22.09 BERMUDA

Bermuda is a highly respected jurisdiction with tax neutrality and no exchange control for non-residents undertakings. It has an established stock exchange, political stability, modern business laws, a good judiciary and a very well developed professional infrastructure. There is easy access by sea and air. Bermuda has a very well developed and respected captive insurance industry. It is one of the favorite tax havens and destination resorts for the British and American establishment. It is also expensive. Annual government fees are US$1,680. Companies formed as exempt under the Companies Act of 1981 enjoy substantial advantages: no capital duty; no restriction on where meetings are held; Bermuda directors are not required; no restriction on location of meetings: no annual return or filing and no exchange controls. There is however public disclosure of directors, officers and shareholders but not accounts. Identity of the beneficial owners must be disclosed to the authorities prior to incorporation and the granting of tax exempt status. There are no double tax treaties. Bermuda is recommended for substantial public business enterprise, especially insurance activity or companies which wish to list their shares. (Courtesy of the Baltic Banking Group).

Find the contact names, addresses, numbers and information for local government offices, banks, accountants, company formation services, investment and management companies, advisors, experts, maildrops, real estate agents and other useful local contacts in the THE OFFSHORE MANUAL & DIRECTORY

22.10 BRITISH VIRGIN ISLANDS

Called by the French 'les Iles sous le Vent', and with a near perfect climate, the BVI has raced to the forefront as one of the premier tax havens of the world. The forty islands (many uninhabited) have friendly people, beautiful beaches, and an efficient infrastructure. The BVI special niche is its proximity to the United States. It is 60 miles east of Puerto Rico in the Caribbean, only 2 hours by jet from Miami.

The BVI have the basic offshore financial center attributes: stable, capitalistic government, good communications, an educated population, no exchange controls, and a tax and regulatory climate that encourages offshore activity. The country is a British Dependent Territory, with locally elected members and a Governor appointed by the British Crown. The language is English and the currency is the U.S. dollar.

The center of this large-scale activity is a clutch of ordinary-looking offices in a Road Town, Tortola where 50 or so corporate agents, including well-known names such as Ansbacher and Matheson, compete for this lucrative business.

The BVI government recognizes the importance of its offshore business. Following the termination of the income tax treaty with the U.S. in 1982, the International Business Ordinance was introduced in 1984. This provides for the incorporation of companies exempt from BVI taxes. The success of the financial sector in the British Virgin Islands (BVI) is due almost exclusively to its role as the world's leading jurisdiction for international business companies (IBCs).

Unlike the Cayman Islands and other Caribbean offshore centers, BVI does not have a diversified financial services industry, but what it does it does well. In the 11 years since BVI, with the blessing of the British government, passed the International Companies Ordinance, the islands' company incorporation services industry has blossomed.

The explosive growth of BVI IBCs over the years received a major boost in 1988 when US lawyers panicked because they had so many companies incorporated in Panama on behalf of their client. At that time the US government was building up its ultimately successful bid to oust Panama's drug-trafficking dictator Manuel Noriega.

What was a calamity for Panama proved to be a bonanza for BVI when almost overnight a whole raft of companies was transferred to BVI.

Now half way through 1996, the BVI is the undisputed leader of the pack, with 180,000 IBCs accounting for nearly half the territory's national income in management fees.

In 1987, only 2,000 IBCs were registered in the BVI. By the end of 1988 the figure had soared to 7,000. Incorporation levels during 1990 reflect an almost 50% increase over 1989, a year in which slightly more than 11,000 IBCs were registered. Today (August, 1996) a total of about 180,000 IBCs have been registered in the BVIs. The BVIs can now claim to have more offshore companies in their registrar than the Caymans have in theirs (=34,000).

The majority of IBCs are private companies. Recently, IBCs have been used for mutual funds. IBCs cannot (1) do business with BVI residents, (2) own BVI real estate, (3) do business as a bank or insurance company, or (4) provide registered offices to others.

