Have there been any notable recent developments in the provision of private client and offshore services in your jurisdiction, including any regulatory changes or case law?
Perhaps unsurprisingly, recent developments in the British Virgin Islands (BVI) have focused on transparency and regulation. Automatic exchange of information regimes (eg, the Common Reporting Standard of the Organisation for Economic Cooperation and Development and the US Foreign Account Tax Compliance Act) and on-request exchange of information have dominated the landscape as policy makers seek to impose legislation relating to the disclosure of beneficial ownership information.
The March 2017 case of Quiver Inc v International Tax Authority confirmed that public bodies such as the BVI’s International Tax Authority must strike the balance when discharging their exchange of information obligations by ensuring that procedural fairness safeguards are preserved.
Residence and domicile
How is residence/domicile determined for tax liability purposes in your jurisdiction?
The British Virgin Islands does not have any form of income, corporate or capital gains tax. There are no inheritance or gift taxes.
There is no official tax year and the concept of residence and domicile is not applicable.
Describe the income tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
There is no income tax.
Describe the capital gains tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
There is no capital gains tax.
Inheritance and lifetime gifts
Describe the inheritance and gift tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
There is no inheritance tax.
What taxes apply to individuals’ acquisition and disposal of real estate in your jurisdiction?
The acquisition and disposal of property in the British Virgin Islands (BVI) gives rise to a stamp duty liability. The primary legislation governing matters of stamp duty under BVI law is the Stamp Act (Cap 212). Stamp duty is payable on instruments, as opposed to transactions. Stamp duty is a voluntary tax, but with two important caveats that:
- unless a document that is stampable has been duly stamped as required by law, it cannot be admitted into evidence at court, making it effectively unenforceable; and
- if the instrument that is to be stamped requires registration at the Land Registry for it to be effective (as the vast majority of instruments relating to the acquisition and disposal of interests in property in the BVI do), then it must first be stamped, since stamping is a prerequisite to registration.
It is the transferee who typically assumes the obligation to pay stamp duty since it is the transferee’s risk where stamp duty that is payable is not duly paid.
Under the Stamp Act, a transfer or assignment amounting to a conveyance on sale of any property attracts an ad valorem rate of duty of 4% of the market value or consideration, whichever is higher. Transfers and assignments that do not amount to conveyances upon sale attract nominal stamp duty at the rate of $5.
The provisions of the Non-belongers Land Holding Regulation Act (Cap 122) are also relevant to the matter of stamp duty, because every instrument that conveys any right, title or interest of any property in the BVI, to a non-belonger, shall be liable to stamp duty at the rate specified in the Non-belongers Land Holding Regulation Act, in lieu of the duty chargeable under the Stamp Act. A ‘non-belonger’ is someone that does not ‘belong’ to the BVI, as that term is defined in the Virgin Islands Constitution Order 2007. For present purposes and in very general terms, a ‘belonger’ is a person that has a connection with the BVI by virtue of birth and/or ancestry, or who otherwise acquires belonger status under the BVI immigration rules.
Under the Non-belongers Land Holding Regulation Act, conveyances upon sale of interests in property attract an ad valorem rate of duty of 12% of the market value or consideration, whichever is higher. Conveyances of interests in property to which the Non-belongers Land Holding Regulation Act applies and which are otherwise than upon sale attract an ad valorem rate of duty of 5% of the market value of the property.
The Non-belongers Land Holding Regulation Act provides for a limited range of circumstances in which the transfer of property or an interest in property to a non-belonger attracts nominal stamp duty at the rate of $5, rather than the ad valorem rate of duty previously described. Those circumstances include:
- a transfer, otherwise than for value, of property or an interest in property by an individual to that individual’s legal spouse, children or grandchildren exclusively; and
- a transfer, otherwise than for value, of property or an interest in property by an individual to a trustee of a trust where at the time of the transfer the beneficiaries of that trust are the individual’s legal spouse, children or grandchildren exclusively.
Under the Stamp Act, a different rate of duty applies to the grant of a new leasehold interest in property. Where a new leasehold interest in property is granted to a belonger, the Stamp Act provides that for a lease with a term of 20 years or more, the rate of duty is 1% of the total rent payable for 20 years and any other money consideration to be paid under the lease, however described. For a lease with a term of 20 years or less, the rate of duty is 1% of the total rent payable for the duration of the term and any other money consideration to be paid under the lease, however described.
