Offshore Tax Planning

As a result of the generous tax exemptions available to foreign sales corporations[8] and USVI exempt companies[7], the USVI has become an offshore tax planning center. While foreign sales corporations are formed for the specific and limited purpose of saving taxes on export profits, USVI exempt companies are formed for numerous different purposes.

A USVI exempt company ought to be utilized rather than an offshore entity formed in another jurisdiction in any situation where U.S. flag protection is either desirable or essential to the purposes of the company.

For example, USVI exempt companies benefit from coverage under U.S. bi-lateral investment treaties and treaties of friendship commerce and navigation and are therefore ideal for persons who seek political stability and the protection of U.S. laws and treaties. Holding assets through a USVI exempt company covered by such treaties helps protect them from expropriation by an unfriendly government.

Another use for a USVI exempt company is where there is a desire to have access to United States courts for dispute resolution. By incorporating an exempt company in the USVI, the United States courts located in the Virgin Islands would generally have jurisdiction over disputes involving the company notwithstanding the fact that its business activities take place elsewhere.

USVI exempt companies are also useful as financing entities for foreign persons who are required by banks to keep accounts in U.S dollars in order to borrow money. This would be particularly appropriate if the country where the investment is to be made requires local entities to keep accounts in local currencies.

The USVI redomiciliation [4] statute can be used to move a tax-free company from another jurisdiction into the USVI.

USVI exempt companies can also be used by foreign persons who wish to register their aircraft[11] with the Federal Aviation Administration or to establish captive insurance companies[10].

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