Advantages of BVI IBC's include:
  1. A minimal requirement of 1 shareholder and director;
  2. A company may serve as director;
  3. No minimum issued share capital;
  4. Can issue bearer shares (and shares without par value), and can acquire its own shares;
  5. No annual returns or accounts need be filed;
  6. Exemption from all BVI income taxes, stamp duties, estate, inheritance and gift taxes;
  7. Administration of the IBC within the BVI does not subject the company to local income taxes (as high as 50%);
  8. Information concerning shareholders and directors does not have to be filed with the Registrar of Companies.
Costs

IBC's having an authorized capital of $50,000 pay a government incorporation fee of $300. An annual IBC license fee of $300 is payable to the government every year after the year in which the company is registered. Large IBC's with authorized capital in excess of $50,000 pay a $1,000 annual franchise tax (license). Failure to pay the government's license fee on time (by July 31 of each year) will result in a 10% to 50% penalty assessment. BVI companies are stricken from the records if they do not pay the annual fee by the 31st of December of the year in which it is due. While several offshore centers (including the Cayman Islands and Bermuda) offer similar advantages as the BVI, in most cases there are onerous administrative, legal and statutory costs to bear and these may have the effect of eroding the benefits of low taxes. Currently, only the Bahamas offer a less expensive cost regime for incorporating than the BVI.

The British Virgin Islands has succeeded in avoiding the necessity to involve the principal in hefty fees, duties and charges by virtue of its uncomplicated operating procedures and statutory requirements and has justly earned a reputation as one of the least costly offshore centers worldwide.

FORMATION AND STATUTORY REQUIREMENTS

The only documentation that needs to be lodged by an IBC, upon incorporation, is the Memorandum and Articles of Association. This will give details of the Registered Agent and Registered Office. Directors and shareholders are not on public record.

Time to Incorporate

IBC's can be ready-incorporated and held as shelf companies on an immediate basis and can deliver incorporation documents by courier within 48 hours. When a specific name is required, incorporation can normally be arranged within 24 hours, with courier delivery of the incorporation documents within one week. Using an offshore accounting firm or lawyer, the cost of forming an IBC is about US$1,400, which includes the first year's Registered Office and Agents Fee.

Share Capital Requirements

The minimum share capital, which must be issued, is one share, which may be to bearer. An IBC may issue multiple classes of shares. Shares may be issued with or without par value. The authorized capital may be stated in any currency.

Directors, Secretary, Registered Office

Directors of an IBC need not be British Virgin Island residents, may be corporations and only one director is required. The concept of secretary is not recognized in the British Virgin Islands but there is no objection to such an appointment if so required.

An IBC must have a Registered Office and a Registered Agent in the British Virgin Islands and a copy of its Shareholders Register has to be kept at the Registered Office but is not open to public inspection.

Location of Company Records

The statutory records of a British Virgin Islands company may be kept anywhere in the world but an imprint of the Company Seal must be held at the Registered Office if the seal is outside the British Virgin Islands.

TAXATION

IBC's are exempt from all taxes and withholding taxes in the British Virgin Islands and pay only Registration Fees and Annual License Fees which amount to US$300 per annum unless authorized capital is higher than US$50,000. In this situation, the fees rise to US$1,000.

Double Taxation Agreements between the United Kingdom and Japan and Switzerland extend to the British Virgin Islands but do not generally apply to IBC's.

Audit/Reporting Requirement

An IBC is not required to either prepare or file any financial records in the British Virgin Islands.

Financial Year End

Normally, for reasons given above, this would not be relevant but if financial records are prepared any financial year end may be used.

EXCHANGE CONTROL & CURRENCY

There are no exchange controls whatsoever in the British Virgin Islands. The currency used is the United States Dollar.

British Virgin Island Trusts

The 1961 Trust Ordinance provides that BVI-based trusts are exempt from tax where all the assets (other than bank accounts) are outside the BVI. Stamp duty on the trust instrument is nominal if a small cash sum is settled originally and other assets added later.