Under the Non-belongers Land Holding Regulation Act, the basis for calculating duty on the grant of a new lease to a non-belonger is the same as that described above for a belonger, other than the rate of duty is 1.5% instead of 1%.
There are no capital gains or inheritance tax in the BVI and, therefore, the disposal of real estate in the BVI is not subject to these taxes.
Non-real estate assets
Do any taxes apply to the acquisition and disposal of other assets apart from real estate?
There is no sales tax or value added tax levied on the acquisition and disposal of assets in the BVI. Most goods that are imported into the BVI are, with certain limited exceptions, subject to the payment of customs duty at varying rates, depending on the nature of the goods in question.
There are no capital gains or inheritance tax in the BIV and, therefore, the disposal of assets in the BVI is not subject to these taxes.
The acquisition and disposal of non-real estate assets in the BVI potentially gives rise to a stamp duty liability. Under the Stamp Act, a transfer or assignment amounting to a conveyance on sale of any property (which the Stamp Act does not limit to real property) attracts an ad valorem rate of duty of 4% of the market value or consideration, whichever is higher. Transfers and assignments that do not amount to conveyances upon sale attract nominal stamp duty at the rate of $5.
While stamp duty liability is a factor that should be considered in relation to the acquisition and disposal of any asset, it is often the case that no such liability arises in relation to the acquisition and disposal of non-real estate assets. This is partly because such assets are generally transferred by way of delivery, meaning there is no instrument of transfer on which the stamp duty liability arises. It is also because the acquisition and disposal of some assets, such as ships and vessels, is exempt from stamp duty liability under the Stamp Act and this is the case even where the transfer is effected by way of an instrument.
Other applicable tax regimes
Are any other direct or indirect tax regimes relevant to individuals?
Persons carrying on business in the BVI are subject to payroll tax that is payable by every self-employed person or employer. Payroll tax may go as high as 14% of remuneration, 8% of which may be reclaimed from employees. The remaining 6% is payable by the employer. No payroll tax deduction shall be made in respect of the first $10,000 of actual remuneration paid to an employee in any financial year.
Are there any special tax planning considerations for individuals with a link to your jurisdiction?
The BVI remains the leading jurisdiction for the incorporation of business companies. While BVI companies are used as tax-neutral vehicles, the territory’s sophisticated and user-friendly trust legislation provides practitioners with the perfect toolkit for structuring private wealth.
Trusts, foundations and charities
Are trusts legally recognised in your jurisdiction? If so, what types are available and most commonly used?
All types of trust that are permissible under English law may be established under British Virign Islands (BVI) law.
BVI trusts may be discretionary or fixed interest in nature. This means that the trust assets can either be held for a class of beneficiaries with distributions being made at the discretion of the trustee (discretionary trusts) or, alternatively, the trust deed can set out the specific beneficial interests of each beneficiary, such as a right to the income earned by the trust assets (fixed-interest trusts).
It is also possible to create reserved power trusts and both charitable and non-charitable purpose trusts.
Non-charitable purpose trusts may be established in the BVI provided that the following conditions are met:
- The purpose is specific, reasonable and possible;
- The purpose is not immoral, contrary to BVI public policy or unlawful; and
- At least one trustee is a ‘designated person’ (which usually results in the trustee being a licensed BVI trust company or a BVI private trust company).
For a number of reasons, a settlor may wish to retain a certain level of control over specific elements of the administration of a trust. The BVI was one of the first offshore jurisdictions to bring in legislation allowing powers to be reserved in favour of the settlor or another. As a result, certain powers that would usually be vested in the trustee (generally, a third-party professional offshore trust company) can instead be conferred on a ‘protector’, who can be the settlor or such other family member, friend or adviser as the settlor chooses to appoint.
The powers held by the ‘protector’ might include:
- power to determine the law governing the trust;
- power to remove and appoint trustees;
- power to exclude or include beneficiaries in the class of potential beneficiaries; and
- power to approve or refuse distributions of income and capital.
The Virgin Islands Special Trusts Act (VISTA) came into force on March 12004 and was introduced in order to allow a shareholder to establish a BVI trust over a BVI company that disengages the trustee from administrative and managerial responsibility in relation to that BVI company.
