The British Virgin Islands (BVI) is a British Overseas Territory of the United Kingdom. However, the BVI provides an independent legal system.

Legal System

The BVI operates a combined common law and statute-based legal system. Certain statutes in the BVI provide that English common law and principles of equity apply in the BVI and further provide that the common law of England is in force in the BVI. To the extent there is any conflict between the rules of equity and the common law, the rules of equity prevail. English common law authority is highly persuasive under BVI law, providing an invaluable jurisprudential resource. The BVI has a robust legislative suite on matters relating to corporate and commercial law. English common law will only apply to the extent that it has not been modified by such statutes.

Court System

The principal court in the BVI is the Eastern Caribbean Supreme Court (ECSC). The ECSC consists of the Court of Appeal and the Hight Court of Justice. The BVI also has a sophisticated, high-quality commercial court and international arbitration centre, with a final right of appeal to the Judicial Committee of the Privy Council in London. The doctrine of judicial precedent applies to the BVI courts.

Regulatory Framework

The BVI Financial Services Commission (FSC) is the primary regulator responsible for the regulation and supervision of the financial services sector in the BVI. The BVI has a modern securities law framework which is recognised by foreign regulators as well as a strong commitment to provide anti-money laundering, anti-terrorist financing and anti-proliferation financing frameworks.

The BVI does not currently have a specific foreign direct investment (FDI) regime. However, the BVI welcomes foreign direct investment. The BVI continues to see a high level of investment activity and interest in the FinTech and virtual assets sectors as well as continued investment activity in traditional markets such as real estate and mutual funds.

A BVI company must have a registered agent and a registered office address in the BVI. Companies must pay an initial registration fee and an annual license fee to the FSC to remain active. There is no corporate income tax, capital gains tax, branch tax, or withholding tax for companies incorporated under the BVI Business Companies Act (save for a company that holds real property in the BVI). An investment into a BVI-regulated entity such as a bank, trust company or insurance/reinsurance company is subject to a “fit and proper” person assessment by the FSC.

Payroll tax is imposed on every employer and self-employed person who conducts business in the BVI and on each employee. A work permit must be obtained for any expatriate who wishes to engage in employment in the BVI, whether it is paid or unpaid, full-time or part-time. Employers must advertise any position in a local newspaper in the BVI for two consecutive weeks and give preference to any belonger (as defined below) or Virgin Islander who has applied and is qualified for the position.

In order to engage in any business, profession or trade in the BVI, as distinct from establishing an offshore trust, limited partnership or company, all persons and companies must obtain a license under the Business, Professions and Trade Licences Act.

In order for a non-belonger company to purchase land in the BVI for the purpose of conducting business, it is necessary to obtain a Non-Belonger Land Holding Licence. Stamp duty is also payable on the purchase and transfer of real property in the BVI.

Under the Non-Belongers Land Holding Regulation Act (Cap. 122) (“Non-Belonger Act”), a non-belonger company is defined as a company, whether incorporated in or outside the BVI, in which, inter alia, any one of its directors is a non-belonger or where any of the company’s non-belonger shareholders has an interest in more than one-third of its shares (“Non-Belonger Company”).

A belonger is defined in the BVI Constitution as follows:

