General Information
Taxation and Duties
Double Tax Treaties
Company Law
Trust Law

General Information

The British Virgin Islands is a British Overseas Territory in the eastern Caribbean. Tortola and Virgin Gorda are the main inhabited islands of the group, which consists of about 40 islands and cays. On Tortola, Road Town is the territory's major port, financial centre and seat of government. From the main airport on Beef Island it is approximately 30 minutes flying time to the US Commonwealth of Puerto Rico in the east or the joint Dutch/French island of St Martin to the west. The government's 1999 figures give the mid-year population as being approximately 20,000, just over 50% of whom were immigrants to the territory.

Tourism and financial services are the two main pillars of the economy. The latter rests largely upon the success of the territory's International Business Companies Act (Cap 291), which was enacted in 1984. At the end of 1999 there were 358,045 international business companies (IBCs) registered at the British Virgin Islands Companies Registry, up from 305,359 in 1998. There are no exchange controls in force in the British Virgin Islands and the US dollar is the official currency.

The territory has a ministerial form of government provided for in its own Constitution. A governor, with responsibility for foreign affairs, internal security and administration of the courts, is appointed by the UK Foreign and Commonwealth Office, while an elected Legislative Council promulgates local legislation. The United Kingdom does, however, reserve power to disallow or make laws for the order and good government of the territory.

Legal system
British Virgin Islands' law is based on the English legal system, supplemented by legislation enacted by the Legislative Council. The Common Law (Declaration of Application) Act (Cap 13) has extended all English common law to the British Virgin Islands. Pursuant to the West Indies Associated States Supreme Court (Virgin Islands) Act (Cap 80), the principles of English equity also apply. Admission to the Bar of the British Virgin Islands is either as a solicitor or a barrister. While barristers are also able to work as solicitors, this right is not reciprocal.

Court system
The territory has a magistrates' court (dealing mainly with minor criminal and smaller civil matters) and a High Court. The latter comes within the Eastern Caribbean Supreme Court. The Court of Appeal of the Eastern Caribbean Supreme Court visits the British Virgin Islands twice a year. Appeals from this may be made to the Judicial Committee of the Privy Council of the United Kingdom. There is no formalized system of case law reporting in the courts of the British Virgin Islands although Court of Appeal decisions are usually available for purchase.

Taxation and Duties

Income tax is levied on individuals, partnerships, trusts and certain income derived by companies formed under the Companies Act. IBCs are completely exempt from all income taxes in the British Virgin Islands.

Gains realized by a non-resident majority shareholder on the sale of shares in a real-estate holding company, which is attributable to British Virgin Islands real estate, are taxable. Otherwise, there are no inheritance or gift taxes and no capital gains taxes in the territory.

Stamp duty is levied on many types of document, including share transfers, although in most cases the amount is nominal. Again, IBCs are exempt from all stamp duties in respect of all transfers of property, shares and other transactions related to their business. Customs duties are levied and collected on importation of goods into the territory at rates expressed as a percentage of the value of the goods. These range from 5% to 20%.

Double Tax Treaties

The territory has two double tax agreements, with Switzerland and Japan. The 1954 United Kingdom - Switzerland Treaty was extended to be retroactively effective from January 1 1961.

The 1962 United Kingdom - Japan Treaty was extended to the British Virgin Islands to be retroactively effective from January 1 1963. On June 21 2000, however, the government of Japan gave notice to the UK government of its termination of the territorial extension to the British Virgin Islands and Montserrat. Termination is to be effective on January 1 2001.

Company Law

The British Virgin Islands has two corporate statutes, the Companies Act (Cap 285) and the International Business Companies Act (Cap 291). The Companies Act is similar to the 1948 English Companies Act. Companies Act companies (CACs) have, since the introduction of the IBC Act, been used primarily where IBCs are unsuitable. This has been mainly as vehicles for those wishing to do business or to own land in the British Virgin Islands, as companies limited by guarantee or as unlimited liability companies (since such structures are not permitted for IBCs).

CACs are, however, subject to more onerous regulations than IBCs, particularly with regard to filing requirements. They are also subject to income tax in the British Virgin Islands. If the CAC is deemed to be resident in the territory, it will pay income tax at 15% on its worldwide income. A non-resident CAC is only liable to tax for 15% on profits arising or received in the British Virgin Islands. If a CAC is resident, but is an offshore trading company (ie, 90% of its profits arise from business carried on exclusively outside the British Virgin Islands), it is only liable to pay income tax at the rate of 1%.

Some of the main differences between the two forms of company are the following:

  • IBCs may be incorporated for any object or purpose not prohibited under the IBC Act or under any other law for the time being in force in the British Virgin Islands. There are prohibitions on IBCs carrying out certain business, especially with residents of the British Virgin Islands, and on their owning an interest in real property situated there. An IBC can have a single objects clause which will cover everything, whereas a CAC has to list all its objects in its memorandum and articles of association. IBCs may also have wide powers to perform all acts and engage in all activities necessary or conducive to the conduct, promotion or attainment of the objects or purposes of the company, irrespective of corporate benefit.

