1 PRE-ENTRY TAX PLANNING
1.1 In the British Virgin Islands, what pre-entry estate and gift tax planning can be undertaken?
There are no estate or gift taxes in the British Virgin Islands.
1.2 In the British Virgin Islands, what pre-entry income tax planning can be undertaken?
There is no income tax in the British Virgin Islands.
1.3 In the British Virgin Islands, can pre-entry planning be undertaken for any other taxes?
There are no other relevant taxes.
2 CONNECTION FACTORS
2.1 To what extent is domicile relevant in determining liability to taxation in the British Virgin Islands?
There is no direct taxation in the British Virgin Islands.
2.2 If domicile is relevant, how is it defined for taxation purposes?
This is not applicable in the British Virgin Islands.
2.3 To what extent is residence relevant in determining liability to taxation in the British Virgin Islands?
There is no direct taxation in the British Virgin Islands.
2.4 If residence is relevant, how is it defined for taxation purposes?
This is not applicable in the British Virgin Islands.
2.5 To what extent is nationality relevant in determining liability to taxation in the British Virgin Islands?
There is no direct taxation in the British Virgin Islands.
2.6 If nationality is relevant, how is it defined for taxation purposes?
This is not applicable in the British Virgin Islands.
3 GENERAL TAXATION REGIME
3.1 What gift or estate taxes apply that are relevant to persons becoming established in the British Virgin Islands?
There are no gift or estate taxes in the British Virgin Islands.
3.2 How and to what extent are persons who become established in the British Virgin Islands liable to income tax?
There is no income tax in the British Virgin Islands.
3.3 What other direct taxes (if any) apply to persons who become established in the British Virgin Islands?
Whilst there is no income tax in the British Virgin Islands, payroll tax is charged on every self-employed person or employer who carries on business in the British Virgin Islands. The rate of taxation is up to 14% of remuneration, 8% of which may be reclaimed from employees. The rest is chargeable to the employer.
3.4 What indirect taxes (sales taxes/VAT and customs & excise duties) apply to persons becoming established in the British Virgin Islands?
In terms of individuals bringing their personal possessions with them if they are immigrating to live in the British Virgin Islands for more than six months, each adult has a personal allowance of up to US$1,000 of personal and used household effects exempt from duty. There are a range of duties and a number of exemptions, generally in order to encourage investment in certain industries considered to be of benefit to the British Virgin Islands, such as materials imported for school construction or for necessities. Generally speaking, import duty ranges from 5% to 15% of the sum of the market value of the possession and the insurance and shipping costs of delivery to its destination in the British Virgin Islands. Certain items such as perfume, precious metals, electrical appliances and motor vehicles incur higher rates of import duty.
3.5 Are there any anti-avoidance taxation provisions that apply to the offshore arrangements of persons who have become established in the British Virgin Islands?
There are no anti-avoidance provisions that apply to the offshore arrangements of persons who have become established in the British Virgin Islands.
3.6 Is there any general anti-avoidance or anti-abuse rule to counteract tax advantages?
No, there is not.
4 TAXATION ISSUES ON INWARD INVESTMENT
4.1 What liabilities are there to direct taxes on the remittance of assets or funds into the British Virgin Islands?
There are none.
4.2 What taxes are there on the importation of assets into the British Virgin Islands, including excise taxes?
Dutiable items that are classified as personal and used household effects of a person immigrating for more than six months to the British Virgin Islands are exempt from duty as to the first US$1,000, provided they are immigrating to the British Virgin Islands for more than six months. Tourists and other visitors not intending to stay for more than six months may bring personal effects and baggage compatible with their intended length of stay without paying duty. Returning residents will not be charged duty on baggage and personal effects if they have left the territory for over 72 hours and are exempt from paying duty on purchases up to the value of US$50/adult and US$10/child.
Baggage and personal (and household, if immigrating) effects may arrive unaccompanied but will only be exempt from duty if they are imported either three months prior to or post the passengers' arrival. All other imports will, generally speaking, attract duty at a rate of 5% to 15%, although many foodstuffs are zero-rated and a number of exemptions apply. Perfume, precious metals, electrical appliances and motor vehicles, amongst others, attract higher rates of duty.
