Pros and Cons of a BVI Entity
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.
The BVI is a recognized jurisdiction in the international
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.