In the British Virgin Islands , stamp duty is charged at a rate of US$1 on each US$500 or part thereof when a trust is set up unless an IBC (International Business Company) is the settler (grantor) or trustee, in which case the transfer to the BVI trust is exempt from the stamp duty. Where neither the settler nor the beneficiaries are resident of the BVI, no income tax is payable provided the trust receives no income in the BVI. The exemption from BVI income taxes applies even if the trustees are resident in the BVI.

TYPES OF COMPANIES

In the British Virgin Islands a company can be incorporated either under the Companies Act (known as a CAP 243 Company) or as an international business company ("IBC"). The latter company is extremely versatile in a similar way to, for example, the traditional type of Panamanian and Liberian corporation.

B.V.I. Banking

To protect its reputation as a responsible offshore financial center, the BVI has stringent licensing requirements for banks. Six major banks have general licenses and six have restricted offshore licenses.

BANKS AND TRUST COMPANIES

Companies wishing to carry on banking and trust company business have to be licensed under the Banks and Trust Companies Act, 1990.

There are various minimum capitalization requirements and the annual license fee ranges from US$4,000 for a general trust license to US$10,000 for a general banking license.

There is also a restricted trust license available for a company carrying on trust business on behalf of a particular firm or person, the annual fee for which is US$100.

INSURANCE COMPANIES

Companies wishing to carryon insurance business, either within or outside the British Virgin Islands, have to be licensed.

New Offshore Insurance Act

The Insurance Act 1994 "is the first in a series of major legislative measures, scheduled for adoption over the next six to nine months, that will deepen and expand our partnership with the intentional financial community," according to Lavity Stoutt. The Act is designed to provide an attractive vehicle for a wide range of high-quality insurance services such as: all types of captives; most types of reinsurance; protected life policies and annuities that are free of attachment; and credit life. Regulators in BVI are hoping that the new legislation will significantly enhance the territory's status and attractiveness as a center for legitimate international business activities.

One of the central features of the Act is the provision of an appropriate facility for exemptions. "This provision will enable the BVI to offer high-quality insurance operations, and an exceptionally flexible and attractive environment in which to operate and develop innovative insurance vehicles according to Robert Mathavious (head of the Financial Services Department).

An important feature of the Act is that it provides for the appointment of a commissioner of insurance whose powers will include general supervision of the insurance business being carried on in or from within the territory, ensuring that the laws and regulations relating to the conduct of insurance are enforced and obeyed, and examining all matters connected with insurance. The BVI government says it id confident that the Act will provide a fillip to its efforts aimed at developing the offshore industry in an orderly and progressive manner and at keeping the BVI at the cutting edge of offshore financial centers. The objective is to develop the BVI as a full service international financial center.

The new legislation reflects a recognition by the BVI government and by the insurance industry that some measure of regulation is necessary for the proper conduct of insurance business. It is part of a continuing evolving process in which the BVI government participates and consults with the private sector.

The underlying philosophy and purpose of the legislation is to provide a regulatory environment that offers relative freedom to the insurance industry and is designed to minimize government interference in the day-to-day operations of insurers which are financially sound and in a position to fulfill their commitments to their policyholders and creditors.

The insurance legislation is expected to play significant role in the economic growth of the BVI. Among the projected benefits are: new employment opportunities for islanders; additional expenditure in the local economy from new insurance companies, insurance management companies, insurance agencies and brokerage firms setting up offices in the territory and from their employees; more business for islanders providing support services and for professionals providing accounting, banking and legal services. Legislation for other financial sectors is promised, but Robert Mathavious draws the line at asset protection trusts, at least from the time being. "The jury is still out," he says. We won't lead, but maybe down the road.

ADVANTAGES OF THE BRITISH VIRGIN ISLANDS

Political Stability

A stable and established political structure is essential to the continued success of any offshore financial center. This is evident from the decline of many other offshore areas due to political uncertainty and turmoil. The strength and success of the British Virgin Islands as a low tax center is in no small measure attributable to its longstanding and stable democratic political system. Legal Structure and Expertise.

