British Virgin Islands

*Updated September 2019*

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• Legal system
• Inheritance and succession
• Estate planning
• Taxation
• Residence and domicile
• Other relevant information

Legal system

The legal system of the British Virgin Islands (BVI) is based on English common law. As varied by local statute, the principles of English common law apply by virtue of the Common Law (Declaration of Application) Act 1705 and the rules of English equity apply by virtue of the West Indies Associated States Supreme Court (Virgin Islands) Act (the WISC Act).

A further gateway for the incorporation of English law into the BVI has been established by virtue of s.11 of the WISC Act. Section 11 provides that where no ‘special provision’ exists in the BVI, the jurisdiction of the Eastern Caribbean Supreme Court (ECSC) in the BVI may be exercised as nearly as may be in conformity with the law and practice administered for the time being in the High Court of Justice of England.

In Re Pasig Ltd (BVI HC (COM) 0116/2011) the ECSC gave a restrictive interpretation to s.11. It held, in effect, that the section is concerned with the exercise of jurisdiction and, further, it is not designed to permit the court to rely on English law to improve upon what a party may consider to be a deficient BVI law. The section may only be used when the BVI makes no provision for the jurisdiction sought to be exercised. The court ruled also that s.82 of the Trustee Act, 1961, which confers jurisdiction on the court where, for example, the proper law of the trust is BVI law or the trustee is resident in the BVI, does not provide an exemption from the requirement to obtain permission to serve out.

The BVI is an associate member of the Organisation of Eastern Caribbean States (OECS). The judicial arm of the OECS is the ECSC, administered from St Lucia. The ECSC appoints resident ECSC judges to member states. There are three resident judges in the BVI.

A Commercial Division of the ECSC was established in the BVI in 2009. It is a specialist division dedicated to the hearing of corporate and commercial (including insolvency) matters and trust disputes. A commercial judge presides over the Commercial Division. The Court of Appeal sits in the BVI at least three times yearly, and provision is made for additional special hearings either in the BVI, or by telephone or video conference, or in any other member state should the need arise. Appeals lie from the Court of Appeal to the Judicial Committee of the Privy Council.

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Inheritance and succession

Succession

Succession in the BVI is governed by the common law as varied by statute. The order of inheritance in cases of intestate succession where the person dies domiciled in the BVI is determined by the Intestates Estates Act. Wills are governed by the Wills Act. There is freedom of testamentary disposition in the BVI. The Status of Children Act 2014 was brought into force on 31 October 2014. It abolished the status of illegitimacy and declared that all children are of equal status as if they were born in wedlock. Where a deceased dies domiciled outside the BVI, the rules of succession to movable property are governed by the law of his domicile. In any event, the rules of succession to immovable property are governed by the lex situs.

Family law and defined inheritance rules

The Matrimonial Proceedings and Property Act 1995 and principles of common law govern the allocation of beneficial interests in property on a break up of marriage. There are no mandatory provisions for financial provision of children or spouses or other relatives on death.

Probate process

Where a person domiciled in the BVI dies intestate, the spouse or children or other close relative of the deceased may apply to the court for a grant of letters of administration to the estate of the deceased. If the deceased died testate, the executor named in the will or on the death of the executor or the failure or refusal of the executor to apply or on the executor giving up the right to apply, some other suitable person, may apply for a grant of probate. The application is made to the Registrar of the ECSC. If the deceased died domiciled outside the BVI the application should be supported by evidence of foreign law (usually given on affidavit) establishing that the applicant is entitled to a grant under the law of the domicile of the deceased. The Eastern Caribbean Supreme Court (Non-Contentious Probate and Administration of Estates) Rules, 2017 came into force on 1 November 2017. Rule 28(5) codifies the position in relation to the person(s) to whom the court may order that a grant be issued where a person died domiciled outside of the BVI as follows: 

• to the person entrusted with or entitled to the administration of the estate by the court having jurisdiction at the place where the deceased died domiciled;
• where there is no person so entrusted, to the person beneficially entitled to the estate by the laws of the place where the deceased died domiciled or if there is more than one person so entitled, to such of them as the court may direct; or
• if in the opinion of the court the circumstances so required, to such person as the court may direct.

Mental capacity

General issues of mental health, including the management of the property and affairs of patients and the appointment of receivers, are dealt with under the Mental Health Act 2014 which replaced the previous Mental Health Act 1986. Testamentary capacity is governed by common-law principles.

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Estate planning

Use of trusts in estate planning

Trusts, both inter vivos and testamentary, are used for estate planning, confidential or flexible holding of assets, circumvention of forced heirship provisions, and preservation of assets.

The most frequently used types of trusts are:

• Discretionary.
• Fixed.
• Charitable.
• Non-charitable purpose trusts established for a specific reason and possible purpose (whether or not charitable), which is neither immoral nor contrary to public policy, or unlawful. The BVI purpose trust regime has been modernised by the Trustee (Amendment) Act 2003.

