% before 31 May and 50% after 31 May
- Certificate of Good Standing $100 (electronic) $150 (physical)
- Continuation into the BVI – $500 (50,000 shares or less) $1300
- Continuation Out of the BVI – $2500
- Notice of Intent to continue Out – $250.00
- Filing of Register of Directors – $100
- Filing of Changes to Register of Directors – $50
- Application for Restoration – within 12 months (200) outside 12 months ($400)
- Restoration once approved – within 12 months ($500) outside 12 months ($1200)
- Filing Court Order – within 12 months of dissolutions ($400.00) outside of 12 months of dissolution ($600.00)
- Court Restoration – within 12 months of dissolutions ($2000.00) outside of 12 months of dissolution ($4000.00)
The BVI is a recognized jurisdiction in the international financial services sector, but many are starting to opt for other Caribbean jurisdictions like Anguilla, Turks and Caicos, Cayman Islands, or even jurisdictions which aren’t British Overseas Territories, such as Mauritius or Singapore for their reputations.
In the past the BVI earned a bad reputation for money laundering, but in recent years the country has strengthened its systems and is now a part of major international agreements. But more robust compliance screening results in slightly higher costs and slower registration.