Starting a company overseas can be a challenging task, but it’s an ideal strategy for internationalizing your business, maximizing profits and lowering operating costs. One of the challenges investors face is finding an overseas jurisdiction with a combination of the right economic and political climate, low tax rates, strong property rights and a simple incorporation process.
In the world of offshore business, the British Virgin Islands is certainly one of the few jurisdictions that satisfy the requirements of a tax haven and an offshore financial center. This UK overseas territory is not only known for its tourist attractions, but also for a vibrant offshore business and financial sector. This article outlines the reasons why forming a company in BVI could be a great business decision.
Reputable International Financial Center
Since the turn of the new millennium, offshore financial centers have received plenty of international attention for all the wrong reasons, from money laundering to hedge fund fraud and tax evasion. In light of this, entrepreneurs looking to do business in offshore jurisdictions that specialize in providing financial services to non-residents must focus on finding a reputable location, like the Virgin Islands.
According to a 2015 Global Financial Centers Index, the BVI was ranked number 34, up from number 47 in a prior ranking. This improvement can be attributed to the development of financial regulations and business policies that enhance the territory’s integrity, as well as the regulatory effectiveness of the Financial Services Commission. As such, choosing to invest in the BVI means you are assured of accessing quality banking, accounting, insurance, wealth management and other financial services.
Strategic Geographical Location
In international trade, the geographical location of a country can play a significant role in attracting foreign investors, with the most strategically located nations receiving more investments. A strategic location ensures investors are easily able to access markets in nearby countries or continents.
Sandwiched between the Northern Atlantic Ocean and the Caribbean Sea, the territory offers a perfect location for entrepreneurs who are interested to break into markets in Southern America, Central America and Northern America. Other prime offshore destinations such as Cayman Islands, Saint Vincente and the Grenadines, Anguilla and Saint Kitts and Nevis are also closely located to the BVI, so you will always have plenty of offshoring options in case you decide to relocate your BVI Business Company (BC).
When choosing an overseas location for company formation, it’s very important to examine the political and economic stability of your preferred territories. In general, avoid countries with a history or potential of civil unrests, labor strikes and political disagreements.
The BVI is an independent democracy with an elected House Assembly and government headed by a UK-appointed premier, and a legal system based on English common law. The judiciary is independent, and has a solid record of defending the country’s offshore business sector and interests. The territory’s corporate law is also modern and flexible. Under the BVI Business Companies Act, for instance, you can form a range of companies, including a foreign company, private company limited by shares or guarantee, or unlimited company with or without shares. There are also strong laws for the protection of business assets from political risks and future creditors.
Among the nations in the Caribbean, the BVI has the most stable and successful economy. Fueled by tourism and financial services business, the nation is home to a well-developed transport and communication infrastructure. The official currency is the US dollar, there are no foreign exchange restrictions or capital controls, and new economic policies are typically developed in consultation with the private sector. With such an economic environment, your BVI BC has every chance of succeeding.
Favorable Tax System
High taxation regimes exert a lot of unnecessary pressure on corporations and individuals. Unable to bear the weight of the tax burden, entrepreneurs are forced to move their companies, along with their personal tax residency, to low-cost jurisdictions. If you are offshoring for tax reasons, then you will be pleased to know that BVI has one of the friendliest tax regimes in the entire world.
For starters, there is no requirement for British Virgin Islands BC’s to pay any corporation tax. You can keep all the profits your company makes, regardless of whether they are drawn from rent, interest, royalties, capital gains or dividends earned from foreign and local investments. They are also exempt from inheritance, gift and value added taxes (VAT), but stamp duties are imposed on real estate transactions. Since corporation tax is zero-rated in the BVI, there is also no requirement for Business Companies to submit tax returns or any other audited financial accounts to any government authority. However, proper financial records must be kept either at the company’s registered office or at any other place declared by the company to its registered agent.
In addition to a zero-tax environment, the British Virgin Islands is party to double taxation and tax information exchange agreements with a few countries, including the UK. Essentially, this means that should the BVI decide to introduce corporation or personal income tax in the future, British citizens will only be taxed in one of these jurisdictions.
Simple and Quick Incorporation Process
Incorporation is the process of forming a new company, and it involves all the activities that happen right from selection of a company name through to the issuance of a certificate of incorporation. While the process can be a long, bureaucratic and frustrating in some countries, the same cannot be said of popular offshore jurisdictions where incorporation is designed to facilitate quick and cheap company formation.
In the British Virgin Islands, you can register a company within one working day, and the process is initiated when a registered agent files memorandum and articles of association with the Registry of Corporate Affairs.
Here are some of the basics you need to know about forming and running a company in the BVI:
It’s a legal requirement for the names of all BVI companies to end with any of the following words or their corresponding abbreviations: Corporation (Corp), Incorporated (Inc), Limited (Ltd), Societe Anonyme (S.A.) or Sociedad Anonima (S.A.). If you want to use Bank, Insurance, Trust, Trustee, Savings, Royal, Assurance, Re-Insurance, Asset management, Municipal, Fund Management, Building Society, Investment Fund or Chartered, you need to obtain a license from a competent authority. Prohibited names include all those that signify an association to a local, state or national government.
Shareholders and Directors
The number of shareholders and directors required to start a BVI Business Company is 1 (one each). Both the shareholder and director can either be a corporate body or a natural person, and neither has to be a resident or citizen of the BVI. The names and addresses of shareholders and directors are not part of the records that are available publicly, and the use of nominee shareholders and directors is permitted.
Share capital is the amount of money a company raises in exchange for issuing ownership stake to prospective shareholders. In countries with a prescribed minimum share capital, potential investors have no option but to fork out the required amount. In the BVI, however, you don’t need to raise any share capital in order to start your company, and shares can be issued at par value i.e. nominal value, which is not connected to the market value of the share or at no-par value, i.e. without listing a nominal value on the face of the share certificate. Other classes of shares permitted include preference shares, registered shares, bearer shares, redeemable shares, shares with voting rights and shares without voting rights.
Important note: Although bearer shares are typically structured to enhance shareholder anonymity, there are strict requirements related to their custody. For example, bearer share certificates must be kept by a licensed BVI custodian, together with written information detailing the identity and address of the actual beneficiary.
Registered Office and Registered Agent
All business companies in the BVI are required to have a registered agent and a registered address within the territory. A registered agent is usually a firm that has been licensed or approved to provide corporate services, such as facilitation of incorporation and company administration and management. As a rule, the registered address of a BVI BC is maintained at the offices of its registered agent. Starting Business is a professional company that has established relationships and partnerships with a number of BVI registered agents and offers this service to all their customers at preferential rates.
Although there is no law that requires BVI business companies to hold annual general meetings, shareholders and directors can hold meetings if they so wish. These meetings can take place in or outside of the BVI, by telephone or other electronic means. Shareholders and directors can also vote by proxy.
Domiciliation and Re-domiciliation
The British Virgin Islands permits owners of existing BC’s to re-domicile or relocate their entities to another jurisdiction that allows the practice. Similarly, the BVI allows the re-establishment of foreign companies without having to make reciprocal arrangements in the original country of incorporation.
Regardless of your reasons for starting an offshore entity, there is no doubt the British Virgin Islands can be the best location for you. Yet, the key to finding offshore business success lies not only in finding the right location for your business needs, but also having an experienced corporate services provider by your side. Starting Business can be your perfect offshoring partner.