BVI [Taxation related trusts]
“Santa Ursula y las Once Mil Virgines” (Saint Ursula and her 11.000 Virgins) is the name given by Christopher Columbus in 1493 to that archipelago of islands bathed by the Atlantic Ocean to the north and by the Caribbean Sea in the south. Today known as the Virgin Islands or British Virgin Island or simply BVI, to distinguish them from the nearby U.S. Virgin Islands (curiosity: as a result of the par condicio principle between the British Virgin Island and the U.S. Virgin islands, the first are driving on the left-hand side of the road while using the U.S. dollar) and Spanish Virgin Islands. They were conquered by the English, Dutch, French, Spanish and the pirates until they passed under the definitive control of the British. In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate their companies on the island. Roughly, 400.000 companies were on the offshore registry by year-end 2000.
This British overseas territory did not have a single bank on its territory before the end of the 1950’s. Today the islands host over 350.000 IBCs (half of the world’s IBCs’ operativity), 2 000 collective investment schemes, 350 insurance companies…
This activity provides employment to few thousands of people, representing approximately 50% of the national tax revenue. Such success started with the ratification of a series of conventions / treaties with the United Kingdom and the United States of America, which ensured the local taxation (taxation?) to be levied towards those companies that were BVI resident for tax purposes.
BVI than implemented very thorough and « à l’avant-garde » insurance laws aiming at overcoming in terms “quality” all the neighbor States’ (which in turn were already trying to beat the already very sophisticated Luxembourg and Swiss Laws [FYI: we would suggest Bermuda as the most insurance friendly State].
The British Virgin Islands got famous in 1984 for inventing the IBCs (International Business Companies) by enacting a law that was more or less copied by most Caribbean Nations. BVI’s laws were nonetheless the most appreciated in the financial world.
The Virgin Island Special Trusts Act was first issued in 1989 (last revision in 2003). VISTA trusts (which are valuable alternatives to a non-charitable purpose trust) are frequently set up to reserve managerial / administrative / investment powers in the hands of the settlor of the trust by maintaining control on his assets through a company of which he is the sole director.
VISTA TRUSTS 101:
Perpetuity period for beneficiaries:
360 years, plus a trust which benefits physical individuals can now be set up as a non-charitable purpose trust (existing in perpetuity). Trusts in BVI are exempt from registration under the Records Act while trustees are exempt from any reporting and filing requirements, ensuring a high degree of confidentiality. Taxation: no taxes. Non-resident trusts are not taxed in BVI, that meaning, if the beneficiaries of a VISTA Trust are not tax resident in the BVI and no assets are located on the islands, they are exempt from taxation (okay, okay there is a 50$ registration tax).
Private Trust Companies:
The instrument of Private Trust Companies, quite common in BVI, if properly structured, can solve some issues concerning the preservation of direction, administration or control powers over the assets that formally belong to the a BVI trust company.