US VIRGIN ISLANDS TRENDS AND DEVELOPMENTS Contributed by: Marjorie Roberts (“Jorie”), Sean Foster, Renée Marie André, Lisa Wisehart, David Bornn, Duncan J. J. Kessler and Jessica McKenney, Marjorie Rawls Roberts PC (St Thomas - HQ)
investments in Opportunity Zone communities. Inves - tors can: • defer capital gains taxes on earnings from many types of investments up to December 31, 2026; • reduce taxes on the capital gain invested into an Opportunity Fund by 10% after 5 years and by an additional 5% after 7 years; and • gain permanent exclusion from capital gains taxa - tion on Opportunity Fund investments held for at least ten years. The USVI has 14 designated Opportunity Zones, encompassing half of St. Croix, including the towns of Christiansted and Frederiksted, and significant por - tions of St. Thomas, including the capital city of Char - lotte Amalie and Water Island. Other tax credits are also available in the USVI, such as the income tax credit for preserving historic proper - ties and income tax credits for owners of certain newly constructed or substantially rehabilitated low-income rental housing projects. It should be noted that, in some cases, investors can combine investments across multiple programmes, such as combining an investment under the Oppor - tunity Zone Program with one that qualifies for the Economic Development Program or the Enterprise Zone Program. However, since the USVI is considered foreign to the US for many tax purposes, it is critical that non-USVI bona fide residents carefully structure investments in the USVI to avoid the USVI investment being structured as a controlled foreign corporation. Marine Benefits To expand its marine tourism sector, the USVI has enacted certain tax exemptions beyond those also available under the four USVI incentive programmes previously discussed. For example, the USVI has exempted all boats, boat engines and boat parts from USVI excise taxes and customs duties. Also, passen - gers on charter yachts and other boats are not subject to the USVI’s hotel room tax. Finally, the USVI’s 5% gross receipts tax is only imposed on receipts from USVI sources, so the payments for any boat that is chartered in the USVI but that also spends time in the British Virgin Islands or Puerto Rican waters or at sea
are allocated between time spent in the USVI waters and time spent elsewhere, with only the USVI source payments being taxable. Entity Selection and Business Licensing Requirements The USVI provides many options for forming a legal entity within the jurisdiction, including corporations, limited liability companies, trusts, and partnerships, including general partnerships, limited partnerships, limited liability limited partnerships, and limited liabil - ity partnerships. The USVI has adopted the Uniform Limited Liability Company Act, and the formation and governance of an LLC is similar to that imposed in the 50 states and the District of Columbia. Apart from general partnerships (which are formed simply by agreement of the partners) and trusts, all entities are formed through filings with the USVI Office of the Lieu - tenant Governor, Division of Corporations & Trade - marks. Federal law applies in the USVI, including the Securities Act of 1933 and the Securities Exchange Act of 1934. The USVI has also adopted the Uniform Securities Act for territorial-level securities regula - tions. Careful consideration should be taken when structuring business operations in the USVI, includ - ing the choice of entity, tax elections available under the Code, and franchise taxes owed by different entity types. All USVI entities receive employer identification numbers from the IRS. Business licences are issued by the Department of Licensing and Consumer Affairs (DLCA) and are required before a business can operate in the USVI. The DLCA provides a general business licence that can be used to register with the Department of Labour and to set up a bank account, but a business must request a licence that specifies its specific business activities as soon as feasible, since licences are effec - tive upon the issuance date rather than the application date. Hotel Occupancy Reports and Hotel Room Tax Every hotel in the USVI is required to file Hotel Occu - pancy Reports with the USVI Bureau of Economic Research, a division of the Office of the Governor, on a monthly basis, even for months in which the respec - tive hotel is closed. The information obtained from
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