US VIRGIN ISLANDS Trends and Developments Contributed by: Marjorie “Jorie” Roberts, Sean Foster, Alexander Polinsky and Duncan J. J. Kessler, Marjorie Rawls Roberts P.C.
The Code applies in the USVI under a “mirror” system, whereby “USVI” is effectively substituted for “United States” wherever the latter appears. Consequently, the income tax provisions of the Code, the Treasury Regulations promulgated thereunder, and revenue rul - ings and revenue procedures issued by the Internal Revenue Service (IRS are generally applicable in the USVI, with certain limitations. As a US territory, the USVI occupies a unique status: although it is part of the USA, it has been granted authority by the US Congress to enact special tax laws to encourage investment in business operations. The USVI offers many opportunities for investors who seek a politically stable jurisdiction with targeted eco - nomic incentives, legitimate protection of their assets from taxes, and an enticing location with excellent telecommunications. Benefits for Family Offices, Investment Managers, Venture Capital Management, Investment Banking and Similar Businesses Overview of USVI economic incentive programmes The infrastructure to support family offices and invest - ment and consulting businesses in the USVI has large - ly been in place since 1986 through the Economic Development Authority (EDA) and its various invest - ment programmes (and their predecessors). The Eco - nomic Development Commission (EDC) programme, administered by the EDA’s seven-member board, offers exemptions and reductions to entities qualified as EDC beneficiaries, and offers reductions to direct and indirect owners of entities qualified as EDC ben - eficiaries if the owners are bona fide residents of the USVI. Businesses can also qualify for tax incentives under the Research and Technology Park (RTPark) programme, which seeks to support the USVI’s expanding tech - nology and knowledge-based sectors to promote the growth, development and diversification of the USVI economy. In addition, the RTPark programme works to broaden the capabilities of the University of the Virgin Islands (UVI) by providing it with financial sup - port and training opportunities for UVI students, and by creating a supportive research environment that combines the resources of the UVI with those of the public sector and private industry. Oversight of the
RTPark programme is vested in the seven-member RTPark board of directors, which has the authority to review and approve or disapprove applications from potential beneficiaries, referred to under the RTPark programme as “Protected Cells”. The RTPark programme is ideal for applicants engaged in energy, research and system development, busi - ness process outsourcing and financial technology, especially where technological resources are critical elements. By way of illustration, RTPark beneficiaries currently operate in areas such as: • data analytics; • e-commerce; • software development and licensing; • technology-based management and business process services; • blockchain and crypto; • internet advertising; • telecommunications and information technology; Additionally, in 2020 the USVI legislature enacted the Virgin Islands South Shore Trade Zone Act (SSTZ), which designates approximately 3,000 acres in the “south shore” area of St Croix. This area features a deepwater port, is a short distance from the Henry E. Rohlsen Airport, and has established roads and utility infrastructure. The SSTZ formally adopts this area as an “Enterprise Zone”. • financial technology; and • medical device technology. The goal of the SSTZ is to establish a business zone that eliminates traditional barriers to commercial trade and investment in support of industries such as light manufacturing, trans-shipment, the agricultural sec - tor, micro-manufacturing, industrial development, and the territory’s green and blue economy sectors. Tax benefits Benefits under the EDC and RTPark programmes include a credit equal to 90% of the otherwise appli - cable income tax, which applies to the income from the benefited business and to the USVI-resident own - ers on their allocations or dividends. A USVI corpora - tion pays an effective tax rate of approximately 23.1% on its eligible income, and with the 90% tax credit
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