• a person born in the Virgin Islands and at the time of the birth of his or her father or mother is or was:
1. a British overseas territories citizen (or a British Dependent Territories citizen) by virtue of birth, registration or naturalisation in the Virgin Islands or by virtue of descent from a father or mother who was born in the Virgin Islands; or
2. settled in the Virgin Islands; and for this purpose “settled” means ordinarily resident in the Virgin Islands without being subject under the law in force in the Virgin Islands to any restriction on the period for which he or she may remain, but does not include persons on contract with the government of the Virgin Islands or any statutory body or Crown corporation;
• a person born in the Virgin Islands of a father or mother who belongs to the Virgin Islands by birth or descent or who, if deceased, would, if alive, so belong to the Virgin Islands;
• a child adopted in the Virgin Islands by a person who belongs to the Virgin Islands by birth or descent;
• a person born outside the Virgin Islands of a father or mother who is a British overseas territories citizen by virtue of birth in the Virgin Islands or descent from a father or mother who was born in the Virgin Islands or who belongs to the Virgin Islands by virtue of birth in the Virgin Islands or descent from a father or mother who was born in the Virgin Islands;
• a British overseas territories citizen by virtue of registration in the Virgin Islands;
• a person to whom a certificate has been granted under section 16 of the Immigration and Passport Act 1977 of the Virgin Islands (in this subsection referred to as “the Act”, and references to the Act or to any section thereof include references to any enactment amending, replacing or re-enacting the same) and has not been revoked under Section 17 of the Act; and (without prejudice to the right of any person to apply for the grant of such a certificate under the Act) a British overseas territories citizen by virtue of naturalisation in the Virgin Islands has a right by virtue of this Constitution to apply for the grant of such a certificate;
• the spouse of a person who belongs to the Virgin Islands and has been granted a certificate under Section 16 of the Act; or
• a person who was immediately before the commencement of the Constitution deemed to belong to the Virgin Islands by virtue of the Virgin Islands (Constitution) Order 1976(a).

The BVI remains one of the world’s largest centres for the incorporation of companies, especially those created to facilitate cross-border trade, investment and business. The FSC noted in their press release of 29 March 2023 that there are currently over 375,000 active companies on the Register.

FDI Regime and Proposals

The BVI does not currently have a specific FDI regime.

The BVI government has produced/gazetted draft legislation that would encourage and regulate investments into the BVI. The relevant draft legislations are the Business Licensing Act (BLA) and the Virgin Islands Investment Act (VIIA).

The VIIA will place an obligation on any foreign investor proposing to invest in the BVI to first lodge an application with the BVI government prior to such investment. In considering the application, the BVI government will consider the benefit to the BVI, taking into account:

• the contribution of the investment to the national development, economic growth, public policy and national security objectives of the BVI;
• the contribution of the investment to the advancement of persons who have been socially, economically or educationally disadvantaged by past discriminatory laws and practices;
• the contribution of the investment to the implementation of programmes and policies aimed at redressing social and economic imbalances in the BVI, including gender-based imbalances;
• the contribution of the investment towards increasing employment creation in the BVI;
• the contribution of the investment to the advancement of the development of a geographical area of low social and economic development;
• the contribution of the investment to the transfer of technological and managerial skills, knowledge and innovation;
• the contribution of the investment to value addition to the natural resources, manufacturing and services sectors of the BVI;
• the extent to which the investment will procure goods and services from the small to medium enterprises sector and belonger suppliers in general;
• the impact on the environment and contribution to environmental benefits; and
• any other factors the commission may prescribe.

Market and Regulations

The BVI financial sector is closely tied to the US, European and Asian economies. In 2023, deal flow has been impacted by the Russian-Ukrainian War, the Israeli-Palestinian conflict and the fluctuations in interest rates.

The BVI continues to see a steady flow of corporate and finance transactions due to the prevalence of BVI holding companies in wider group structures. The BVI continues to see an increase in instructions in relation to fund formations particularly in respect of virtual asset funds. The BVI remains popular for its Approved Manager regime, working harmoniously with the fund formation workstreams. Real estate transactions continue to increase.

The BVI has enacted new rules and legislation aimed at tackling perceived base erosion and profit shifting. The BVI has also made certain commitments on establishing beneficial ownership registers. The BVI has also enacted new legislation and new regulations for private funds and enhancements to its anti-money laundering and combating the financing of terrorism (AML/CFT) regimes.

Government

The last BVI general election took place in April 2023. The governing Virgin Islands Party remained the largest party in the House of Assembly. The next general election is slated to take place in 2027.

Transaction Structures and Considerations

The most common structuring options in the BVI are:

• mergers or consolidations;
• schemes of arrangements;
• asset sale and purchase; or
• tender offer or squeeze-out.

A merger is where two or more existing companies merge into one of the constituent companies. A consolidation is a process whereby two or more existing companies are consolidated into a new company. A merger is preferred to acquire public companies largely due to the lower voting threshold and the ability to have different treatment of shareholders.

