Company formation in BVI

In case of offshore company formation bvi in packages in “All included,” all expenses related to:

• legal registration of the company and its further operation, such as drafting of the initial memorandum of association, articles of association, orders on appointment of director/manager, decisions on issue of shares, registration of office, etc., preparation of information on all owners and managers, entering data on the beneficiary in BOSS (Beneficial Ownership Secure System);
• payment of mandatory state fees to the Register of Corporate Affairs and obtaining a certificate of incorporation;
• registration of the legal address, office, seal, and services of the registration agent;
• formation of documents for work with the banking system;
• payment for courier delivery.

The Financial Services Commission of the British Virgin Islands (FSC) has been the principal regulator of the financial services industry since 1990. The FSC bases its activities on several pieces of legislation like the Financial Services Act 2009, the Economic Content Act 2018, and the Business Companies Act 2004, which has greatly improved corporate offshore legislation. This allows companies to have a simple management and control structure with one director and one owner, the ability to hold shareholder meetings around the world with no time limit, and no need to be audited, file tax returns, and provide ownership details to public registers. This has encouraged the BVI to grow in popularity and become one of the most progressive offshore centers.

The FSC is still responsible for updating information in the BVI company register, where about 5,000 new companies are registered every quarter. As a rule, this jurisdiction is chosen by trusts (415), holdings, and companies related to international trade because the BVI banks allow opening accounts in US dollars and work all over the world; small enterprises, corporations listed on stock exchanges for reliable protection of assets.

In order not to be included in sanctions lists, the jurisdiction is subject to FATF regulations and the Anti-Money Laundering and Terrorist Financing Act of 2008 (amended in 2020), which obliges businesses to conduct KYC/AML procedures.

In case of litigation, the court of the last instance will be one of the highest courts in the UK.

General Information

The process of registering a new company has become simple and fast thanks to the Business Companies Act of 2004. Now, starting a business in BVI as a foreigner or resident can be done in just a few days. This approach of the authorities to develop a favorable investment environment and simplify company management has made the jurisdiction one of the most desirable for offshore business.

Benefits of forming a BVI company:

Taxes Benefits

Many people think about how to open a business in BVI because of the absence of corporate tax, capital gains tax, royalties, interest and dividends, donation of shares, property, or inheritance, there is also no stamp duty, which together allows you to invest additional capital in the further development of the company.

Fast Set-Up of a Company

The process of BVI company incorporation is fast – a maximum of two days.

BVI as a Financial Services Center

Simplification of norms of setting up an offshore company in BVI and the possibility of controlling the business from any corner of the world stimulated the increase in the number of new companies, among which there are giants of the financial market, such as Bank of Asia, trust – CITCO Ltd. with the management of more than $1 trillion, DeFi aggregator 1-inch Network, TeraBlock allowing transactions in fiat and cryptocurrency, trading platform Bitfinex.

Privacy and Confidentiality

A high level of anonymity when registering a company in BVI has become one of the main advantages of the jurisdiction. All data about owners, managers, shareholders, and other general managers are closed from public access.

Even though the Safe Beneficial Ownership Search System Act of 2017 requires disclosure of the ultimate beneficiary, such information will still not be open in public registers. Only local authorities, the Financial Investigation Agency, the FSC, the Tax Service, and the Prosecutor’s Office have access to this type of confidential data.

Financial Reporting for BVI Companies

A plus with BVI business registration is that there is no requirement to file financial statements and tax returns when operating off-island.

Apostille/ Notarization/ Legalization

The process of incorporation of foreign companies in BVI is possible without visiting the island remotely, both residents and non-residents, with the provision of corporate documents with apostille and notarized.

Local legislation, according to the FSC website, allows for the registration of several types of legal entities and legal formations, such as:

• BC (Business Company) – one of the most common forms.
• Limited partnerships.
• MBC (Micro Business Companies), there is a limit on company size and transactions.
• Trusts usually choose to register VISTA.

BC (Business Company)

Under the Business Companies Act 2004, 5 types of business entities can be formed:

• a company limited by guarantee;
• a company limited by guarantee without the right to issue shares;
• a company limited by guarantee with the right to issue shares;
• unlimited company without the right to issue shares;
• unrestricted company with the right to issue a share.

BC is one of the most chosen forms for offshore company registration as it requires a minimum of one manager and one owner. BC is allowed to conduct commercial activities, but it is necessary to have a registration agent and an office where all the memorandum of association and information will be kept. The name must have an abbreviation indicating the form of activity (Ltd, Inc, Corp). On average, the size of the initial capital reaches $50,000.

Company limited by shares

A limited liability company may issue shares, whereby the shareholders are not liable for the obligations of the company but have voting rights according to the shares held. It is permissible for the owner and manager to be the same person. The registration agent has the right to appoint a director within six months, who must then issue shares in the company.

