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
Opportunity Zones – federal benefits for USVI investments Several US programmes are also available for investors in the USVI. The Tax Cuts and Jobs Act was passed in December 2017 and established the Opportunity Zone Program, which provides immediate and long-term tax advantages to US investors in Opportunity Zones. Investors can defer capital gains taxes on earnings from many types of investments up to 2027, can reduce taxes on the capital gain invested into an Opportunity Fund by 10% or 15%, depend - ing on whether the qualifying investment is held for five years or seven years, and can gain per - manent exclusion from capital gains taxation on Opportunity Fund investments held for at least ten years. The USVI has 14 designated Oppor - tunity Zones. Other tax credits are also available in the USVI, such as the 20% income tax credit for preserv - ing historic properties and income tax credits for owners of certain newly constructed or sub - stantially rehabilitated low-income rental hous - As referenced above, the USVI is outside the US Customs Zone. 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 Harmo - nized Tariff Schedule. Choice of entity The USVI provides many options when choos - ing to form a legal entity within the jurisdiction, including corporations, limited liability compa - nies and partnerships, such as: ing projects. Tariff Benefits
• general partnerships; • limited partnerships;
• limited liability limited partnerships; • limited liability partnerships; and • trusts.
The USVI has adopted the Uniform Limited Lia - bility Company Act, and the formation and gov - ernance of an LLC are similar to that imposed in the 50 states and the District of Columbia. Except for general partnerships (which are formed by the agreement of the partners) and trusts, all entities are formed through filings with the Office of the Lieutenant Governor of the USVI, Division of Corporations and Trade - marks. Federal law applies in the USVI, includ - ing the Securities Act of 1933 and the Securities Exchange Act of 1934. In addition, the USVI has adopted the Uniform Securities Act for territorial- level securities regulations. The USVI imposes an annual franchise tax on LLCs and corpora - tions, based on the capital used in the USVI trade or business, with the minimum franchise tax being USD300 annually. Partnerships pay a Many USVI economic incentives and related programmes provide personal tax benefits for bona fide USVI residents on their allocations or dividends. To be a bona fide USVI resident, a person must meet one of five alternative physical presence tests each year, have a closer connec - tion to the USVI than any other location, and have a USVI tax home. The most-used “physical presence” test involves being in the USVI for all or part of 183 days in a given year; however, individuals who travel fre - quently can satisfy the physical presence test by spending no more than 90 days in the USA each set annual fee of USD150. Residency requirements
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