  • An IBC does not have to file details of its directors or shareholders at the Companies Registry in the British Virgin Islands. If a CAC has share capital, it must file an annual return containing these details. If it does not have a share capital, it must file a register of directors.

  • A CAC is obliged to call a general meeting of shareholders once a year. There is no such requirement for an IBC.

  • An IBC can issue bearer shares, whereas a CAC cannot. CACs may, however, keep the identity of shareholders confidential. Nominees, whose names will appear in the annual return as shareholders, can be used to hold their shares.

  • IBCs cannot have non-shareholder members, members with unlimited liability, or members whose liability is limited by guarantee, while a CAC may. A private CAC must have a minimum of two shareholders, whereas an IBC can have one and can be incorporated without any. IBC shareholders meetings may be attended by telephone, and resolutions may be passed by way of written consent. There is no distinction for IBCs between ordinary resolutions and special resolutions.

  • IBCs may have a minimum of one director who may be an individual or a corporation. Directors are not required to hold shares in the IBC and need not be resident in the British Virgin Islands. IBC directors meetings may be called in any place they wish and may be attended by telephone. Written consents may be executed to pass resolutions in lieu of holding meetings.


Regulation in the territory is contained in a number of different pieces of legislation. The most important of which are the following:

The Banks and Trust Companies Act 1990
The Banks and Trust Companies Act regulates (i) banking business (defined to cover the receipt and holding in accounts of money for customers which is repayable by cheque or order and which is capable of being invested by way of advances to customers or otherwise) and (ii) trust business (defined to include acting as a professional trustee or protector of a trust, managing or administering a trust and company management as defined by the Company Management Act 1990).

The Company Management Act 1990
The Company Management Act regulates those providing company management services by requiring them to be licensed. The definition of 'company management' includes:

  • the registration of companies under the Companies Act and the IBC Act;

  • the provision of registered office services for companies incorporated under the Companies Act or the IBC Act;

  • the provision of registered agent services for companies incorporated under the IBC Act; and

  • the provision of directors, officers and nominee shareholders of companies.

The Insurance Act 1994
The Insurance Act 1994 provides for the licensing of all insurers, insurance managers, brokers, agents and adjusters.

Mutual Funds Act 1996
The Mutual Funds Act 1996 regulates collective investment schemes, which includes unit trusts. The act makes a distinction between (i) public funds - which must be registered, and (ii) private and professional funds - which must only be recognized.

It also requires that managers and administrators must be licensed. The regulatory regime for private and professional funds is considerably less restrictive than that for public funds, since registration requires the publication and filing of a legally binding prospectus containing specified information. A public fund must also have a custodian who is functionally independent of the fund's manager or administrator.

Proceeds of Criminal Conduct Act 1997
The Proceeds of Criminal Conduct Act came into force on January 2 1998 and contains provisions broadly similar to those found in the majority of sophisticated common law jurisdictions throughout the world. The purpose of the legislation is to deter any and all forms of money laundering in the British Virgin Islands.

Trust Law

As the basic principles of the trust laws of the British Virgin Islands are derived from English law, trust legislation in the territory serves by and large to update and give flexibility to the trust regime, as opposed to changing the concept itself.

Trustee (Amendment) Act 1993
The Trustee (Ammendment) Act act significantly updated the original 1961 Trustee Act (which in turn was based to a large extent on the 1925 English Trustee Act, the 1925 English Law of Property Act and the 1958 UK Variation of Trusts Act). The act includes up-to-date provisions relating to:

  • the establishment of non-charitable purpose trusts;

  • recognizing protectors;

  • confirming that the proper law of a trust will be that of the British Virgin Islands if there is an express statement to this effect in the trust instrument;

  • enabling the proper law of the trust to be changed to and from that of the British Virgin Islands; and

  • specifying when the territory's courts will have jurisdiction.

The act also gives recognition to flee provisions and includes various anti forced-heirship provisions. In addition, the act includes provisions to exempt trustees and beneficiaries from taxation, as well as a list of standard trustees' powers and administrative provisions that can be incorporated in trusts by way of reference.

Trustees' Relief Act
The Trustee's Relief Act (Cap 304) enables trustees to apply to a judge for his opinion, advice or directions on any questions concerning the management or administration of a trust.

Recognition of Trusts Act (Overseas Territories) Order 1987
The Recognition of Trusts Act (Overseas Territory) Order extended most of the provisions of the UK's Recognition of Trusts Act 1987 to the territory. It therefore has the effect of extending the majority of the provisions of the Hague Convention on the Law Applicable to Trusts and on Their Recognition to the British Virgin Islands.

Banks and Trust Companies Act 1990
The Banks and Trust Companies Act sets out licensing requirements for corporate trustees that carry out 'trust business', which is defined to include the business of acting as a professional trustee, protector or administrator of a trust as well as the managing or administering of trusts.


For further information on this topic please contact Stuart Hopper at Harney Westwood & Riegels by telephone (+284 494 2233) or by fax (+284 494 3547) or by e-mail ([email protected]).

The materials contained on this web site are for general information purposes only and are subject to the disclaimer