A guide to help you understand the ins and outs of business in the US Virgin Islands
The US Virgin Islands (USVI) is an unincorporated Territory of the United States located approximately 1,100 miles southeast of Miami, Florida. Acquired from Denmark in 1917, the USVI is made up of the islands of St. Croix, St. John, St. Thomas and Water Island, plus numerous uninhabited cays, with a total population of just over 100,000. The USVI uses US currency, and no exchange controls exist. In 2017, the GDP of the US Virgin Islands was $3.855 billion. The USVI’s prime natural resources include pristine beaches, crystal clear seas, a mild year-round climate, the natural harbour on St. Thomas, the Virgin Islands National Park on St. John, and the rainforest on St. Croix. These assets, combined with the investment security of a US jurisdiction and a variety of federal and local incentives, have cemented tourism as the major local economic activity. The USVI has a growing number of consulting businesses and technology businesses that complement tourism through its specialised economic incentive programmes. The USVI also offers banks that are FDIC insured and coverage by the United States’ extensive network of bilateral investment treaties (but not tax treaties). The USVI has two federal judges and is part of the Third Circuit Court of Appeals.
The U.S. Virgin Islands is uniquely positioned to support a number of target industries spanning St. Croix, St. Thomas, St. John and Water Island. With an active and diverse business community, the USVI is fertile ground for companies to thrive. The economic landscape of traditional and emerging industries include financial services, information technology, advanced manufacturing, and tourism and hospitality. With a highly productive workforce and powerful tax benefits, the U.S. Virgin Islands offers a competitive advantage that is second to none for starting, growing, or relocating your business.
The Virgin Islands Economic Development Commission (“VIEDC”) offers a unique and attractive tax incentive program for companies locating in the USVI. This is a competitive off-shore tax benefit program that is sanctioned by the U.S. Government through an Act of Congress under the Internal Revenue Code. A USVI corporation pays an effective tax rate of approximately 23.1% on its eligible income, and with the 90% tax credit the effective rate is 2.31% (salaries and other forms of compensation such as guaranteed payments are fully taxable). Beneficiaries are also exempt from the Territory’s 5% tax on gross receipts, and from USVI property tax for the property occupied by the beneficiary for its approved business activities. No withholding tax is imposed on payments to US corporations or US resident individuals. Beneficiary companies with foreign owners are exempt from withholding tax on interest payments, and are subject to a reduced withholding tax rate of 4.4% on dividend payments overseas. Similarly, no income tax is withheld on interest paid to non-resident alien individuals, and the tax rate on dividends paid to non-resident individuals is 4%. Beneficiaries receive an exemption from USVI excise tax on building materials and machinery used in the construction of their facilities, and on raw materials brought into the USVI to produce articles. In addition, a beneficiary’s customs duties are reduced from 6% to 1% on raw materials and component parts imported from outside the United States.