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Company formation in BVI

Company formation in BVI

The British Virgin Islands (BVI) is an overseas territory of the United Kingdom in the Caribbean. Offshore company registration in these islands is a popular choice for businesses and individuals looking to set up a company in a well-regulated and tax-efficient jurisdiction. Fast Offshore Licenses supports the company registration process in both the BVI and other jurisdictions.

The British Virgin Islands, located in the Caribbean Sea near Puerto Rico, is a popular jurisdiction for setting up offshore companies and corporate trusts. More than 950,000 business companies are registered in the islands, of which more than half are offshore.

Despite their modest size, the BVI has a developed economy and an efficient system of governance. The island government provides a favorable investment climate for offshore companies, which makes the islands a popular place for incorporation.

The Territory became a rapidly growing business center and preferred incorporation location following the enactment of the International Business Companies Act in 1984. This Act detailed the advantages of incorporating a company in the British Virgin Islands, such as tax neutrality, corporate flexibility, and simplified incorporation procedures.

The BVI is now a semi-autonomous territory, and International Business Companies (IBC) effectively serve as the business unit for foreign companies and individuals wishing to incorporate a legal entity in these islands. The laws of the British Virgin Islands, both business and general, are subject to the oversight of Great Britain, a recognized business center. At the same time, the British Virgin Islands has additional freedom to establish its own incorporation and corporate tax laws.

Advantages of Company Registration in BVI

Registering a company in the BVI is an effective way to start or expand your business in this jurisdiction, which offers several advantages:

Tax neutrality
One of the main advantages of the BVI is its neutral tax environment. There is no corporation tax on profits, capital gains tax, or inheritance tax in this jurisdiction. This is particularly attractive to international companies looking to minimize tax liabilities.

Privacy
The BVI places great emphasis on the privacy of business owners. The names of shareholders and directors are not included in publicly available records, providing a degree of anonymity and confidentiality for those involved in the company.

Flexibility in corporate structure
BVIs provide flexibility in the structuring of companies. The Companies Act allows for the creation of different types of organizations, including limited companies, limited partnerships, and trusts, giving businesses the ability to choose the most appropriate structure.

Political and economic stability
The BVI is known for its political stability and well-developed legal system based on English common law, which creates a safe environment for doing business.

English as an official language
English is the official language of the BVI, which facilitates international business transactions and communication. This can be beneficial for companies interacting with global customers.

The U.S. dollar is the official currency
Using the US dollar as the official currency in the BVI greatly simplifies the processes of trade, investment, financial management, and reporting for companies.

Ease of registration
The process of incorporating companies in the BVI is quite simple. The jurisdiction has simplified procedures in place, making company formation an efficient and quick process.

No currency restrictions
There are no currency restrictions in BVI, allowing companies to freely repatriate profits and capital without restrictions. This contributes to ease of doing business and financial flexibility.

Legal system based on English common law
The BVI operates under a legal system based on English common law. This provides a familiar and well-established legal framework for businesses and investors.

Global business hub
The BVI has established itself as a global business hub, especially in offshore financial services. This status attracts a variety of international companies, financial institutions, and legal professionals.

Requirements for opening a formation in BVI

The requirements for opening a legal entity in the British Virgin Islands are relatively simple and may vary depending on the type of company chosen. They typically include:

the company name must be unique and comply with BVI naming rules;
a registered address in the BVI, with offshore companies not allowed to buy land and buildings in the BVI, but can rent an office to provide a physical address for the company;
a local registered agent – a resident of the BVI or a company that acts as the company’s official contact person for legal and government communications;
Memorandum of Association, which specifies the form of the legal entity and other information;
certificate of ownership (for foreign legal entities);
for limited liability companies: at least one shareholder and one director of any nationality, and this may be the same person;
when registering a company in the BVI, the beneficiaries must provide bank statements of their accounts used during the last six months;
confirmation of the registered addresses of the founders and a full set of their details;
no minimum paid-up share capital.

Registering a company in the British Virgin Islands is a fairly straightforward procedure, but there are regular changes to the legislation, so it is important to keep a close eye on them and take any changes into account promptly.

Process for Opening a Company in BVI

Opening a company in this jurisdiction is a fairly simple process that involves several steps:

Choosing a name and type of company.

Determine the type of company that fits your business objectives. The most common choice for the BVI is an International Business Company (IBC). Next, choose a name for your company that meets the rules and registration standards spelled out in the Companies Act:

the name must be unique and must not be the same as the name of another registered company in the BVI;
the name must be in English;
the name must contain the words “Limited”, “Incorporated”, “Corporation”, “Societe Anonyme” or “Sociedad Anonima” or their abbreviations “Ltd”, “Corp”, “Inc” or “S.A.” depending on the legal form of the company.

Document preparation.

The package of documents required for incorporation varies with the type of company chosen. As a rule, it includes:

Memorandum of Association, Articles of Association, and a brief description of the company’s business model;
a resolution appointing a director;
share certificate;
resolutions on the issue of shares;
copies of passports of all directors and shareholders;
proof of residential addresses of all directors and shareholders;
application for incorporation of the company.