4.3 Are there any particular tax issues in relation to the purchase of residential properties?
Stamp duty is payable at 12% of the sale price or appraised value, whichever is the higher, on the transfer of residential property. Annual land tax of US$50 is payable for land under half an acre. For land over half an acre, a US$150 charge plus US$50 for each additional acre is payable annually.
5 SUCCESSION PLANNING
5.1 What are the relevant private international law (conflict of law) rules on succession and wills, including tests of essential validity and formal validity in the British Virgin Islands?
The British Virgin Islands laws on succession largely follow the English law approach. Under British Virgin Islands law, the applicable law for the succession of the property of a deceased person is his domicile. The British Virgin Islands' test for establishing a person's domicile is the same as the English law test: the domicile of the individual's father at the date of birth (domicile of origin) which continues to apply unless replaced by migrating to a new jurisdiction with the positive intention of making that jurisdiction the permanent home (domicile of choice). Having established domicile as a matter of British Virgin Islands law, movable property follows the succession laws of the jurisdiction of domicile at death. The requirements for formal validity of a will are set out in the Wills Act; summarised, the will has to be in writing, signed by the testator in the presence of two witnesses present at the same time and in his presence who also sign. The testator must intend by his signature to give effect to the will. Concerning essential validity, the settlor has to have the necessary testamentary and mental capacity, he has to know and approve the contents of the will, he must not be subject to any undue influence and there must be no component of fraud and no component of forgery. Testamentary or mental capacity requires the testator to be of sound mind, memory and understanding. He must therefore be capable of forming the testamentary intentions, his memory must be sound to recall the persons who ought to be considered as his likely beneficiaries and he has to be able to understand the ties of those people to him by blood or friendship and their claims on these or other grounds on his testamentary generosity. Undue influence follows the English test, that is, "influence" does not mean that the testator was persuaded to make his will in a certain way for reasons that other people might consider foolish or inappropriate. Undue influence in this context means coercion to the extent that the will does not reflect the actual intentions of the testator. To seek to declare a will essentially invalid on grounds of fraud or forgery requires very cogent evidence.
5.2 Are there particular rules that apply to real estate held in the British Virgin Islands or elsewhere?
Regardless of the domicile of the deceased, if the deceased owns real estate, whether in the British Virgin Islands or elsewhere, British Virgin Islands law will apply the laws of succession of the jurisdiction where the property is located to the question of the succession to that property (lex situs).
6 TRUSTS AND FOUNDATIONS
6.1 Are trusts recognised in the British Virgin Islands?
Yes, trusts are recognised.
6.2 If trusts are recognised in the British Virgin Islands, how are they taxed in the British Virgin Islands?
There is no direct taxation in the British Virgin Islands. There is trust duty of US$100 on trust instruments.
6.3 If trusts are recognised, how are trusts affected by succession and forced heirship rules in the British Virgin Islands?
The British Virgin Islands has specific statutory provisions that cover conflicts of laws concerning trusts. That legislation also addresses, and declines to give effect to, attempts to set aside a trust merely on the grounds that the terms of the trust may defeat a forced heirship claim of a disappointed heir of the settlor. There are no forced heirship rules under British Virgin Islands law.
6.4 Are foundations recognised in the British Virgin Islands?
Foundations in the sense generally understood in civil law countries do not exist as such in the British Virgin Islands. A foundation from a civil law country that largely resembles a company or corporation, that is, it has a separate legal personality, it can own property and sue and be sued, is likely to be recognised in the British Virgin Islands as a legal person similar to a foreign company. Some charitable trusts and charitable companies are named "foundation" in the British Virgin Islands, but they are either a trust or a company if they are governed by British Virgin Islands law. They are not foundations as understood in civil law jurisdictions.
6.5 If foundations are recognised, how are they taxed in the British Virgin Islands?
There is no direct taxation in the British Virgin Islands.