The principal effect of VISTA is to remove the duty of trustees to monitor and intervene in the conduct of the directors and in the running of the BVI company held in trust. Owing to the large number of companies incorporated in the BVI, VISTA was introduced:
- to offer a vehicle that would remove the need to obtain a grant of probate in the BVI (which would otherwise be a requirement on the death of the owner of BVI company shares) by implementing a trust structure; and
- to allow the owner to retain effective management and control of the company after having divested him or herself of its ownership.
The VISTA regime can apply to discretionary trusts, fixed-interest trusts, charitable trusts or purpose trusts, as long as certain conditions are satisfied.
The VISTA legislation was amended in May 2013 to fine-tune certain elements of the regime and introduce greater flexibility; as a result, is likely to remain the most popular form of trust vehicle in the BVI.
What rules and procedures govern the establishment and maintenance of trusts?
BVI trusts follow traditional equitable concepts of a trust whereby a person (the settlor) places assets under the control of another (the trustee) for the benefit of beneficiaries or a specific purpose set out in the trust deed.
The general principles of BVI trust law are derived from those of English trust law; they have been supplemented by statute to offer a variety of flexible and user-friendly trust structuring solutions.
The main statutory sources of trust law for the creation and administration purposes can be found in the BVI Trustee Act 1961, which was largely based on the English Trustee Act 1925. The BVI trust regime has since been enhanced by the Trustee (Amendment) Acts 1993, 2003, 2013 and 2015.
How are trusts taxed in your jurisdiction?
Foundations and charities
Are foundations and charities legally recognised in your jurisdiction? If so, what forms can they take?
There is no foundation legislation in the BVI.
A charitable trust may be established under BVI law to create a charitable fund or to make provision for existing charitable institutions or purposes.
A trust under BVI law is charitable if all its purposes fall exclusively within one or more of the categories of charitable purposes recognised by law listed below:
- the relief of poverty;
- the advancement of education;
- the advancement of religion;
- other purposes beneficial to the community at large; and
- there is an element of public benefit.
What rules and procedures govern the establishment and maintenance of foundations and charities?
How are foundations and charities taxed?
Anti-avoidance and anti-abuse provisions
What anti-avoidance and anti-abuse tax provisions apply in the context of private client wealth management?
British Virgin Islands (BVI) law contains very limited taxation offences, all of which are tried summarily and not on indictment.
Anti-money laundering provisions
What anti-money laundering provisions apply in the context of private client wealth management (eg, beneficial ownership registers)?
The main legislation in this area is the Anti-money Laundering Regulations 2008, and the Anti-money Laundering and Terrorist Financing Code of Practice 2008. These require trust companies to undertake substantial due diligence and to report concerns to the Money Laundering Reporting Officer. This provides a defence to the offences of assisting in retention or control of proceeds of criminal conduct, and associated offences, contained in the Proceeds of Criminal Conduct Act 1997.
Wills and probate
What rules and restrictions (if any) govern the disposition of and succession to an individual’s property and assets in your jurisdiction?
The law of succession that would apply to a deceased person’s assets is that of:
- the person’s deceased’s domicile if the assets are movable; and
- the situs of the assets if the assets are immovable.
For persons dying domiciled in the BVI and/or assets situated in the BVI, the law applies freedom of testation. There is no equivalent of, say, the United Kingdom’s Inheritance (Provision for Family and Dependants) Act 1975.
Shares in BVI companies are deemed situated in the BVI for title purposes, but are movable property for succession purposes. Accordingly, a BVI Grant of Representation is required to pass title to the shares, but the identity of the personal representative and beneficiary will be decided by the relevant law of the deceased’s domicile.
What rules and procedures govern intestacy?
For persons dying domiciled in a non-BVI jurisdiction, the intestacy rules governing their BVI movable assets (including shares in BVI companies) are that of their jurisdiction of domicile.
For intestate persons dying domiciled in the BVI and/or holding immovable BVI assets, the relevant legislation is the Intestate Estates Act (Cap 34).
The surviving spouse takes:
- the personal chattels;
- $240 or a sum equal to 10% of the net value of the estate, whichever is greater, with 5% a-year interest until payment; and
- half of the residue on trust for life (if issue) or the whole on trust for life (if none).
