
Exempt Companies in the United States Virgin Islands
In February 1987, the Tax Implementation Agreement was established between the United States and the Virgin Islands, bringing the US Virgin Islands Exempt Companies Act of 1986 into effect the following year. This legislation is detailed in Chapter 14, Title 13 of the VI Code and is supported by the United States Internal Revenue Code – § 934 (b)(1) and §934(b)(3). Under this Act, foreign-owned companies not conducting business in the United States or the US Virgin Islands can qualify for a 20-year exemption from local taxes.
US Virgin Islands companies are structured similarly to those in Delaware and Nevada, drawing on an earlier version of Delaware corporate law, recognized as one of the most respected legal frameworks worldwide.
Taxation of Exempt Companies
Authorized exempt companies in the US Virgin Islands are free from gross receipts, local licenses, and withholding taxes. The only tax obligation is an annual franchise tax of $1,000 payable to the US Virgin Islands Government. Even income from banking or investment activities within the US Virgin Islands is exempt from taxes on interest or dividends due to its classification as passive income. Furthermore, shares of exemption companies owned by non-US tax residents are not subject to US or US Virgin Islands gift or estate taxes. Upon incorporation, the US Virgin Islands Government provides a 20-year contract ensuring the company’s tax exemption.
Ownership Requirements
To qualify for Exempt Company Status, entities must be primarily foreign-owned. According to the US Virgin Islands Legislature, a company qualifies as an Exemption Company only if less than 10% of its total voting stock or stock value is owned by US or US Virgin Islands individuals. If the company issues bearer shares, it is presumed to belong to US or US Virgin Islands persons.
Tax Treaties and Information Exchange Agreements
The US Virgin Islands is not part of any tax treaty involving the United States and lacks the legal authority to enter into such treaties with foreign countries. Notably, all FATCA Model 1 and Model 2 Intergovernmental Agreements exclude reporting by the US Virgin Islands and financial institutions within its territory.
Additionally, neither the US nor the US Virgin Islands have implemented the OECD’s Common Reporting Standards (CRS), eliminating the need to report account ownership or beneficial ownership of companies in this context.
Key Benefits of US Virgin Islands Exempt Companies
•No FATCA reporting
•No CRS compliance
•Exemption from US Heritage Tax
•Taxation as a US Exempt Entity
•Federal US Identification Number
•US Tax Residency Certificate (if required)
•Certified Copies of Tax Returns (if needed)
•No individual tax requirement for persons outside the US
•Compliance-focused bookkeeping and record-keeping in the USA
•Access to all banks across the USA
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