U.S. Export Incentives Using USVI Foreign Sales Corporations

The U.S. Internal Revenue Code authorizes the establishment of foreign sales corporations (FSCs) in the U.S. Virgin Islands. FSCs are established by U.S. exporters in order to reduce their income tax on profits from export sales by approximately 15%.

Since the FSC program was established by Congress in 1984, more FSCs have been established in the U.S. Virgin Islands than in any other jurisdiction in the world. They have come to take advantage of the professional infrastructure and the excellent communications and transportation links between the USVI and the U.S. mainland, as well as for the tax benefits. Local benefits for FSCs include complete exemption from all local taxes[6] and Virgin Islands income taxes[5], except for a nominal annual franchise tax and license fee. Benefits are guaranteed by a contract with the government for up to thirty years.

FSCs are usually established with the assistance of a licensed USVI FSC management company, many of which have offices in the United States mainland as well.

A regular FSC (one with export sales in excess of $5 million annually) is required to hold its annual meetings in the U.S. Virgin Islands, although this can be handled by a management company if desired. A small FSC (one with export sales of $5 million or less annually) does not have to hold such meetings.

Small FSCs must pay a flat annual franchise tax to the USVI government of either $400 or $900 depending on the volume of sales. The annual franchise tax for regular FSCs starts at $1,000.

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