In case of issue but no spouse, the residue is held on statutory trusts for the surviving issue.
In case of surviving parents but none of the above, the residue is held on trust for the surviving parent(s).
If none of the above applies, the residue is held on statutory trusts for the following in descending order:
- brothers and sisters of the whole blood;
- half-brothers and half-sisters;
- grandparent or grandparents equally;
- uncles and aunts of the whole blood; and
- uncles and aunts of the half blood.
If none of the above applies, the residue is held absolutely for:
- the spouse (ie, absolutely rather than a trust for life); and
- the Crown.
‘Statutory trusts’ broadly means:
- a trust for sale for the relevant relatives and their issue in equal shares per stirpes when they attain 18 years;
- subject to statutory maintenance and accumulation provisions; and
- hotchpot provisions apply.
What rules and restrictions (if any) apply to the governing law of a will?
There is free choice over a will’s governing law. However, for the governing law of a will to be most effective, it should match the relevant law of succession.
The law of succession that would apply to a deceased’s assets is that of:
- the deceased’s domicile if the assets are movable; and
- the situs of the assets if the assets are immovable.
What are the formal and procedural requirements to make a will? Are wills and other estate documents publicly available?
The BVI’s Wills Act (Cap 81) contains the familiar English requirement that no will is valid unless it is:
- in writing;
- signed at the foot, or end, thereof by the testator, or by some other person in his or her presence and by his or her direction; with
- such signature being made, or acknowledged, by the testator in the presence of two, or more, witnesses present at the same time, and such witnesses attest and subscribe the will in the presence of the testator, but no form of attestation is necessary.
As to wills executed by persons domiciled elsewhere, there is a controversy about whether the BVI has ever signed up to the 1961 Hague Convention on the Conflicts of Laws Relating to the Form of Testamentary Dispositions. An order in council needed to be passed by the United Kingdom to extend it to the BVI and the United Kingdom’s Foreign Office both believe it was, and in practice the BVI Probate Registry operates as if it was, but some prominent BVI lawyers say it was not.
If the BVI did not sign up to the convention, it falls back to the old common law position that the will has to be executed in accordance with the law of domicile at the date of death. There is then a further question as to whether the ‘law of domicile’ means the internal law only, or also the jurisdiction’s own conflict of law rules.
Therefore, cautious clients may wish to check with lawyers from their place of domicile how to validly execute the wills in accordance with their laws. Of course, that does not prevent a question if the client eventually dies domiciled elsewhere.
In terms of public availability, there is no registry of wills. However:
- before an application for a Grant of Representation is made, adverts must be run in local BVI newspapers (which are not currently digitally available). The advert must contain the names and addresses of the deceased and executor, and the dates of the will (if any) and death. They do not contain details of the deceased’s BVI assets;
- once the application is lodged, it will be entered on a list searchable for caveat purposes. This list will simply contain the names of the deceased and executor;
- once a grant is made, it will be entered on a register of grants. The public may take copies of the register, and the grants, for a small fee. The grants contain the same information as the adverts. Practice as to whether the copied grant would contain the will has differed in the past and the recently enacted Eastern Caribbean Supreme Court (Non-Contentious Probate and Administration of Estates) Rules 2017 do not provide guidance. However, the precedent grants reference an “annexed Will”, which implies that they will.
Validity and amendment
How can the validity of a will be challenged? Can the will be amended after the decedent’s death?
A will can be challenged during the probate process. The initial approach is via the familiar common law caveat/warning/appearance system, after which the relevant rules move from the Non-Contentious Probate Rules to the general Civil Procedure Rules. The High Court has the usual wide common law powers.
Under BVI law, a will cannot be amended after the testator’s death. However, a beneficiary’s entitlement may potentially be varied depending on the succession law of the domicile (if the relevant assets are movables) or asset situs (if non-movables).
How is the validity of a will established in your jurisdiction?
