US VIRGIN ISLANDS Trends and Developments Contributed by: Marjorie “Jorie” Roberts, Sean Foster, Alexander Polinsky and Duncan J. J. Kessler, Marjorie Rawls Roberts PC
first half of a year and remain USVI residents for the next three years, among other requirements. Tariff benefits Given that the USVI is outside the US customs zone, it has enacted its own customs law, imposing a 6% duty on items not manufactured in the US. However, items can be imported into the USVI (and specifically the SSTZ) free of customs duties and if “substantial transformation” then takes place in the USVI, the newly transformed or manufactured items can then be imported into the United States free of any US tariffs pursuant to General Headnote 3 (a)(iv) of the US Harmonized Tariff Schedule. Opportunity Zone benefits OBBBA extends the Federal Opportunity Zone pro - gramme, which also applies in the USVI. The renewal of Opportunity Zones presents a significant opportu - nity to accelerate economic development in the USVI – particularly on St Croix. Opportunity Zones are federally designated areas that offer capital gains tax relief to investors who make long-term commitments in underserved communities. The goal is to stimulate private investment, create jobs and foster economic revitalisation in areas that need it most. “This is a major step forward for St. Croix and for our broader economic development goals”, USVI Gover - nor Albert Bryan has said. “The reauthorization of the Opportunity Zone program gives us the ability to des - ignate new zones in 2026, and we are moving quickly to ensure that key industrial sites are prioritized for this incentive.” Benefits for persons who are naturalised in the USVI General rule The Code imposes estate taxes on the value of estates of US citizen decedents and taxes on gifts, defined as the transfer for less than fair value. Persons who obtain their US citizenship by reasons of their birth or naturalisation in the USVI are treated for US estate- and gift-tax purposes as non-citizens not resident in the USA when they are resident in one of the posses -
sions at the time a gift is made or are domiciled in one of the possessions at the time of death. Specifically, Section 2209 of the Code provides that a person who acquires US citizenship solely by reason of being a citizen of a US possession, or through birth or residence within such possession, is treated as a non-resident not a citizen of the USA if they reside in a possession at the time of death. Under Section 2501 (c) of the Code, a person meeting these require - ments is treated as a non-resident for federal gift-tax purposes if they reside in a possession at the time of making the gift. Non - residents taxable on certain US situs assets The gross estate of a decedent is determined in the same manner as the gross estate of a US citizen or resident, no matter where the property is located. However, only the part of the gross estate located in the USA (ie, the 50 States and the District of Colum - bia) is subject to tax under Section 2103 of the Code. Federal estate tax rates for non - resident non - citizens are the same as for citizens , but a special credit applies The estate tax must first be computed, but only in respect of US situs assets, and then reduced by certain credits. For a non-resident non-citizen who resides in a US possession and was a US citizen because of birth, residence or citizenship in the pos - session, Section 2102 (c) of the Code provides that the taxpayer’s estate qualifies for a credit that is the greater of USD13,000 or USD46,800 multiplied by the ratio that the value, at death, bears to the value of the decedent’s gross estate. For gifts made by non-resident non-citizens, the fed - eral gift tax applies to a transfer only if the property is situated in the USA, pursuant to Section 2511 (a) of the Code. For such gifts, the USD19,000 annual exclusion (2025) provisions apply. Naturalisation in the USVI requires residency in the USVI Even if a person has acquired their permanent resi - dent Green Card status through a means other than as an immigrant investor in the USVI, they can apply for naturalisation in the USVI. The IRS has not spe -
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