International Business Company’s (‘IBC’s') are companies incorporated in the British Virgin Islands (‘BVI’) under the International Business Companies Act, 1984, but whose business is to be conducted outside the BVI, and which may not do business with any person resident in the BVI.
BVI IBC’s are a very popular and widely used offshore companies because of their administrative ease, flexibility, taxation exempt status and the fact that they are widely accepted and understood by the international financial community. BVI IBC’s may not own real property in the BVI, other than the lease of an office, and may not carry on banking or trust business (unless licensed under the Banks and Trust Companies Act, 1990) or insurance or re-insurance business (unless licensed in the BVI to carry on that business). Otherwise, BVI IBC’s may engage in any activity that is not illegal under the laws of the BVI subject to any restrictions in their Memorandum of Association.
The British Virgin Islands are a small group of islands in the Caribbean Sea located 60 miles east of Puerto Rico. The BVI has excellent airline connections with Puerto Rico’s capital of San Juan, which is a major hub for American Airlines. The BVI financial services industry enjoys the advantages of having responsibility for its internal self-government, while maintaining the political and economic stability associated with being a British Overseas Territory.
The BVI has an independent legal and judicial system based on English Common Law, with a right of final appeal to the Privy Council in London. Policies and legislation are developed in close consultation with the private sector. Offshore business can be carried out in a tax-free environment.
The British Virgin Islands are an English-speaking Dependent Territory of the United Kingdom, located in the Caribbean off Puerto Rico. The BVI is politically stable; under the 1967 constitution, the Governor represents the Queen and heads an Executive Council. There is a 13-member elected Legislative Council.
The only significant tax in the BVI is income tax, which applies to the relatively few local companies and to individuals (the Government is planning to abolish income tax in 2004); there are customs duties and some real estate taxes. The population of 19,000 is of mixed European and Caribbean origin. There is minor tension between the settled population and recently-arrived Caribbean economic migrants. The economy is highly dependent on tourism, with financial services also important.
There is no pressure for major constitutional change, although in 2002 the BVI Government said it wanted to increase its establishment and asked for some of the Governor’s powers to be transferred over, recognising the BVI’s ‘constitutional maturity and prudential system of government’. The local currency is the US Dollar, and there are no exchange controls.
The BVI introduced its outstandingly successful International Business Company (IBC) in 1984; there are now more than 500,000 IBCs, with Hong Kong and Latin America the main sources of clients. The BVI has significant mutual fund and captive insurance sectors. Banking activity is, by design, quite minor. The BVI has tried hard to exclude money-laundering, mostly with success, and has a relatively good reputation. Offshore business use the IBC, the Limited Partnership and the Trust; all are exempt from taxation. In 2002 the BVI introduced a Financial Services Commission to ensure independent and effective supervision of financial institutions.
The BVI is a reasonably cheap jurisdiction compared to its local rivals, and has quite strong professional services. The Government is responsive to the needs of business, and its legislation is mostly flexible and straightforward. There is an international airport at Road Town; connections are mostly to Puerto Rico.
IBCs are required to have a Register of Directors maintained at the company’s Registered Office. This is not public but is available for inspection by the authorities.