 Company limited by guarantee

A company limited by guarantee (with or without the right to issue shares) must have at least one guarantor member, who may also be a shareholder. The company’s memorandum of association sets out all of the obligations of the guarantor member in the event of the company being wound up.

Unlimited company

The structure of an unlimited company must include at least one member. The members have unlimited liability for all obligations of the company and contribute to the assets of the company in the event of liquidation.

Limited partnerships

LPs (Limited Partnerships) are established subject to the fulfillment of all the provisions of the Limited Liability Partnerships Act 2017. It is mandatory to have a written agreement specifying the rights and obligations of the partners of the LP.

When registering this legal form, submit to the Registrar:

• An application with the name and address of the LP.
• A statement indicating the term of creation of the LP.
• Details of each partner, such as name and place of residence.
• A statement from the registration agent.

Micro Business Companies

MBC is most suitable for startups. However, there are restrictions on transactions (only as per the previously stated business purpose), number of employees, shares, and annual turnover. Also, MBCs cannot engage in providing financial services.

MBC can conduct business outside the territory. Only physical persons can be shareholders of the company. All information about the owners of the company is held by the registration agent, and the company’s records of its current activities are kept at the registered office.

Restricted purpose company

A limited-purpose company has the abbreviation SPV Ltd at the end, which is similar to BC but is limited in the type of transaction. The memorandum of association sets out all the business objectives, and it is prohibited to make any changes to the memorandum or alter it.

In addition, a company with limited objectives can be a segregated portfolio company – SPC. Usually, this type of organization is required to hold the assets of institutional investors, to manage several types of business with a separate portfolio (assets and liabilities of each portfolio are segregated from each other), and to dispose of real estate. When registering an SPV, it is required to fulfill such criteria as obtaining authorization from the FSC.

Trusts

Trusts are interesting for conducting business related to the management of capital, property, land plots, transfer of inheritance, and preservation of control over family business. The main legislation regarding trusts was the Trustee Act 2003 (from 2020).

The most common types of trusts in the BVI are:

• Specialty trusts (VISTAs) are set up to hold BC shares. VISTAs are usually chosen by those who own their own business and want to manage their own company while benefiting from the regulation of the property by the trust.
• Discretionary and fixed interest trusts where the circumstances under which the beneficiaries receive income are specified.
• Non-charitable purpose trusts, there are no charitable principles, the trust is created to protect or hold certain assets.

Holding

BCs can also be used as personal investment holding companies (PICs). The main benefits of registering PIC are the storage of assets of the owner or his family (from works of art yachts to a portfolio of securities), ensuring confidentiality, and protection from kidnapping. During a certain period, dividends are paid to shareholders, and then, at the end of the period, the assets are returned to the owner.

Requirements include having one general manager and owner, and a backup director may also be appointed.

E-Commerce

The fast business registration process in the BVI and the favorable business climate with low tax rates have also attracted many e-commerce companies. In addition, company registration can be done online, as well as payment of company setup costs. An e-commerce business can operate with accounts in multiple currencies, use Visa or Mastercard, multiple payment gateway options, and payment systems like Paypal or Stripe to provide its services to the global market. Online businesses have the right to connect offshore servers without using home servers for the transaction, which provides additional protection for the activity.

Business opportunities

Each jurisdiction has its own rules and requirements for the list of documents. The BVI values its reputation and adheres to all international regulations regarding AML/KYC.

Necessary Documents

To complete the registration process, it is necessary to prepare the following:

• Initial company documents like Memorandum of Association and Articles of Association, where the main objectives of the company are defined.
• Certificate of Incorporation.
• Package of copies of incorporation documents with apostille.
• Resolution on the first issue of shares.
• Certificate of shares.
• Resolution of the shareholder/owners.
• Register of managers, shareholders, and officers.
• Agreements of merger reorganization.

KYC Documents Checklist

BVI allows setting up a company as a non-resident, but in any case, the KYC procedure is mandatory.

Business provides:

• Certificate of Incorporation.
• Basic incorporation documents.
• Register of directors/shareholders.

Managers and owners must submit identification documents, as well as confirm the residence of the manager and shareholder of the company. In addition, a full resume or a link to a professional portfolio is required.

Applicable Legal Frameworks and Regulations

The FSC regulator monitors the integrity of the market and compliance with statutory regulations:

• Financial Services Act 2009.
• Economic Content Act 2018.
• Business Companies Act 2004.
• Trustee Act 2003.
• Limited Liability Partnerships Act 2017.

The AML/KYC norms are laid down in:

• The Money Laundering and Terrorist Financing Act 2008.

The Commercial Companies Act of 2004 exempted all types of businesses from paying income taxes. This was a key decision for the dramatic growth of new corporations and the transformation of the BVI into an offshore financial center.