All trusts may be set up as VISTA trusts. The Virgin Islands Special Trusts Act 2003 (as amended) permits the establishment and formation of trusts that leave significant control of the underlying assets in the settlor or their nominees and relieve the trustee of several common-law duties that in any event are more properly performed by experts. The trusts are designed to be the trusts of shares of a BVI company and a sole trustee of a VISTA trust may be a trustee licensed in the BVI, or a BVI private trust company (PTC). Alternatively, one or more foreign companies or individual may act as co-trustees with a licensed BVI trustee or a BVI PTC. 

Other amendments to the Trustee Act, the Trust Corporation (Probate and Administration) Act and the Banks and Trust Companies Act have introduced 

• an extended perpetuity period (now 360 years);
• capacity for a BVI PTC to act as trustee of a purpose trust;
• capacity for BVI-licensed trustees to act as executors regardless of previously onerous capital requirements; and
• an increase in trust duty payable on the establishment of a trust to USD200.

The Trustee (Amendment) Act 2015 includes certain record-keeping obligations on trustees. It requires trustees to maintain ‘records and underlying documentation’ of the trust and to retain the records for at least five years. The records and documentation must be in such form to be sufficient to show and explain the trust's transactions and enable the financial position of the trust to be determined with reasonable accuracy. The records and documentation include accounts, invoices and contracts. A trustee who fails to maintain records as required is guilty of an offence and liable to a fine not exceeding USD100,000 or to imprisonment for up to five years.

Use of foundations in estate planning

The BVI has no legislation under which foundations may be established.

Types of entities

The entities that may be created under the BVI Business Companies Act 2004 (as amended) are:

• companies limited by shares;
• companies limited by guarantee that are not authorised to issue shares;
• companies limited by guarantee that are authorised to issue shares;
• unlimited companies that are not authorised to issue shares;
• unlimited companies that are authorised to issue shares; and
• limited liability partnerships.

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Taxation

Income tax system

Income tax in the BVI is zero-rated. Income tax was effectively replaced by payroll tax as of 1 January 2005. The Payroll Taxes Act, 2004 (PTA) generally imposes tax of up to 8 per cent on employees’ remuneration, with employers generally subject to tax of up to 6 per cent of this remuneration. Employers whose payroll does not exceed USD150,000, whose annual turnover does not exceed USD300,000 and who employ fewer than eight persons are subject to tax of 2 per cent of total payroll.

The PTA does not apply to trustees except to the extent that the trustee, in its capacity as trustee of the trust, has employees rendering services to the trustee wholly or mainly in the BVI. The liability to such taxes of a professional service provider trustee is imposed on the trustee in its personal capacity and cannot be satisfied from the trust’s assets. The PTA applies to all companies incorporated in the BVI except for companies which do not employ BVI residents or carry on business within the BVI.

Personal income tax rates

As stated above income tax in the BVI is zero-rated.

Corporate income tax rates

Corporate income tax is also zero-rated.

Capital gains tax

There is no capital gains tax in the BVI.

Non-residents

• Remuneration or deemed remuneration from a business carried on for gain in the BVI or outside the BVI from a place in the BVI.
• Stamp duty on transactions charged to duty under the Stamp Act.
• Land and house tax on real property in the BVI.

Withholding tax rate (non-treaty)

There are no withholding taxes applicable in the BVI. Arrangements are instead contemplated under the regime of tax information exchange agreements (TIEAs).

Withholding tax rate (treaty)

There are no current tax treaties. 

Taxation at death

There are no capital gains or estate taxes and no succession duty. Depending on the value of a deceased's estate the filing fees payable on the declaration of the value of the estate range from USD200 for an estate valued at below USD10,000 to USD5,000 for an estate valued at more than USD5 million. Filing fees range from USD10 to USD100 for supporting affidavits and other documents.

Other taxes

There are no gift or wealth taxes but stamp duty at the rate of 4 per cent of the price or market value (whichever is higher) is payable on the transfer of land by gift to a ‘belonger’ to the BVI and at the rate of 12 per cent where the transfer is to a ‘non-belonger’.

Tax treaties

The BVI is not subject to any double taxation tax treaties.

