US VIRGIN ISLANDS Law and Practice Contributed by: Marjorie (Jorie) Roberts, Duncan J.J. Kessler and Jessica McKenney, Marjorie Rawls Roberts PC
Beneficiaries under the EDC Program can request modifications, extensions, renewals or waivers under the Program. See, eg, 29 V.I.C. § 715. Additionally, applicants and beneficiaries of the Program can appeal any actions of the EDC in the Superior Court of the Virgin Islands. See 29 V.I.C. § 724. 3. Corporate Vehicles 3.1 Most Common Forms of Legal Entity Like the United States, the USVI primarily uses cor - porations, limited liability companies (LLCs), general partnerships, limited liability partnerships (LLPs) and limited liability limited partnerships (LLLPs). Under 13 V.I.C. § 62, corporations must have at least three directors (unless the corporation has fewer than three shareholders), and under § 69 any two offices (but not more than two) other than those of president and secretary may be held by the same person. LLCs may be formed by one member, while LLPs require at least two partners. In our experience, most enti - ties are LLCs or LLPs, which limit the liability of their members or partners. Some persons may prefer LLPs depending on their initial capital, as under 13 V.I.C. § 531 every USVI or foreign corporation doing busi - ness in the USVI must pay an annual franchise tax of USD1.50 for each USD1,000 in “stock, capital, and paid in capital stock used in conducting business in the [USVI]”. However, an LLP pays a flat annual fran - chise tax of USD150. LLCs are the most common entities and are well- suited for a wide range of business activities while providing their members with flexibility in governance. For example, LLCs do not require mandatory annual meetings or the appointment of directors or officers, and, other than certain statutory fiduciary duties (duty of loyalty, duty of care, the obligation of good faith and fair dealing, and access to books and records), an LLC’s operating agreement may differ from the provi - sions found in the LLC Act. The V.I. Code specifically provides for foreign corpo - rations, foreign LLCs and foreign limited partnerships doing business in the USVI. See 13 V.I.C. §§ 401–407; 13 V.I.C. §§ 2001–2009; 26 V.I.C. §§ 521–528.
On 8 December 1986, the Legislature enacted the exempt companies’ legislation, which subsequently went into effect on 24 February 1987, upon the sign - ing of the Tax Implementation Agreement Between the United States of America and the Virgin Islands. On 17 August 1993, then-USVI Governor Alexander Farrelly signed into law the Exempt Company Amendments Act of 1993, which made significant changes to the USVI exempt companies’ legislation to enhance the use of exempt companies by foreign investors. USVI exempt companies offer many of the benefits of other offshore jurisdictions’ international business companies but with the added advantages of US flag protection, access to US courts, non-coverage of the Common Reporting Standard, and the ability to obtain an “N” registration number from the US Federal Avia - tion Administration for foreign-owned aircraft. The V.I. Code (13 V.I.C. §§ 850–863) provides for exempt companies. According to § 855, most exempt companies are treated as “a foreign corporation which does not earn United States Virgin Islands source income and which is not engaged in trade or business within the United States Virgin Islands”. However, an exempt insurer, exempt mutual fund or exempt inter - national banking facility has additional provisions that relate to its exempt status. A USVI exempt company offers foreign investors substantial tax benefits. An exempt company is effectively exempt from tax on all income except for income derived from US sources and effectively connected with a US trade or business. A USVI exempt company is exempt on interest income received on deposits with banks or savings institutions located in the USVI or abroad, as well as on amounts held by an insurance company under an agreement to pay interest on the amounts. USVI exempt companies are also exempt from tax on dividends and interest received from another exempt company and on gains or losses from the sale, exchange or other disposition of the stock of another exempt company. They are also exempt from all local USVI taxes, shareholders of a USVI exempt company are not subject to any with - holding tax, and stock held by a non-resident alien individual in a USVI exempt company is not subject to federal estate tax or to USVI inheritance tax, so use of a USVI exempt company can be an important estate planning tool for foreign individuals. Such individuals
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