Principals requiring the use of offshore facilities will want and need to understand the legal framework of the area within which they wish to operate. The legal system in the British Virgin Islands is based upon English law and is of Anglo-Saxon origin and therefore offers a tried and tested system with which many international operators will be comfortable and familiar. Furthermore, it is a system which is suited to company structures and which fully recognizes the Anglo-Saxon trust concept. This fact is most often crucial to the success of an international structure.

The British Virgin Islands can also boast a highly developed infrastructure of skilled professionals, which is necessary to support an efficient offshore center.

Communications

The British Virgin Islands has frequent same day air communications with North America and Europe. Telephone, telex and facsimile facilities compare favorably with any international financial center and worldwide postal and courier services are available on Tortola.

Language

Certain offshore centers prove cumbersome when legal and other documents need to be translated into the official language of the territory. Apart from the obvious inconvenience caused, there are, as a result, additional costs to be borne with no benefit accruing therefrom. The official language of the British Virgin Islands is English and therefore these problems do not arise here. Communications are also, as a result, far easier.

Confidentiality

Unlike the majority of offshore centers, the British Virgin Islands offer the discretion of not having to disclose the beneficial ownership of companies to any authority or person in the British Virgin Islands. Furthermore, as seen earlier, British Virgin Islands IBC's have the power to issue bearer shares.

Change of Domicile

One advantage of an IBC is that it may change its domicile from the British Virgin Islands to another jurisdiction, i.e. it may, for whatever reason, de-register as a company in the British Virgin Islands but in order to continue as a corporate entity it will need to register in whatever other jurisdiction it goes to.

Non-British Virgin Islands incorporated companies may also change their domicile to the British Virgin Islands by lodging Articles of Continuation there, from which time they are recognized by the British Virgin Islands Government as having a legal corpus there. On seizure of assets or prejudice of interest of shareholders by a foreign government, an IBC may obtain a court order to disregard the actions of the foreign government.

CAP 243 COMPANIES ACT COMPANIES

British Virgin Islands companies may be incorporated under the provisions of the Companies Act 1885. Whilst this Act is modeled on United Kingdom company law, there are some differences relating particularly to disclosure requirements.

Briefly, CAP 243 companies may be private or public, limited or unlimited and with or without share capital. Companies are required to file a Memorandum and Articles of Association and a minimum filing fee of US$210 (based upon authorized share capital of US$10,000) is payable. The company must have a registered office within the Territory. Shares may not be issued at no par value and may be issued as fully or partly paid in any currency or for a consideration other than cash. There are no residence or nationality requirements for shareholders, except if the company owns property in the Territory. Names and addresses of registered shareholders are to be kept in a register of members and filed annually with the Registrar of Companies. The recording of details of trust is specifically prohibited by the Act.

Names and addresses of directors must be reflected on the annual return but only for those directors in office at the date of the return. There are no other regulations concerning directors, other than that meetings must be minuted. For example, it is not necessary to disclose the directors names on letterheads.

An annual return must be filed to 30th June in each year, disclosing shareholders and directors as above, plus details of authorized and issued share capital. Along with the annual return a public company has to present an audited balance sheet but this is not required for a private company.

Statutory costs include:
  1. Annual return filing fee - US$50.
  2. Annual company license fee as under:
    1. Resident Company
      On a scale of approximately US$1 per US$1,000 of the total book value at the preceding 31st December of the company's assets situated outside the British Virgin Islands without any deduction for liabilities:
      Minimum when such assets do not exceed US$10,000 - US$25
      Maximum when such assets exceed US$9M - US$10,000
    2. Non-Resident company - US$250
New Developments

You have to use a BVI corporate agent if you want to set up an IBC. It is the task of the corporate agent to carry out due intelligence inquiries with people wanting to form an IBC, to ensure that the company is not going to be used for illicit purposes. The corporate agents are regulated by the Financial Services Department of the BVI's Ministry of Finance.

Both the regulators and the practitioners are keen to ensure that the requirements of due diligence are not mere records. As Robert Mathavious, the MBA-educated head of the Financial Services Department puts it: "We feel effective supervision always attracts rather than deters the type of business we want to see conducted from BVI and we go to tremendous lengths to ensure that service providers (corporate agents) are thoroughly vetted through a screening process." Mathavious adds that the aim of regulation in the BVI is to ensure that corporate agent licensees are institutions of intentional replete who will not let BVI down by associations with dubious business. "You should know who you're going to bed with," says Mathavious, adding, "if not, you run the risk that they're not fit and proper people."