A scheme of arrangement allows a company and its members or creditors to come to a compromise or arrangement. A scheme of arrangement must be approved by 75% in nominal value of the shareholders and then sanctioned by the court.

An asset sale and purchase allows a buyer to be selective of the assets it wishes to acquire from the target and not assume any of the target’s debts or liabilities.

A tender offer is a contractual offer made to the current shareholders of the target company inviting them to sell (tender) their shares in the target company to the bidder. A tender offer is a contractual offer made to the current shareholders (some or all) to acquire their shares. A squeeze-out is a mechanism used by current shareholders who hold 90% of shares in a BVI company to squeeze out the minority 10% shareholders.

Private companies tend to utilise all of the transaction structures listed above depending on the commercial intentions of the transaction.

Common considerations when selecting a transaction structure are tax considerations, timing, economic substance and voting thresholds.

Minority Investments

Minority investments are generally made directly into the BVI company either through subscribing for newly issued shares or acquiring shares from current shareholders.

Considerations for a foreign investor considering FDI in the BVI are outlined below.

• Entities regulated pursuant to but not limited to securities regulations, banks and trust companies regulations, insurance regulations and virtual asset regulations may be required to obtain prior written approval from the FSC in order to be able to proceed with the relevant transaction subject to certain thresholds. Completing the transaction without such approval may, amongst other penalties, be subject to penalties by the FSC requiring the unwinding of the relevant transaction. Transactions involving transfers of shares below the threshold of the relevant regulations may still be required to be notified to the FSC following completion of the transaction.
• Regulated entities seeking to grant security over their shares or other assets may be required to obtain prior written approval from the FSC as well as notify the FSC of any enforcement actions, variations to the security or notify the FSC of a release of the security.
• Sector-specific regulatory approvals, including under the Telecommunications Act (as revised) and the Non-Belongers Land Holding Regulation Act (Cap. 122), may be required for transferring, acquiring or disposing of shares and property in a company that holds real property or a telecommunications provider.
• Titles to shares in a BVI company are to be transferred and recorded in the company’s register of members.
• Every BVI company must maintain a registered office in the BVI where certain statutory registers and records must be kept.

BVI Corporate Governance Procedures

A BVI company’s corporate governance procedures derive from the BVI Business Companies Act (as revised) (BCA) as supplemented or substituted by the company’s memorandum and articles of association.

A BVI Limited Partnership’s corporate governance procedures derive from the Limited Partnership Act (as revised) and to a limited extent the Partnership Act (as revised and as applicable) for limited partnerships as supplemented or substituted by the partnership agreement.

The BVI does not have a securities exchange operating in the territory and therefore any rules relating to corporate governance such as audit committees, compensation committees, risk committees, etc, will be based on the rules of the relevant exchange.

The duties and liabilities of directors of a BVI company are governed by the BCA, the company’s articles of association and common law (insofar as it has not been amended by or incorporated into statute).

BVI Vehicles

The BCA makes it possible to establish several different types of business companies in the BVI.

BVI companies are allowed to own shares, assets and other securities, freely transfer their assets in any form, enter into and complete transactions in any currency, and perform trading and investment activities.

The most popular structure is a company limited by shares, which has limited liability and is authorised to issue shares.

An unlimited company with unlimited liability or a company limited by guarantee may also be established, both of which can be created with or without authority to issue shares.

In addition, it is possible to form a BVI company as a segregated portfolio company (SPC). SPCs create segregated portfolios, to which specific assets and liabilities may be attributed. These are legally separated from the assets and liabilities of the SPCs’ ordinary account (general assets) and also from the assets and liabilities attributed to any other segregated portfolio of the SPC. In each case, a company will be incorporated with constitutional documents comprised of a memorandum and articles of association.

A BVI company may also be incorporated as a restricted purposes company with limited objects set out in its memorandum of association.

A foreign company that wishes to “carry on business” in the BVI may do so with the permission of the Registrar of Corporate Affairs.