Whether the person died in the BVI or elsewhere, the prospective personal representative must apply for a Grant of Representation at the BVI Probate Registry via a paper application. The exact documents will depend on the exact circumstances, but generally include:
- the application itself;
- a draft order and grant;
- an original or certified death certificate.;
- the original will marked with the prescribed wording. An authenticated copy may be supplied in limited circumstances;
- an oath by the personal representative explaining the circumstances of the death and swearing to administer the estate according to law, etc;
- an affidavit by the personal representative confirming the rough value of the estate. This can be a rough value because no inheritance tax is payable in the BVI, but it does affect the court fee, which ranges from a few hundred dollars for a low-value estate to $5,000 for estates worth over $5 million;
- an affidavit by the personal representative explaining the delay if the application is made over three years since the date of death;
- an affidavit by a witness to the will confirming that he or she witnessed the deceased execute it validly;
- if the deceased was domiciled outside the BVI, an affidavit by a lawyer in the deceased’s jurisdiction of domicile explaining why the personal representative is entitled under the law of that jurisdiction to administer the estate;
- copies of adverts in a BVI newspaper with prescribed wording; and
- copies of searches made in the BVI Probate Register.
Depending on the jurisdiction they are sworn in, affidavits must be notarised and potentially legalised. Any notarisations or legalisations in a non-English language, and any other document in a non-English language, must be translated and the translator swears an affidavit of translation with prescribed wording.
There is a per-document registry fee and the ‘headline’ registry fee mentioned above.
Note that grants from a limited number of Commonwealth jurisdictions (essentially those that retain the Queen as head of state) may be resealed in the BVI. Although this also requires an application, the documents are simpler and fewer than for a full application.
To what extent are foreign wills recognised? Do any special rules and procedures apply to establishing their validity in your jurisdiction?
Foreign wills are recognised to the extent that they abide with the relevant jurisdiction’s laws regarding entitlement to a grant, succession and formal validity.
A BVI Grant of Probate will be required for the will, even if a grant has already been obtained elsewhere. It is important to note that shares in BVI companies are deemed situated in the BVI for title purposes, but are movable property for succession purposes. Accordingly, a BVI Grant of Representation is required to pass title to the shares, even though the identity of the personal representative and beneficiary will be decided by the succession law of the deceased’s domicile.
As part of the probate process, an affidavit must be submitted by a lawyer in the jurisdiction under which the will is held to be formally valid.
Grants from a limited number of Commonwealth jurisdictions (essentially those that retain the Queen as head of state) may be resealed in the BVI. Although this also requires an application, the documents are simpler and fewer than for a full application.
What rules and procedures govern:
(a) The appointment of estate administrators?
Entitlement to act as personal representative is according to the law of the deceased’s domicile.
If the deceased died domiciled in the BVI, the order of entitlement is contained in Rule 10 if with a will (whether seeking a Grant of Probate or Letters of Administration with Will Annexed) and is as follows:
- the executor;
- any residuary devisee or legatee holding in trust for any person;
- any other residuary devisee or legatee;
- any devisee or legatee holding in trust for any other person;
- any devisee or legatee;
- any person entitled to share in the undisposed residuary estate; and
- such other person as the court may direct.
If the deceased left no will, the order of entitlement is contained in Rule 14 and is as follows:
- the surviving spouse of the deceased;
- the children of the deceased, and the issue of any child who died before the deceased;
- the father and mother of the deceased;
- brothers and sisters of the whole blood and the issue of any deceased brother or sister of the whole blood who died before the deceased;
- brothers and sisters of the half-blood and the issue of any deceased brother or sister of the half-blood who died before the deceased;
- uncles and aunts of the whole blood and the issue of any deceased uncle or aunt of the whole blood who died before the deceased; and
- uncles and aunts of the half blood and the issue of any deceased uncle or aunt of the half-blood who died before the deceased.
(b) Consolidation and administration of the estate?
A BVI Grant of Representation is required for the personal representative to administer most BVI assets with the usual exceptions of personal chattels, jointly held assets with rights of survivorship, etc.
Most readers are likely to be concerned with administering shares in BVI companies. In order to transfer shares, most registered agents will require, as well as the BVI grant, a completed share transfer, resolutions, and KYC (ie, know-your-customer) documents for the beneficiaries. They may agree to complete these documents for a fee, and will in general probably charge a fee to process the transfer.
(c) Distribution of the estate to heirs?
