Taxation in the British Virgin Islands

Taxation in the British Virgin Islands is relatively simple by comparative standards; photocopies of all of the tax laws of the British Virgin Islands would together amount to about 200 pages of paper.Taxation in the British Virgin Islands is mostly notable for what is not subject to taxation. The British Virgin Islands has:

There is technically still income tax assessed in the British Virgin Islands for companies and individuals, but the rate of taxation has been set at zero. However, individuals are subject to a payroll deduction made of up to 8% for employees with 12% paid by employers, in relation to all salaries over US$10,000 per annum.

The absence of most major forms of taxation in the Territory has led to the country being included on most recognised lists of tax havens, although the jurisdiction prefers to style itself as a modern offshore financial centre.

There are a number of forms of taxation and revenue collection in the British Virgin Islands, but the majority of the Government's revenues are obtained directly from annual licence fees for offshore companies incorporated in the jurisdiction.

In 2005 the British Virgin Islands introduced a payroll tax in relation to employment and "deemed employment" within the British Virgin Islands. The legislation was brought in at the same time as income tax in the Territory was reduced to zero. The numbers were not in fact a perfect balance, and the Government (deliberately) reduced the amount of tax revenue it received by moving to the payroll tax system.

The tax is paid at a graduated rate depending upon the size of the employer. The current rates (as at June 2007) are 10% for small employers and 14% for larger employers. 8% of the total remuneration is deduction from the employee, the remainder of the liability is met by the employer. The first US$10,000 of remuneration are free from payroll tax.

Certain limited transactions in the British Virgin Islands are still subject to stamp duty. The main application of the stamp duty legislation relates to transfers of real estate, or transfers of in companies which own real estate. The rate of stamp duty on such transactions varies according to the status of the transferee; if the transferee is a Belonger, then stamp duty on land transfers is assessed at 4%; if the transferee is a Non-Belonger, it is assessed at 12%.

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