It is also possible to register limited partnerships under the Limited Partnership Act (as revised). Depending on the geographical location of investors, certain fund managers in particular may utilise a limited partnership structure for their fund but partnership and limited liability partnerships are not limited to fund vehicles.

Key Considerations for an Investment Vehicle

Due to the BVI’s tax neutral regime, the most popular structure for holding companies is a BVI company limited by shares. BVI companies limited by shares are also regularly used as investment fund structures or investment business companies. BVI investment funds are also frequently structured as limited partnerships.

Some pertinent considerations when choosing the structure of an investment vehicle will include onshore tax treatment, the need for separate legal personality, limitations on liability, the intention of the investment vehicle and the sector in which the vehicle is going to operate. The BVI has several vehicles to accommodate various investments.

In addition to the common law remedies, the BCA provides for more robust protections in respect of minority investors. The BCA provides for derivative action, restraining and compliance orders, dissenters’ rights and unfair prejudice aside from other minority shareholder protections.

Minority shareholders may make an application to the BVI courts where they allege that the business or act(s) of the company has been, is being or is likely to be run in a way that is unfairly discriminatory, unfairly prejudicial or oppressive to a shareholder in its capacity as a shareholder.

In the event that a court finds in favour of the alleging minority shareholder, it has a wide discretion to make an order that it believes to be just and equitable, including but not limited to compelling the company or another person to purchase the minority shareholders’ shares or to pay compensation, amend the memorandum and articles of association, rectify records or set aside an action or transaction.

Shareholders may also initiate a derivative action where no action is likely to be taken by the company, for example if the involvement of directors or other decision-makers is implicated, such as a breach of fiduciary duties by a director.

Minority members also have the statutory right pursuant to the BCA to dissent from certain transactions such as a merger, consolidation or disposition of assets in certain circumstances.

As mentioned in 1.2 Regulatory Framework for FDI, the BVI does not currently have a specific FDI regime. However, certain other general disclosures may be applicable.

Subject to the memorandum and articles of association of a BVI company, a BVI company is not required to make disclosures to any governing body save for filing of a suspicious activity report to the BVI Financial Investigation Agency pursuant to the BVI Proceeds of Criminal Conduct Act or the BVI anti-money laundering framework.

However, BVI companies (subject to certain limited exemptions) are under an obligation to report information regarding their beneficial ownership and to keep records that are sufficient to show and explain the company’s transactions and that enable the financial position of the BVI company to be determined with reasonable accuracy at any time.

Regulated entities are required to make certain disclosures to the FSC subject to the regulations under which the entity is regulated, including changes such as changes to directors or MLRO, granting of security or entering an insolvency situation.

A foreign investor seeking to obtain or dispose of a holding in a regulated entity that is a significant interest or a controlling interest is required to make an application to the FSC. A significant interest is, in respect of a regulated entity, a holding or interest in the regulated entity or in any holding company of the regulated entity held or owned by a person, either alone or with any other person and whether legally or equitably, that entitles or enables the person, directly or indirectly:

• to control 10% or more of the voting rights of the regulated entity;
• to a share of 10% or more in any distribution made by the regulated entity; or
• to a share of 10% or more in any distribution of the surplus assets of the regulated entity.

A controlling interest, in relation to a regulated entity, means the ownership or interest in the regulated entity or in any holding company of the regulated entity by a person of:

• more than 50% of the voting rights of the regulated entity; or
• a significant interest in the regulated entity which, although not constituting more than 50% of the voting rights of the regulated entity (in aggregate or otherwise), gives the person a considerable advantage in the voting rights of the regulated entity if the remaining votes in the regulated entity are not voted on.

A foreign investor seeking to acquire or dispose of a significant interest or a controlling interest is required to make an application to the FSC indicating the proposed change in structure, the background of the transaction, any security and any changes to the regulated entity following completion.

Traditional and Other Sources of Funding

The primary source of funding for BVI entities in the jurisdiction is traditional bank financing. Subject to a company’s memorandum and articles of association, there is no restriction on BVI entities in respect of borrowing from foreign banks and BVI has a tried and tested system in relation to the granting and registration of security.