It's a view shared by BVI's Association of Registered Agents, some of whose members want to see membership of the association, arbitration between members and minimum fees all becoming mandatory. They also want members to be required to provide evidence of adequate professional indemnity insurance and they want to establish a database of 'undesirable clients'. So the regulators and the practitioners are moving ahead in the same direction; there is no disparity in their views. But that does not mean there are no potential problems. The difficulty of a harmonious approach comes in translating these laudable aims into practice.

It's a question of having to achieve a delicate balance between effective and responsible regulation and overbearing legislation, which would risk making BVI uncompetitive.

To add to the complexity of the situation is the largely unseen, but ever present involvement, of the British government, which is anxious to ensure that its dependant territories (of which BVI is one) are not used as havens for drugs and terrorist arms activities.

BVI is unusual in that final responsibility for the financial services sector rests with the Islands' recently reelected chief minister, the Honorable Lavity Stoutt.

This is an historical quirk. The usual arrangement is for the dependent territories finance sectors to come under the authority of the governor, appointed by the Queen.

Robert Mathavious says: "Constitutionally, they [the British government] cannot dictate to us." That doesn't mean to say BVI can completely disregard the views of the Foreign Office in London, but as Mathavious points out, the situation has been improved by the presence of Rodney Gallagher, a Foreign Office official based in Barbados as regional financial services adviser. "He understands better than officials in London," says Mathavious bluntly, underlining that the relationship between the UK and BVI is sometimes a bumpy one.

That shaky relationship took a turn for the worse in 1993 when a constitutional review found that there was no effective public accounts Committee in BVI and little parliamentary debate. The report recommended the creation of four additional seats in the islands' legislative Council to take the number up to 13.

The ruling Virgin Islands Party won six seats and remains in power with the help of an independent member. Lavity Stoutt remains chief minister, a position he has held since 1985. The Foreign Office in London has its own ideas about toughening up BVI's legislation on IBC's, but is aware of:

BVI's concern that if it moves too far ahead of others, it will become uncompetitive. Nevertheless, it's hard to imagine that somewhere among those 180,000 IBC's there isn't a scandal waiting to happen.

Potential problems aside, why are IBC's so popular and how much do they cost? Their main appeal is that they operate in a tax-free and unregulated environment. Also, while BVI does not have a stock exchange, it is possible for a BVI company to be listed on a stock exchange elsewhere.

Robert Mathavious points to the flexibility of IBC's.

They can be used of mutual funds, shipping companies and intellectual property. So flexible is the IBC structure, he says, that one was formed specifically to pay Sophia Loren for starring in a movie.

The annual government registration fee for an IBC in BVI varies from US$300 to $1,000 depending on the amount of authorized capital. Incorporation fees paid to a corporate agent are likely to be about $600 and you can double that figure to include items such as the memorandum and articles of association, and provision of a registered office and nominee director.

Because of the huge success of IBC's, BVI has acquired a reputation as a one-product jurisdiction. In an effort to diversify, BVI introduced its new insurance act last year with gateways' for disclosure of information to regulatory authorities and law enforcement agencies in other countries and jurisdictions. The gateways are aimed at assisting in the investigation of any potential irregular or criminal activities.
(Courtesy of New Providence Press: Tax Havens of the World ).

Find the contact names, addresses, numbers and information for local government offices, banks, accountants, company formation services, investment and management companies, advisors, experts, maildrops, real estate agents and other useful local contacts in the THE OFFSHORE MANUAL & DIRECTORY .

22.11 BRUNEI

Find the contact names, addresses, numbers and information for local government offices, banks, accountants, company formation services, investment and management companies, advisors, experts, maildrops, real estate agents and other useful local contacts in the THE OFFSHORE MANUAL & DIRECTORY