The personal representatives are responsible for distributing the assets to the beneficiaries in accordance with the deceased’s law of domicile. The BVI Probate Registry will not proactively interfere with that process and it is the beneficiaries’ job to enforce correct distribution. Note in particular that there is no need to inform the BVI Probate Registry of any variations or disclaimers between the beneficiaries.
Most readers are likely to be concerned with administering shares in BVI companies. In order to transfer shares, most registered agents will require, as well as the BVI grant, a completed share transfer, resolutions, and KYC documents for the beneficiaries. They may agree to complete these documents for a fee, and will in general probably charge a fee to process the transfer.
(d) Settlement of the decedent’s debts and payment of any taxes and fees?
For persons dying domiciled in the BVI, it is the personal representative’s duty to settle the deceased’s liabilities from the estate.
Are there any special considerations specific to your jurisdiction that individuals should bear in mind during succession planning?
It is a simple but often unappreciated point that a BVI Grant of Representation is required in order for the personal representative to pass title to shares in BVI companies, or to be able to act in relation to them by exercising membership rights. This is the case even if a grant has already been obtained in the deceased’s domicile. Shares in BVI companies are deemed situated in the BVI for title purposes, but are movable property for succession and grant entitlement purposes; therefore, the identity of the personal representative and beneficiaries will be decided by the law of the deceased’s domicile.
Unlike other comparable offshore jurisdictions, the BVI will reseal grants from only a few jurisdictions. The list is essentially the United Kingdom, its overseas territories and crown dependencies, and those Commonwealth jurisdictions that have retained the Queen as their head of state.
The probate process in the BVI is relatively involved. Many clients who wish to expedite this process, if resealing is not possible and if trusts or other probate avoidance solutions are not desirable, decide to execute a BVI will. On a practical level, the BVI Registry is familiar with BVI wills and so will generally process the application faster. It also allows the applicant to carry out the BVI process simultaneously with the processes in other jurisdictions. Other ways to expedite it include having a witness to the will execute the required affidavit of due execution before the testator’s death, so as to avoid the risk that a witness cannot be found after death, causing delays to the process.
Capacity and power of attorney
Loss of capacity
What rules, restrictions and procedures govern the management of an individual’s affairs where he or she loses capacity and the grant of power of attorney in such cases?
The principal legislation in this area is the Mental Health Act 2014.
Powers of attorney lapse on the loss of mental capacity – there is no provision in the act for lasting or enduring powers of attorney. However, a British Virgin Islands (BVI) court has wide powers so may agree to recognise a foreign lasting or enduring power of attorney.
Alternatively, the court can appoint a receiver who has wide powers to manage the patient’s property and financial affairs. There is no ability in BVI law to appoint someone to manage a patient’s welfare or personal affairs, although a receiver would probably be able to use his or her powers to extend into that area de facto.
What rules, restrictions and procedures govern the holding and management of a minor’s assets until the minor reaches the age of capacity?
There are no specific rules save for some particular requirements regarding BVI land. In general, the position is the same as in other common law jurisdictions – namely, that although it is possible for minors to hold assets, it is often seen as inadvisable because of, for example, the difficulty that it causes with third parties, or the fact that transactions may be voidable at 18. Solutions are often for parents or trustees to hold the assets.
Marriage and civil partnerships
What matrimonial property regimes are recognised in your jurisdiction?
None are formally recognised, although it may be that a British Virgin Islands family court would attempt to replicate a couple’s foreign matrimonial property regime in its divorce order.
Are same-sex marriages and/or civil partnerships recognised in your jurisdiction?
Neither is recognised.
Is there a legal distinction between legitimate and illegitimate children in terms of estate and succession planning?
The Status of Children Act 2014 abolished the previous distinction between legitimate and illegitimate children – for example, in definitions of ‘issue’. However, the distinction remains (which often means a presumption that illegitimate children are not included unless specifically included) for the following:
- statutory rules governing the estates of intestate persons who died before the date of commencement of the Status of Chidren Act (October 31 2014);
- wills of persons who died before the date of commencement of the act;
- dispositions made inter vivos before the date of commencement of the act;
- instruments (including inter vivos dispositions and wills) made after the date of commencement of the act that provide for the distinction to remain.
Is there a legal distinction between natural and adopted children in terms of estate and succession planning?
Once a child is legally adopted, there is no presumed difference between natural and adopted children, although this presumption can be overturned by contrary language.