Alongside traditional bank lending, the debt and equity capital markets are major sources of funding BVI entities. The BVI also has an active capital markets sector with asset-backed securities, derivatives, debt capital raises, equity capital raises and real estate finance amongst instructions seen in the jurisdiction.

Private Credit

Private credit (where a non-bank lender provides debt financing to companies) is a growing source of debt financing for BVI entities, offering an alternative to private equity and the equity capital markets.

Fund Finance

Bank financing through subscription finance lines (capital call facilities) and NAV loans are becoming a source of funding used by BVI-domiciled funds to finance investments and return capital to their investors.

Digital Assets

In recent years, the BVI capital markets have witnessed the introduction of digital assets as an alternative to traditional debt and equity financing, including tokenised funds. Tokenised funds (where the investor’s interest is represented by a cryptographic token instead of shares, units or other interests offered to investors in a more traditional fund structure) have proved increasingly popular.

There is no separate framework for the regulation of tokenised funds in the BVI.

The primary legislation in the BVI governing securities trading is the Securities and Investment Business Act, 2010, as revised (SIBA), which provides for the licensing and control of persons engaged in securities investment business in or from within the BVI and would potentially be binding on a foreign entity that undertakes investment business in the territory. SIBA sets out an exhaustive list of financial instruments that constitute “investments”. If an instrument has been established to be an investment and an investment activity is undertaken in respect of that investment, the company will require an investment business license.

Securities investment business includes, amongst other activities:

• dealing in investments (dealing as agent or dealing as principal);
• arranging deals in investments;
• investment management (managing segregated portfolios (excluding mutual funds), mutual funds, managing pension schemes, insurance products, managing other types of investment);
• investment advice (excluding mutual funds, mutual funds);
• custody of investments (excluding mutual funds, mutual funds);
• administration of investments (excluding mutual funds, mutual funds; and
• operating an investment exchange.

No securities should be offered to members of the public in the BVI.

A “member of the public”, in relation to a person soliciting him or her (the first person), means any other person except:

• (i) a company in the same group as the first person;
• (ii) a person who is a participant with the first person in a joint enterprise;

• (iii) a person holding:
1. a licence issued under section 6 of SIBA;
2. a licence issued under the Banks and Trust Companies Act;
3. a licence issued under the Company Management Act; or
4. an insurer’s licence issued under the Insurance Act;
• (iv) a person licensed in a jurisdiction outside the Virgin Islands to carry on an activity equivalent to an activity for which a licence specified in paragraph (iii) is required, provided that the person is regulated and supervised in the carrying on of that business.

No specific BVI review will be required to authorise a foreign investment fund to invest in the BVI or for a foreign investor to invest in a BVI-regulated investment fund save for as mentioned in 5.2Securities Regulation regarding members of the public.

The BVI does not have a specific merger control or antitrust regime.

A BVI merger must be approved by the BVI Registry; however, the applicable criteria are the same for all mergers and do not change depending on any potential antitrust/competition criteria or the existence of foreign investment.

The consideration of the proposed merger does not include a substantive review of the competitive aspects of the merger pre- or post-merger.

The BVI does not have a merger control regime in respect of FDI.

The BVI does not have a merger control regime in respect of FDI.

The BVI does not have a foreign investment/national security regime applicable to FDI.

The BVI does have a comprehensive sanctions framework and all BVI companies and BVI persons should ensure compliance with the sanctions regime.

The BVI does not have a foreign investment/national security regime applicable to FDI.

The BVI does not have a foreign investment/national security regime applicable to FDI.

The BVI does not have a foreign investment/national security regime applicable to FDI.

Sanctions and Anti-Money Laundering Framework

The BVI, as well as implementing the sanctions obligations and sanctions lists of the United Kingdom, has a substantial sanctions regime. The sanctions regime applies to any person in the BVI, any person elsewhere who is a British citizen, British Overseas National or British protected person who is ordinarily resident in BVI. In addition, BVI has a robust anti-money laundering framework.

