Located in the Caribbean Sea, the British Virgin Islands is a popular jurisdiction to set up offshore companies. This is because of the business-friendly and flexible government policies, high level of privacy and security, straightforward incorporation process, and more. In this article, we provide you with the 5 things you need to know about a BVI holding company and how you can register company in BVI.
What is a BVI holding company?
Before you begin with the BVI company registration, you need to understand what a holding company is. A holding company is one that holds assets, equities, or investments of other business entities are earn dividends, capital gains, rent, or more from them. These businesses in the British Virgin Islands must comply with the BVI Business Companies Act of 2004.
Approximately 85% of all entities registered in the British Virgin Islands are some form of holding company.
5 facts you need to know about a BVI holding company
Advantages of setting up business in BVI:
- The political and economic environment is stable which reduces the risk faced by the businesses.
- The government policies are business-friendly with fewer compliance requirements. There is no tax levied on the businesses, minimum paid-up share capital requirement, annual audits, filing of tax reports, or more.
- Personal information of the business is not available to the public and therefore, foreign investors and business owners are guaranteed high levels of privacy and security.
- Businesses can take advantage of the tax benefits provided by the government in BVI.
- Businesses can easily transfer the ownership of their assets. This flexible structure is beneficial for holding companies.
- BVI is a reputed jurisdiction to set up an offshore holding company. The opportunities available in BVI attract foreign investors and business owners to set up their business in this region.
Simple Incorporation Process
- The setting up process of a holding company in the British Virgin Islands is quick and straightforward. Moreover, it is relatively inexpensive compared to other offshore jurisdictions.
- There are fewer requirements that business owners need to meet before beginning the incorporation process. For example: there is no minimum number of shareholders or directors needed to set up business in BVI.
- You can refer to the next section to better understand this process.
Types of entities that you can set up
- There are multiple types of business entities found in the British Virgin Islands that can be used for the purpose of holding equity or assets of other businesses.
- These business entities include the following:
- International business company (IBC)- ideal for businesses wanting to take advantage of the tax benefits available in BVI
- Limited liability company (LLC)- ideal for businesses wanting to take advantage of the asset protection given by the government in the BVI.
Types of Holding companies you can set up in BVI:
- Pure equity holding company (PEHE):
- A holding company is considered to be a Pure Equity Holding Entity that as an entity holds the equity shares of other business entities and earns dividends and capital gains.
- However, these businesses are not permitted to perform most business activities without approval.
- This form of holding company has lower economic substance requirements that they need to meet.
- Asset holding company:
- A holding company is considered to be an asset holding company that holds the assets of other business entities and earns revenue from this.
- Intellectual property (IP) holding company:
- Holding companies can hold intellectual property rights as well. These intellectual properties include patents, trademarks, copyrights, or more.
- IP holding companies generate income in the form of royalties.
Economic Substance (ES) in BVI:
- Businesses must comply with the Economic Substance Act of 2019 issued by the BVI government. This is based on the guideline of the Organisation for Economic Cooperation and Development (OECD) and the European Union.
- Under the above Act, businesses are required to have a physical local office and conduct their business activities in the country in which it is a tax resident.
- According to the Act, businesses must undergo some tests to prove that the business’s revenue-generating activities are taking place locally in the British Virgin Islands. The following conditions must be met:
- Relevant business activities must be managed and directed in the region (‘Directed and Managed’ Test)
- There must be an adequate number of qualified employees in the region (‘Adequate’ Test)
- The business must incur a certain level of expenditure (‘Adequate Test’)
- The business must have a local physical office address (‘Adequate Test’)
- The core income-generating activity takes place in the region by the business (‘Core income-generating activity (CIGA)’ Test)
How to complete the company registration in the British Virgin Islands?
In order to ensure a smooth and hassle-free process, you must first understand how to register your business in BVI. You can follow these steps for a better understanding of the same:
Step 1: Planning and Strategising
- There are different types of business entities available in the British Virgin Islands.
- Tetra Consultants will advise you on the best-suited entity for you based on your business activities, requirements, and long-term goals.
- We will also advise you on any requirements you may be required to meet.
Step 2: Meeting all the pre-registration requirements
- Tetra Consultants will check for the availability of your preferred name and apply for the same with the British Virgin Islands business registry.
- You will need to appoint a local registered agent.
- You will also need to have a local physical office address. Tetra Consultants will assist you in finding one.
Step 3: Opening a corporate bank account
- Businesses must open a corporate bank account. Our banking team at Tetra Consultants will open a bank account for you at a reputable bank.
- You will then need to deposit the required minimum paid-up share capital into the account.
Step 4: Registering your business
- We will prepare all the required documents you will need to incorporate your business including the application form, Article of Association, and more.
- Once the above is done, we will get these documents notarised and submit them to the BVI companies registry for approval.
- Once company registration is completed, we will collect the Certificate of Incorporation, Memorandum of Association, and more on your behalf and courier it to your preferred office address.
Step 5: Applying for Business Licenses
- To carry out some business activities in BVI, you need to obtain certain trade licenses and Tetra Consultants will assist you in obtaining the same.
Step 6: Registering for Tax
- Tetra Consultants will register your business for tax with the relevant authorities.
Step 7: Staying Compliant with government regulations
- After the registration process is completed, Tetra Consultants will ensure that your business remains compliant with the government regulations. Even though businesses are not subjected to corporate income tax, they are required to pay the Payroll Tax and Stamp Duty tax.
Tetra Consultants offers our clients a comprehensive service package that includes making recommendations on a suitable legal entity for the holding company, setting up the business with the BVI Company registry, opening a corporate bank account, and ensuring the business’s compliance with the government policies.