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
Applicability of the net investment income tax Finally, Section 1411 of the Code imposes a Medicare contribution on unearned income and specifically imposes a tax equal to 3.8% of an individual’s net investment income for a taxable year. The Treasury Regulations promulgated under Section 1411 of the Code provide that bona fide residents of US territories are subject to the tax only if they have a US income tax filing requirement. However, bona fide residents of the USVI have no income tax obligation (or related return filing requirement) with the USA, provided that they properly report income and pay income tax to the BIR. Therefore, the tax imposed by Section 1411 does not apply to bona fide resi - dents of the USVI because they will not have an income tax liability to the USA if they fully comply with the tax laws of the USVI.
year or by not having a significant connection to the USA at any time during the year (like having a home located in the USA). The establishment of a “closer connection” involves such factors as having a home, filing returns as a USVI resident, obtaining a USVI driver’s licence, registering to vote and voting in the USVI, and having a USVI bank account, although no single factor is determinative. A ”tax home” is an individual’s principal place of business. In most cases, the individual must be a bona fide resident of the USVI for the entire year to get benefits on their income from the benefitted business, although there is a “year of move” rule permitting individuals to be bona fide residents if they move to the USVI in the first half of a year and remain USVI residents for the next three years.
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