The Proceeds of Criminal Conduct Act (as revised) (PCCA) is the primary legislation which, amongst other things, prescribes the offence of money laundering and the penalties for the same. The PCCA provides for offences including:

• providing assistance to another in an arrangement that helps them to retain or control the benefits of their criminal conduct knowing or suspecting that the other person is or has been engaged in or has benefited from criminal conduct;
• the acquisition, possession or use (even temporary) of property knowing that it represents the proceeds of criminal conduct;
• concealing, converting, transferring or removing from the BVI proceeds of criminal conduct to assist another to avoid prosecution or confiscation;
• tipping off the target of an investigation or proposed investigation into money laundering or a third party of anything that is likely to prejudice the investigation or proposed investigation; and
• failing to report money laundering activities or suspicions thereof.

The PCCA also provides for the promulgation of subsidiary legislation having the force of law. This power of promulgation has been utilised in respect of the Anti-Money Laundering Regulations (as revised), the AML Regulations) and the Anti-Money Laundering and Terrorist Financing Code of Practice (as revised, “the Code”).

The AML Regulations and the Code further bolster the BVI AML framework, which is a risk-based framework and provides, amongst other things, the general compliance requirements relating to conduct to be taken by a “relevant person” conducting “relevant business” (including, identification and verification procedures, the maintaining of records, registers and reports, Money Laundering Reporting Officer appointment, staff training and offences and penalties for non-compliance). The objectives of the Code are to bring about a greater understanding and appreciation of the current legal, regulatory and enforcement regimes with respect to compliance in the BVI. It aims to assist persons in the law enforcement and regulatory and non-regulatory specific sectors of the economy to develop and implement systems that effectively combat activities designed to abuse the legitimate tools of business transactions through criminal conduct. Compliance with the Code, along with all the other relevant anti-money laundering and terrorist financing legislation in place, is designed to uphold the business reputation and the overall reputation of the BVI.

The objectives set out in the Code outline the BVI’s commitment to good corporate governance and the promotion of international co-operation to ensure financial stability and lay down minimum standards of compliance. The Code, in effect, supplements the provisions of the Drug Trafficking Act (as revised), PCCA, Financial Investigation Agency Act (as revised), the Terrorism (United Nations and Other Measures (Overseas Territories) Order 2001, the Anti-terrorism (Financial and Other Measures) (Overseas Territories) Order 2002 and the AML Regulations.

Foreign investors will also need to provide Know Your Client (KYC) information and documents to be a director of a company or a shareholder who owns or proposes owning, directly or indirectly, 10% or greater of the company’s issued shares. Additional KYC documents will be required for persons who are a national of or resident in a jurisdiction considered to be a “high risk” jurisdiction.

Regulated BVI companies should also ensure compliance with the relevant legislation and regulations under which they are regulated to ensure compliance with notifications and applications to the FSC. These include, but are not limited to, SIBA, the Banks and Trust Companies Act, the Insurance Act, the Virtual Assets Service Providers Act, the Telecommunications Act and the Regulatory Code. Penalties for breaches of such legislation and regulations are often substantial and can, in certain cases, provide the FSC with the option to require a transaction to be unwound in its entirety.

Exchange Controls

There are no exchange controls in the BVI, which allows free transfer of funds in and out of the BVI, in any currency, with equal freedom to open and maintain accounts in any currency.

Real Estate

In terms of buying real property in the BVI, any person or company who is not a belonger or a belonger company must obtain a Non-Belongers Land Holding Licence in order to purchase real property in the BVI.

Beneficial Ownership

The BVI has enacted a beneficial ownership regime and established a secure, centralised platform for storing the beneficial ownership information of in-scope entities.

The Beneficial Ownership Secure Search system (BOSS) is not public. It is accessible only by a “designated person” (to be designated by Order of the Minister responsible for Finance). The designated person shall search BOSS upon receipt of a request, made in compliance with a prescribed procedure, by a senior officer of any of the following:

• the Financial Investigation Agency;
• the Financial Service Commission;
• the International Tax Authority; and
• the Attorney General’s Chambers.

