US VIRGIN ISLANDS TRENDS AND DEVELOPMENTS Contributed by: Marjorie (Jorie) Roberts, Sean E Foster, Renée Marie André, David Bornn, Lisa M Wisehart and Duncan J J Kessler, Marjorie Rawls Roberts PC
Doing Business in the US Virgin Islands: An Introduction Background The US Virgin Islands (USVI) is an unincorpo - rated territory of the United States of America (USA) located approximately 1,100 miles south- east of Miami, Florida. Acquired from Denmark in 1917, the USVI is made up of the islands of St Croix, St John, St Thomas and Water Island, plus numerous uninhabited cays, with a total popula - tion of approximately 85,000. The USVI uses US currency, and no exchange controls exist. The USVI’s prime natural resources include pristine beaches, crystal-clear seas, a mild year-round climate, the natural harbour on St Thomas, the Virgin Islands National Park on St John, and the rainforest on St Croix. These assets, combined with the investment security of a US jurisdiction and a variety of federal and local incentives, have cemented the territory as a stable place to do business, with tourism as the major local economic activity. Beyond tourism, the USVI attracts a growing number of consulting businesses and technol - ogy businesses owned by US citizens and per - manent residents who have moved to the USVI to take advantage of its specialised economic incentive programmes for entrepreneurs who want to live and work in paradise. In 2020, the USVI completed a long-term economic strategy and action plan (Vision 2040), with goals that include diversifying the territory’s economic base through growth in target industries, including professional and technical services, renewable energy, agribusiness, coastal/ocean resources and health sciences. The USVI is particularly well suited to attract and utilise all types of renewable energy and is actively working with investors on a significant
solar power expansion and implementation of wind power. The USVI also offers banks that are insured by the Federal Deposit Insurance Corporation (FDIC) and is covered by the USA’s extensive network of bilateral investment treaties (but not tax treaties). The USVI has two federal District Court judges and is part of the Third Circuit Court of Appeals. It has direct flights to many mainland cities and attracts many yachts seek - ing a secure, well-located and attractive home base. With respect to transportation, the Virgin Islands Port Authority recently embarked on a public- private partnership with the goal of redevelop - ing and modernising the territory’s two airports: the Henry E. Rohlsen Airport on St Croix, and the Cyril E. King Airport on St Thomas. Among other goals, the project is intended to stimu - late economic growth in the USVI by increasing the efficiency and safety of airport operations, expanding airport capacity and attracting private investment to the territory. Tax system overview The Internal Revenue Code of 1986, as amend - ed (the “Code”), applies in the USVI under a ”mirror” system whereby “the USVI” is effec - tively substituted for ”United States” wherever the latter appears. Consequently, the income tax provisions of the Code, the Treasury Regulations promulgated thereunder, and revenue rulings and revenue procedures issued by the Internal Revenue Service 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 US, it has been granted authority by the US Congress to enact special tax laws to encourage investment in
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