It is recommended to check the full list of documents with Fast Offshore Licenses lawyers.

Applying

Apply for incorporation along with the required documents to the BVI registration office.

Payment of registration fees.

Pay the registration fees according to the type of company and capital structure. As of January 1, 2018, the government fees associated with IBC registration are $450. You should also pay a fee for the services of a registration agent who assists in registering the company. The amount of the fee is US$640.

Registration and issuance of the certificate.

Upon successful verification and approval of your company’s documents, your company will be registered and a certificate of incorporation will be issued to you.

Opening a corporate bank account.

In the British Virgin Islands, there are three banks to choose from where offshore companies can open their local bank accounts. It is also possible to open a business bank account with a reputable international bank.

Legislation in the British Virgin Islands

The British Virgin Islands has a comprehensive legal framework governing the conduct of business within its jurisdiction. The principal legislation governing business activities in the British Virgin Islands is the Business Companies Act 2004 (BCA) (revised March 2023). This Act sets out the procedures and rules for the formation, operation, and dissolution of business companies incorporated in the British Virgin Islands.

In addition to the BCA, several other important pieces of legislation affect businesses operating in the British Virgin Islands, including:

The aforementioned International Business Companies (IBC) Act of 1984, defines IBCs as a distinct type of business company specifically created to meet the needs of international investors. IBCs are not subject to corporate income tax in the British Virgin Islands and enjoy several other advantages such as simplified incorporation procedures and a flexible corporate structure.
The Limited Liability Partnership Act 2004 (Revised January 2020), governs the formation and operation of limited liability partnerships (LLPs) in the British Virgin Islands. An LLP is a hybrid form of business organization that combines the protection of limited liability corporations with the flexibility of partnerships.
The Financial Services Act 2009 establishes a comprehensive framework for the regulation of the financial services industry in the British Virgin Islands. The Act covers a wide range of activities, including banking, insurance, investment management, and securities trading.
Anti-Money Laundering and Countering the Financing of Terrorism Act 2008 (Revised January 2020). The AML/CFT Act imposes several obligations on businesses operating in the British Virgin Islands to prevent and detect money laundering and terrorist financing.

In addition to these key pieces of legislation, several other regulations and guidelines affect businesses operating in the BVI. These are issued by the British Virgin Islands Financial Services Commission (FSC), which is the independent regulator of the financial services industry in the BVI.

The BVI’s legal framework for doing business is designed to be transparent, predictable, and conducive to economic growth. The BVI government is committed to maintaining high standards of corporate governance and complying with international standards to combat money laundering and other financial crimes.

Taxation and Reporting

Companies incorporated in the British Virgin Islands (BVI) are fully exempt from taxation. This means that they do not pay corporate income tax, capital gains tax, tax on dividends, interest, royalties, etc.

The only exception is payroll tax, which is paid by companies that use local employees as salaried staff. The basic rate of payroll tax is 8%, and the first $10,000 is exempt from taxation.

Also, companies incorporated in the British Virgin Islands (BVI) must renew their registration annually. Renewal of registration is accomplished by applying with the BVI Registrar of Companies.

In terms of reporting, companies registered in the BVI are not required to file financial statements with the government. The exceptions are private, professional, and public foundations and other licensed entities. Effective January 1, 2023, legislation was amended to require all companies in the BVI, except in certain cases, to file their annual financial statements with their registered agent. This report includes profit and loss information and a balance sheet and is completed based on the company’s financial statements.

FAQ about a Company formation in BVI

How do I register a company in BVI?

To incorporate a company in the BVI, select the type of company, come up with a unique English-language name, appoint an agent, prepare documents, apply, pay fees, and receive supporting documents.

How much does it cost to register a company in BVI?

The total amount of the registration fee for registering a company in the BVI is US$1,090. This amount includes the state fee payable to the government of the British Virgin Islands for the registration of a company (USD 450) and the fee for the services of a registration agent (USD 640).

How long does it take to register a company in BVI?

The time it takes to register a company in the British Virgin Islands (BVI) can vary depending on several factors, including the completeness of your documents, the workload of the relevant authorities, and the efficiency of your chosen registered agent or service provider. It usually takes about 2 weeks to register a company in the BVI.

How do I know when it’s time to renew my company’s validity?

In the British Virgin Islands (BVI), companies are required to renew their registration annually to maintain their validity and compliance with local regulations.

If your company was incorporated in June or earlier, it must be renewed by May 31 each year. For companies incorporated between July and December, the renewal deadline is November 30.

What are the disadvantages of BVI companies?

British Virgin Islands companies offer tax advantages and regulatory flexibility, but there are potential drawbacks. BVIs have faced increased international scrutiny and pressure for greater transparency in recent years. There is the possibility of future global or local legislation that may affect the legal and tax status of companies in the BVI.

Monitoring regulatory changes and seeking professional advice is crucial for those considering incorporating a company in the BVI.

Do BVI companies file tax returns?

BVIs are known for their tax neutrality and companies incorporated there are not subject to corporate income tax, capital gains tax, or similar direct taxes.