The BVI beneficial ownership registration regime (BO Regime) applies to:

• companies incorporated or registered under the BCA; but not
• foreign companies registered in the BVI.

If a company is in scope and not exempted, it is required to identify its beneficial owners and registrable legal entities, and provide prescribed information on them to the registered agent.

A beneficial owner is:

• a natural person who ultimately owns or controls, whether directly or indirectly, more than 25% of the shares or voting rights in the legal person;
• a natural person who otherwise exercises control over the management of the legal person;
• in the case of a legal arrangement:
1. the partner or partners who control the partnership;
2. the trustee or other person who controls the legal arrangement; or
3. the settlor or other person by whom the legal arrangement is made;
• in the case of a company that is in insolvent liquidation, administration or administrative receivership, the natural person who is appointed as a liquidator, administrator or administrative receiver of the company;
• in the case of a receiver being appointed over 25% or more of the shares or voting rights in a company, the creditor who appoints the receiver; or
• in the case of a shareholder in the company who would otherwise be a beneficial owner but is deceased, the natural person acting as a personal representative of the deceased’s estate.

A person shall not be treated as a beneficial owner only by virtue of holding security over shares or voting rights in a company or by having a commercial exposure to the financial performance of a company pursuant to financial derivatives or similar contractual arrangements.

The BVI does not impose any form of corporate tax on income or distributions including dividends. There is also no form of capital gains tax, wealth tax or stamp duties on transfer in respect of BVI companies (save for companies that own real property in the BVI).

Employers and Employees of BVI companies are subject to payroll tax.

Stamp duty at a rate of 12% for non-belongers and 4% for belongers, is paid on transfers of BVI real estate, and share transfer tax equal to the applicable stamp duty applies to transfers of equity in land holding companies. Security instruments in relation to BVI real estate also attract stamp duty.

Import duty is paid on the importation of most goods into the BVI. The duty rate generally ranges between 5% and 20%.

BVI companies are required to pay annual registration fees to the BVI Registry of Corporate Affairs. These annual fees vary depending on the entity type and, in the case of companies, registered maximum authorised shares.

Companies that operate in the BVI will need to pay an annual trade and business licence fee, and annual licence fees are payable by licensed and regulated entities (such as banks, insurance companies, private funds, mutual funds and their administrators).

There is no tax on distributions including dividends and therefore no withholding taxes exist in respect of BVI structures.

Given the absence of corporate tax, there are no common tax planning strategies employed in respect of BVI entities.

There is no corporate tax in respect of BVI companies, including, but not limited to, capital gains taxes on gains derived by a foreign investor from the sale or other disposition of FDI save for the sale and purchase of real property by a person or entity holding a Non-Belongers Land Holding Licence pursuant to the Non-Belonger Act.

The BVI does not have any double taxation treaties due to the lack of corporate taxation in the jurisdiction; however, the BVI maintains a number of tax information exchange agreements with multiple jurisdictions.

The BVI was also an early adopter of the Common Reporting Standard (CRS) and has agreed to exchange financial account information in accordance with CRS and FACTA provisions.

The vast majority of BVI entities will not have employees in the BVI and will not be conducting business locally within the BVI. Consequently, BVI employment and labour law matters are not often encountered by foreign investors.

The BVI Labour Code (as revised) (the “Labour Code”) is the primary legislation governing the terms and conditions of employment and labour matters in the BVI.

The Labour Code only applies to employers and employees operating or doing business in the BVI. The Labour Code does not apply to the public service or to BVI companies that do not operate in or within the BVI.

A work permit must be obtained for any expatriate who wishes to engage in employment in the BVI, whether it is paid or unpaid, full-time or part-time. Employers must advertise any position in a local newspaper in the BVI for two consecutive weeks and give preference to any “belonger” or Virgin Islander who has applied and is qualified for the position. In order to engage in any business, profession or trade in the BVI, as distinct from establishing an offshore trust, limited partnership or company, all persons and companies must obtain a license under the Business, Professions and Trade Licences Act.

Trade unions and works councils are rarely encountered in the BVI.

