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BVI IBC COMPANY

An International Business Company is a corporate vehicle having limited liability, which, provided it has no business activities in the British Virgin Islands, is wholly exempt from BVI tax on its income and from inheritance or estate tax on its shares.

An IBC can have bank accounts in the BVI, deal with lawyers, accountants, trust companies and other professionals in the BVI, hold company meetings and keep its accounting books and records in the BVI without breaching this restriction. By incorporating in the BVI, a business gains a wide range of competitive advantages, including:

• Exemption from all local taxes and stamp duty.
• Flexible and creative corporate structures for international businesses.
• Online name reservation and incorporation (fulfillment within 48 hours).
• Customized corporate certificates and document verification.
• No required public disclosure of company officers or shareholders.
• No accounting, organizational or annual general meeting requirements.
• Freedom to transfer assets or merge or consolidate with foreign entities.
• Availability of bearer shares and no minimum required capital.
• Option of one or more shareholder(s) or director(s); no residency requirements.
• Shares issued in any currency or for consideration other than cash.
• Access to experienced and trustworthy local industry professionals.
• Highly competitive government and registered agent fees and costs.

There are many different ways to effectively utilize an offshore company in order to legally establish an efficient structure for tax purposes, for international business and investment purposes, or to provide an additional layer of privacy to your business operations. In the following paragraphs, you will read about the various types of structures that can be implemented using IBCs.

This is not intended to be a thorough examination of offshore structures. The benefits which can be obtained by use of offshore entities depends on a number of factors, including the owner's objectives, the owners' residency or citizenship, as well as the countries in which the IBC is doing business. The following are hypothetical uses for IBCs and this text does not constitute legal advice of any nature. Proper legal advice, both in the BVI and elsewhere, must be obtained prior to the implementation of any of the following theoretical uses for IBCs. Please contact our affiliated firm of Hewlett Beck & Arad if you do not currently have access to the proper legal counsel.

International Trading Company: A company engaged in international trade of goods may benefit from establishing itself as an IBC in the BVI. In particular, if a business in one country buys goods in a second country and sells them to a third country, there is no particular need for the business to be established in the home country. By using an IBC, it may be possible to legitimately defer taxation on the profits, which are then available for funding further international expansion. In addition, as an exporter or importer, the IBC may be able to avoid the impact of costly local regulations. Finally, international trading operations can benefit by using a BVI IBC as a risk management mechanism. To the extent that the goods in question have a product liability exposure, having a BVI IBC can provide an added layer of protection, by isolating the risk in an entity separate from the rest of the owner's businesses.

Joint Venture Company: When a Japanese company enters into a joint venture with an English company and an Italian business, in order to export products from Taiwan into Kazakhstan, how should they structure their relationship? Many international joint ventures are established using a BVI IBC as a vehicle. Firstly, English Common Law in general and the BVI IBC Act specifically offer tremendous flexibility in structuring the company, to allow for the most complex partnership relationships. Furthermore, English Corporate and Commercial Law (as practiced in the BVI), is internationally recognized as being very efficient and reasonable in determining the parties' rights in the event of a dispute. Finally, much of the complexity of the international tax implications for all of the various parties can be avoided by using a tax free entity, such as an IBC, in which to pool the funds. Thereafter, each party need be concerned only with their own tax liability in their home country.

Electronic Commerce: A BVI IBC is particularly well suited to conduct business via the Internet or other electronic means. In developing an electronic business, particularly in cases where the product or service can itself be delivered electronically, the server hosting the data can literally be located anywhere in the world. Operating through an IBC in the BVI may offer a number of advantages including the avoidance of sales or value added taxes (VAT), limiting the impact of existing or potential restrictive regulations governing the Internet, limiting exposure to liability and foreign jurisdictions, and possibly providing deferral of tax so that profits may be reinvested in international expansion. In addition, it may be beneficial to host a copy of key data in a Y2K-ready offshore jurisdiction such as the BVI for extra protection.

Investment Company or Mutual Fund: Funds accumulated through BVI IBCs can be invested or deposited throughout the world. While returns or interest payable in respect of the fund's investments may be subject to taxation in a foreign jurisdiction, generally capital gains are not. No taxes are applicable to income or capital gains in the BVI, and as such the Territory may be highly attractive as a venue for Offshore Mutual Funds. The effective tax deferral which a BVI fund can offer (subject to tax laws applicable to investors) can significantly enhance the returns achievable by the fund. In addition, the BVI Mutual Funds Act legislation enables sponsors to offer investors a regulated fund at a fraction of the establishment and compliance costs that such a fund would attract in, for example, the United States or United Kingdom (note that foreign securities regulation in the place of residence of investors still needs to be considered and complied with if applicable).

Holding Company: A BVI IBC may be used as a holding company of any kind of entity anywhere in the world. Such a structure enhances the owner's privacy, facilitates ultimate sale of the underlying business and may have other practical benefits in the course of day to day operations. For example, the holding company could be used to provide loans to subsidiaries in various countries, on which the subsidiaries may obtain the benefit of tax deductions on interest paid. Since the holding company is situated in the BVI, where there are no income or corporate taxes on IBCs and no dividend payment requirements, profits which are accumulated in the tax free jurisdiction can be used to fund subsidiaries' requirements or reinvested elsewhere.

Property Company: If real estate is owned by an IBC rather than an individual, a vendor wishing to dispose of the property can sell the company shares, rather than the property. This may be a legitimate means of successfully avoiding capital gains tax and in some cases inheritance tax implications. In addition, in certain jurisdictions it may be easier to effect a sale by transferring the shares in the company, rather than transferring the property owned by the company. A further advantage includes the ability of several individuals to each own a part of the interest in the property, without the problems involved in having them each recorded as an owner of the property.

Confidentiality and Privacy: In certain circumstances, it could be necessary to shield ownership of a company by establishing an IBC. A high net worth individual with properties or other assets in a number of countries may wish to hold these through the medium of an IBC as a personal holding company. If all assets are transferred into the IBC, upon his death probate could be applied for in the British Virgin Islands rather than in each of the countries where he might hold assets. This saves legal fees and avoids publicity. In addition, the owner's interest would not be recorded in any foreign or domestic public filings (as would be required in many jurisdictions).

Banking Company: Many offshore banking institutions have been established in tax havens in recent years. Many of these institutions are subsidiaries of major international banks. Such institutions pay interest free of withholding tax and engage in international financing from offshore bases, which are free from exchange controls. Such banking institutions and their associated trust companies are able to provide a wide range of financial services to their international clientele. For smaller businesses and individuals, bank licenses are generally not available unless they have an established banking operation in good standing in another jurisdiction.

For more information on registering a BVI IBC Company please contact our advisors on info@miklegal.com for complete assistance.