BVI tax rates:

• Corporate tax 0%.
• Capital gains tax 0%.
• VAT 0%.
• No currency control, the US dollar is legal tender.
• No tax from rent, royalties, dividends, interest, or shares of any type.

But, there are peculiarities:

• When importing goods, 20% is payable.
• When transferring real estate/shares by companies with real estate on the islands – 4%.
• Registration fee of $5000.
• License renewal fee from $350.
• Initial payment for the license (depending on the type) from $10000.
• When hiring employees, the company pays payroll tax depending on its class (1st class – 10%, 2nd class – 14%).

Taxation

Corporate Tax

This offshore jurisdiction is governed by the Income Tax Act 2020, which stipulates that a company pays corporate tax only if the profit is earned within the jurisdiction.

International Tax Treaties

For efficient business management and to avoid double taxation, the island authorities have signed the Tax Information Exchange Agreement (TIEA). Some 117 countries have already supported this initiative and international cooperation efforts.

Accounting and Auditing

According to the amendments to the Commercial Companies Regulations of January 1, 2023, all companies incorporated in this jurisdiction are required to file an annual report (balance sheet, profit/loss statement) with their registration agent within nine months. In case of non-filing, the company may be fined or liquidated by the Registrar. These measures are aimed at strengthening the control of business activities tracking the payment of taxes, including capital gains tax.

Companies do not file a report if:

• They are listed on a stock exchange.
• They report to the FSC.
• File a return with the IRS.
• We are in the process of liquidation.

It is important to understand that the information contained in the financial report remains confidential and will not be publicly available. If the annual report is not filed by the due date, the agent will report it to the Registry of Corporate Affairs within 30 days.

Accounting and Bookkeeping

The tasks of effective company management include adequate and correct recording of all transactions (data is kept for five years). The financial result of the company’s activities is shown in a report, which is filed nine months after the end of the financial year with the registering agent.

Auditing requirements

Regardless of the type of business entities, auditing is not mandatory for companies, which allows them to focus more on their current activities.

Crypto and Bitcoin in BVI

The flexible taxation system has contributed to the growth of cryptocurrency, blockchain, Web3, and shelf companies. But all this was before 2020 when crypto-business was not regulated in any way.

In 2020, the FSC qualified crypto-services as financial services, applying the relevant legal provisions to them.

In 2022, the Virtual Asset Service Providers (VASP) Act was published, which made it mandatory to obtain a license to conduct such activities. The register of companies that have obtained a license for VASPs is publicly available. Token issuance is not subject to VASP regulation.

Digital currencies are considered a digital representation of value, a unit of account, or a means of savings, which can be exchanged or transferred but still does not have the status of legal tender.

Obtaining a VASP license allows you to legally provide services:

• Exchanging cryptocurrencies and fiat currencies.
• Conducting transactions.
• Storage.

To learn more about the process and requirements for obtaining a VASP license, please visit the Fast Offshore Licenses website.

Registration of a legal entity takes place by entering data about the legal entity into the Registry of Corporate Affairs and obtaining a certificate thereof. Only then does the company have the legal right to start its business.

Registry of Directors

Directors or officers must be entered in a Register, which is kept at the company office and provided to the agent for the legal registration of the company together with identification data. There is no publicly available personal data about the director or his place of residence.

In the territory of the islands, there are no requirements for the residency of the manager, as well as the manager can be appointed as a legal entity or individual.

The duties of the general manager of the company must be specified in the Memorandum and Articles of Association of the company. It is possible to appoint a nominee director.

Registry of Shareholders

A minimum of one shareholder is required to form a company. A register of shareholders is kept at the registered office and presented to the registration agent upon request. Such information is not publicly disclosed. Meetings of shareholders are held at any place without time limit.

Nominee Services

The appointment of a nominee manager or shareholder is acceptable in the BVI. Powers of attorney, letters of authorization, declarations, and share documents must be submitted at the time of filing.

Substance and Residency

The authorities of the islands develop the business environment and strive to provide comfortable conditions for any business. However, certain criteria must be met in order not to lose registration.

Economic Substance

In 2018, the Economic Substance Act was passed, which establishes that for certain activities like banking, insurance, financial, shipping, and leasing business, economic presence requirements must be met. This means having an office in the islands, employing local staff, and carrying out management from the jurisdiction and expenses.

Residency Requirements of Shareholders and Directors

Local authorities have not established mandatory residency requirements for directors or shareholders. Similarly to the place of residence, there are no restrictions on the place of stay.

Company Types

The banking system includes eight banks, including the giants Citco Bank and CIBC Bank. When opening an account, all constituent documents of the company are collected, as well as information about the directors and founders. In some cases, the personal presence of the director is required. The account opening process can take several weeks.

Banking