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 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 USVI source gross receipts, and from USVI property tax for the property occupied by the benefi - ciary for its approved business activities. No withhold - ing 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 with - holding tax rate of 4.4% on dividend payments over - seas. Similarly, no income tax is withheld on interest paid to non-resident individuals, and the tax rate on dividends paid to non-resident individuals is 4%. A beneficiary’s customs duties are reduced from 6% to 1% on raw materials and component parts imported from outside the USA. No local customs duties are To qualify under the EDC programme, an applicant in a qualifying business must make a minimum capital investment of USD100,000 and meet certain employ - ment requirements. A designated service business, such as a financial or consulting firm serving clients outside the USVI, is required to employ five full-time employees; the EDA has the authority to lower the five-employee minimum or permit a business to have several years to meet the five-employee minimum upon evidence of good cause. At least 80% of the beneficiary’s employees must be USVI residents, unless a waiver is granted. Beneficiar - ies must purchase goods and services locally when available, make certain contributions to scholarships and public education, and provide a plan for civic par - ticipation. Beneficiaries must also provide employee benefits and a management training programme. The application process is in-depth, and requires details of the beneficiary’s ownership, as well as finan - cial information and a background check for benefi - cial owners with more than a 5% interest. Submission of the application is followed by its presentation at a public hearing before the EDC commissioners, and then by a review by the EDC commissioners. imposed on US-made products. EDC programme requirements
Upon approval by the EDC, benefits are available for initial periods of 20 years for investments on the islands of St Thomas and St John, and for 30 years on St Croix. Beneficiaries that invest in infrastructure, new construction or refurbishment in an aggregate amount of not less than USD1 million may be granted 100% of their existing benefits for an additional five years upon the expiry of their certificates. Also, prior to the expiry of a benefits term, a beneficiary may seek an extension of 100% of benefits for an additional ten years. RTPark programme requirements In most cases, an applicant, through a legal repre - sentative, negotiates the terms of its tenancy with the RTPark’ s executive director. Negotiations include: • the amount of the one-time entry fee paid by the applicant (typically at least USD50,000 and up to USD100,000, depending on the size of the appli - cant); • the applicant’s obligation to pay annual manage - ment fees to the RTPark (typically between 1% and 2% of the applicant’s gross income); • the structuring of a charitable donation to the UVI (which can include scholarships, internships, faculty support, funds for specific programmes and in-kind contributions of time, typically starting at a total of USD35,000 annually); and • the percentage and characteristics of an equity interest to be awarded to the RTPark (which is typically non-voting with no ongoing distribution rights). The payments are typically based on the size of the applicant and its projected financial revenues. Once negotiations have been finalised, a term sheet is entered into between the applicant and the RTPark, providing the basis for the formal application that cov - ers the applicant and its owners. After the application is submitted, the RTPark conducts a due diligence review. The final terms are memorialised in the Park Tenant Agreement, which is executed by representa - tives for both the applicant and the RTPark and serves as the operative document defining the relationship between the Protected Cell and the RTPark. Each
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