6.6 If foundations are recognised, how are foundations affected by succession and forced heirship rules in the British Virgin Islands?
Foundations as they are understood in civil law jurisdictions cannot be created as such in the British Virgin Islands.
7 IMMIGRATION ISSUES
7.1 What restrictions or qualifications does the British Virgin Islands impose for entry into the country?
Those visiting the British Virgin Islands as tourists may be granted entry for up to one month, provided they are in possession of ongoing or return tickets, adequate means of support and have prearranged accommodation. Certain country nationals will require a visa. Those wishing to visit for longer may apply for an extension.
Besides the system of entry under a work permit which allows for entry to the British Virgin Islands, entry may be gained if the person has permanent residency status (as a holder of a Certificate of Residence), has Belonger status, or is employed by specific employers (such as within the diplomatic corps and the like). The Chief Immigration Officer may also grant discretionary leave to enter in all other cases. The process for obtaining a Certificate of Residency, Belonger status or discretionary leave to enter is a complicated and lengthy process and specialist legal advice should be sought.
7.2 Does the British Virgin Islands have any investor and other special categories for entry?
The only special categories for entry relate to persons employed in certain jobs with the diplomatic corps and their accompanying families and those serving and on duty in the Territory in Her Majesty's Armed Forces.
7.3 What are the requirements in the British Virgin Islands in order to qualify for nationality?
The Governor may grant a certificate of naturalisation to a person who meets the requirements set out in the British Nationality Act, so that they may become a British Overseas Territories Citizen. In summary, the requirements for naturalisation are: being of good character; sufficient knowledge of English; having sufficient ties to the Territory (whether by employment or intention to principally reside); and having resided for a sufficient length of time in the British Virgin Islands prior to their application. The applicant must be free of any restriction under the immigration laws on the maximum length of his or her stay in the British Virgin Islands, so therefore must either have been issued a Certificate of Residency or have Belonger status.
A person with Belonger status is deemed to belong to the British Virgin Islands. Generally speaking, status is conferred on successful application if the applicant is of good character, is over 18 years old, has been ordinarily resident in the British Virgin Islands for 10 years prior to applying, has held a certificate of residence for no less than 12 months prior to applying and satisfies the Immigration Board that he or she intends to make the British Virgin Islands his or her permanent home. The Governor may, in exceptional circumstances, waive those requirements provided the applicant is of good character and has been ordinarily resident for seven years or has made significant and consistent contributions to the British Virgin Islands over a period of 50 years. Belonger status can also be conferred through marriage, birth or descent.
7.4 Are there any taxation implications in obtaining nationality in the British Virgin Islands?
There is no direct taxation in the British Virgin Islands. However, there may be indirect taxation implications as a result of obtaining nationality (for example, a reduced rate of stamp duty on the purchase of land).
8 TAXATION OF CORPORATE VEHICLES
8.1 What is the test for a corporation to be taxable in the British Virgin Islands?
There is no direct taxation in the British Virgin Islands.
8.2 How are branches of foreign corporations taxed in the British Virgin Islands?
There is no direct taxation in the British Virgin Islands.
9 TAX TREATIES
9.1 Has the British Virgin Islands entered into income tax and capital gains tax treaties and, if so, what is their impact?
There are no income taxes or capital gains taxes in the British Virgin Islands. The British Virgin Islands has entered into a number of tax information exchange agreements.
9.2 Do the income tax and capital gains tax treaties generally follow the OECD or another model?
There are no income taxes or capital gains taxes in the British Virgin Islands.
9.3 Has the British Virgin Islands entered into estate and gift tax treaties and, if so, what is their impact?
There are no estate or gift taxes in the British Virgin Islands.
9.4 Do the estate or gift tax treaties generally follow the OECD or another model?
There are no estate or gift taxes in the British Virgin Islands.
This article first appeared in the 2014 edition of The International Comparative Legal Guide to: Private Client; published by Global Legal Group Ltd, London.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