Other key legislation applicable to employment and labour matters in the BVI include:

• the Income Tax Act (as revised);
• the Social Security Regulations (as revised);
• the National Health Insurance Act (as revised); and
• the Immigration and Passport Act (as revised).

As noted in 10.1 Employment and Labour Framework, the Labour Code does not apply to employees who are not operating or doing business in the BVI. Given the nature of offshore business, the vast majority of BVI entities will not have employees in the BVI and will not be conducting business locally within the BVI.

The Labour Code requires an employer to provide, for any employee with a term of employment exceeding four months, a written statement containing certain conditions of employment, which must include the level of starting pay, methods of computing pay and the interval between payment of wages. The BVI has in place a basic minimum wage which may be reviewed by an Advisory Committee on behalf of the Minister for Labour.

Compensation typically forms part of the commercial negotiation in respect of a proposed acquisition and employee compensation typically consists of a cash salary, discretionary bonus and participation in a pension plan and health insurance.

The Labour Code further provides that an employer must provide or establish a scheme for retirement benefits to be paid to the permanent employees of the company.

As noted in 10.1 Employment and Labour Framework, the Labour Code does not apply to employees who are not operating or doing business in the BVI. Given the nature of offshore business, the vast majority of BVI entities encountered in international transactions will not have employees in the BVI. In such cases, local law advice should be taken in respect of the jurisdiction in which the employees are operating or engaged.

For local businesses, where there is a change of ownership of business or undertaking due to any merger and acquisition, amalgamation, restructuring, change of ownership or other similar circumstance affecting the rights of employees, the employee’s contract will remain valid.

Where the employee accepts continued employment with the successor-employer, the arrangements made at the time of the change of ownership in respect of the employee, including details of the employee’s length of service and accrued rights, shall be notified to the BVI Labour Commissioner by the successor-employer in a statement signed by the employee and jointly by the predecessor-employer and successor-employer.

Companies with intellectual property will not require additional screening in advance of any FDI due only to the existence of the intellectual property.

Companies that qualify as an intellectual property business pursuant to the Economic Substance (Companies and Limited Partnerships) Act may be required to satisfy the BVI Economic Substance requirements subject to certain potential exemptions and/or exceptions. Since the introduction of economic substance legislation in 2018, the BVI has become a less attractive domicile to those businesses holding and generating revenues from IP.

The BVI is not a party to the Paris Convention. However, the BVI has strong and robust intellectual property protections. The BVI intellectual property protection should be coupled with protection in all other jurisdictions in which the company utilises its intellectual property.

Trademarks

The BVI modernised and revamped its intellectual property regime in 2015 by implementing the Trademark Act and the Trademark Rules.

Some key characterises of the BVI Trademark legislation include:

• the Nice Classification system to classify and register goods and services;
• provisions of the registration of collective and defensive marks;
• multiple class filings; and
• 10-year registration.

Patents

The BVI has its own local patent act, but such registration is currently not accepted.

Patents and industrial designs registered in the UK or at the EU level can also be protected in the BVI by extension with the BVI Registry of Patents and Trademarks. The period of protection is dependent on the underlying UK or EU patent.

Copyright

The Copyright Act of 1956 in the UK was extended to the BVI pursuant to the Copyright (Virgin Islands) Order 1962. There is no copyright registration in the BVI.

The BVI Data Protection Act (DPA) came into force in July 2021. It was drafted around a set of EU-style data protection principles to which data controllers must adhere. Personal data must be collected in a fair and transparent manner and only be used and disclosed for purposes properly understood and agreed to by data subjects. Any personal data collected must be adequate, kept up-to-date and should not be retained for longer than is necessary to fulfil the collection purposes.

The DPA is enforced by the Information Commissioner, who has the power to issue guidance, investigate complaints of breach and initiate investigations. Enforcement is generally administrative but criminal sanctions are possible as well. The DPA extends to all BVI companies and limited partnerships that process, have control over or process personal data. The location of the processing of the personal data does not impact the application of the DPA to a BVI company or limited partnership.