Archive for the ‘Incorporation’ Category

The Advantage of Operating a Foreign-Owned Business in the United States Virgin Islands – The USVI Exempt Company

August 22, 2012

The U.S. Virgin Islands are the only place in the world were tax-free entities can be created under the U.S. flag. Such companies enjoy the non-tax advantages of incorporation within the United States, while avoiding the federal and local income taxes associated with incorporation in any other United States jurisdiction.

As a territory of the United States, federal tax law remains applicable within the U.S. Virgin Islands. However, the U.S. Virgin Islands legislature has the authority to permit tax-free companies to organize and operate within the territory. These companies are known as USVI exempt companies. Popular uses for USVI exempt companies include captive insurance companies, ownership of aircraft, and holding companies for portfolio investments.

To qualify as a USVI exempt company, an entity must be at least 90% owned and controlled by persons or companies outside the U.S. and USVI. This requirement is exempted for companies licensed as captive insurance companies. Qualifying USIV exempt companies pay virtually no U.S. or USVI income taxes. Furthermore, the only local taxes USVI exempt companies are required to pay are an annual franchise fee of $1,000. This favorable tax scheme is guaranteed through contract with the USVI government for 20 years.

USVI exempt companies are subject to certain requirements, such as having three directors and three officers, all of whom may not be residents of the USVI. The company must also appoint a local, USVI resident to be an agent for service of process. While non-residents can form separate USVI exempt companies, USVI exempt companies may also be a branch of a company incorporated elsewhere.

It is both easy and inexpensive to form an USVI exempt company. The process can take as little as 24 hours, and the incorporation fee is only $400.