Tax information exchange agreements

The BVI has entered into 28 TIEAs with the following countries: Aruba, Australia, Canada, China, Curaçao, Czech Republic, Denmark, the Faroe Islands, Finland, France, Germany, Greenland, Guernsey, Iceland, India, Ireland, Isle of Man, Japan, Netherlands, New Zealand, Norway, Poland, Portugal, Saint Martin, South Korea, Sweden, the UK and the US.top

Residence and domicile

Special rules on becoming resident

Under the Immigration and Passport Act any person who does not have a right to reside and work in the BVI may, on obtaining a permit to work, be granted permission to reside for the period specified in the work permit. The person must furnish the Chief Immigration Officer with evidence of good character, medical certificates as required, evidence that they are able to maintain himself and their dependants, and enter into a bond to secure the repatriation expenses of himself and his dependants. A person wishing to reside but not engage in gainful employment must, in addition, provide a written undertaking not to engage in gainful occupation in the BVI. A person who is of good character and has stated in their application their intention to reside permanently in the BVI may apply for a certificate of residence. No minimum period of residence in the BVI is necessary but in practice applications for residence are not granted to persons who have resided in the BVI for less than five years.

Special rules on ceasing residence

A certificate of residence may be revoked if the resident ordinarily resides outside the BVI for a continuous period of three years, has in any country been imprisoned for a criminal offence for more than one year, has so conducted themselves that it is not in the public interest that they should retain residence, or being the spouse of a resident has lived apart from the resident by virtue of a court order or a separation deed or has been divorced from the resident.

Domicile concept for gifts and inheritance

Non-belongers (i.e. persons who are not BV Islanders by descent or who have not become British Overseas Territories citizens by registration in the BVI or have not obtained a certificate of registration as a belonger under the Immigration Act) require a licence to hold real property in the BVI whether the property is acquired by purchase, gift or inheritance.

Taxation of holdings by non-residents on death and of gifts

• Gifts: there are no special taxes based on the residence of the donor or donee of a gift.
• Death: there are no special taxes based on the residence of the deceased or any beneficiary of the estate of the deceased.

Reporting/auditing requirements

Yes.

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Other relevant information

Asset protection laws

No.

Foreign currency restrictions

No.

Foreign ownership restrictions

Yes. 

Special permits are required under the Non-belongers Land Holding Regulation Act for non-belongers to acquire land in the BVI or to acquire shares in a company that holds such land.

AML/due diligence and other requirements and regulatory procedures for advisors

• To establish a trust: trusts are not regulated by any public authority in the BVI, but trustees will require adequate identification of the settlor and named beneficiaries to be maintained as part of the records held by the trustee.
• For incorporation: know-your-client (KYC) due diligence information including identification evidence for all shareholders, directors and officers (functionaries) must be maintained at the registered office of the company in the BVI. Additionally, licensed trustees and company management companies are encouraged to use compliance software to conduct background checks on all persons being appointed as functionaries.
• To open a bank account: KYC due diligence requires the submission of identification evidence and reference letters from professionals and bankers with whom the relevant signatories have previously done business.

Economic substance requirements

The OECD has imposed economic substance requirements on their members, which includes the BVI. This has led to various entities needing to comply with the requirements. These entities include those which carry on business such as: banking; insurance; fund management; finance and leasing; headquarters; shipping; holding; intellectual property; distribution and service centres.

Other points of interest

In 2011 the ECSC of which the BVI is part, amended the Civil Procedure Rules (CPR) governing the conduct of litigation in the court and, inter alia, extended the jurisdictional basis upon which the BVI Court may try trust disputes with foreign elements. 

The court may permit a claim form to be served on a defendant outside the BVI if, inter alia

• the claim is made for a remedy against a defendant as constructive trustee, and the defendant’s liability arose out of acts committed within the BVI;
• the claim is made for any remedy which might be obtained in the administration of an estate or in probate proceedings; or
• the claim is made for any remedy which might be obtained in proceedings to execute the trusts of a written instrument and the trusts ought to be executed according to the law of any member territory of the court and the defendant is a trustee of the trusts.

In addition, the amendments to the CPR permit a claim form to be served outside the BVI where the whole of the subject matter of the claim relates to property within the BVI and also, to remedy the decision in Re Pasig Ltd (referred to above) in cases not specifically provided for by the rules on service out, where the claim is made under any enactment that confers jurisdiction on the ECSC. Finally, with effect from 1 February 2014 the CPR was further amended to permit service of a claim form out of the jurisdiction where application was being made to enforce a foreign judgment at common law and the defendant resides overseas.

Key resources for further information

PUBLICATIONS  

• The Laws of the Virgin Islands (Revised Edition)
• Christopher McKenzie, 'New Regulations Enabling Private Trust Companies to be Established in the BVI', in Trusts and Trustees (Vol 14, No4, May 2008)

WEBSITES

• The International Tax Authority of the BVI Ministry Finance: www.bvi.gov.vg/ministry-finance-international-tax-authority    
• The BVI Land Registry: www.bvi.gov.vg/department/land-registry
• The ECSC website: www.eccourts.org

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STEP branches in BVI

There is one STEP branch in BVI, which forms part of STEP's Caribbean and Latin America region.

• STEP BVI

Firms in the British Virgin Islands

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Members in the British Virgin Islands

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