USVI EDC Tax Incentives

If you are considering relocating your business to the US Virgin Islands, Sea Glass can offer a full service program to suit your needs. Our key to success is our attention to detail. While there are many different ways to take advantage of the tax savings, the most common one includes taking up residency. For families, this can be a big change. As one of the largest real estate firms in the USVI you will find that our team can offer something for everyone. Please don’t mistake quantity for quality; we have the ability to match our agents with your staff. We can provide a seamless service allowing you to view homes/office space on St. Thomas, St. Croix, and St. John. Our success is based on your success. Please contact us today to learn more about our EDC relocation services.

Virgin Island EDC Tax Information

Perfect location, gorgeous weather and amazing beaches. Could the U.S. Virgin Islands actually get any better? As a matter of fact, for entrepreneurial business people, it does actually get better. Not only is the U.S. Virgin Islands a perfect vacation locale, it is an even better place to do business. The U.S. Virgin Islands, an unincorporated territory of the United States, is home to nearly one hundred companies that have opened their doors in the territory and been granted significant tax benefits for contributing to the economic development of the territory.

In an effort to assist the U.S. Virgin Islands in attracting more business to the territory and to allow it to become a self-supporting territory, the United States Congress enacted section 934 of the Internal Revenue Code which allows the U.S. Virgin Islands to grant tax incentives to U.S. Virgin Islands businesses on income that is sourced or effectively connected to the U.S. Virgin Islands. There are two tax incentive programs in the U.S. Virgin Islands that seek to attract new businesses to the territory, the Economic Development Program which operates under the auspices of the Economic Development Authority and the Research and Technology Park which operates in partnership with the University of the Virgin Islands (UVI). There are also significant tax incentives available for companies that wish t o develop hotel properties in the U.S. Virgin Islands.

ECONOMIC DEVELOPMENT COMMISSION

The EDC seeks to attract the a variety of different business to the territory including but not limited to manufacturers, high-technology assembly companies, pharmaceutical companies, hotels, service businesses such as call centers, consulting companies, and financial services companies, including hedge funds and money managers. The goal of the EDC is to provide the necessary incentives to make your business expansion or relocation a reality. In return for such incentives, EDC beneficiaries must commit to meeting certain requirements on an annual basis. The requirements include, among other things:

  • Making the statutorily required capital investment in a new business;
  • Hiring a minimum of five to ten employees (dependent upon the type of business) who have been residents of the U.S. Virgin Islands on the date of hiring;
  • Procuring goods and services locally; and
  • Contributing to local charitable organizations.

Companies who are granted benefits under the USVI EDC program can qualify for the following incentives:

  • 90% credit against corporate income tax due on income derived by the business granted benefits;
  • 90% credit against personal income tax due on distributions from the business granted benefits for bona fide resident owners of the U.S. Virgin Islands;
  • Reduction in the customs duty from the standard 6% to 1%;
  • 100% exemption from excise tax;
  • 100% exemption from real property taxes due on property used in the business;
  • 100% exemption from gross receipts tax (currently imposed at a rate of 5%)
  • Tax reduction on royalty income from software developed in the USVI and sold to non-US customers

USVI RESEARCH & TECHNOLOGY PARK

In an effort to develop a thriving e-commerce and technology sector in the U.S. Virgin Islands, the Legislature of the Virgin Islands created the Research and Technology Park which operates in partnership with the University of the Virgin Islands. The RT Park mission is to position the U.S. Virgin Islands as a near-shore, world-class provider of e-commerce and information technology (IT) infrastructure solutions for knowledge-based, e-commerce and digital content companies.

The RTPark typically engages as a business partner, aligning its resources, including generous corporate tax incentives, with workforce development opportunities benefiting U.S. Virgin Islands companies and the U.S. Virgin Islands economy.

Companies who qualify for benefits under the RT Park program can qualify for the following benefits:

  • (Up to) a 90 percent (90%) reduction in income tax liability shown on its tax return for the taxable year on U.S. Virgin Islands sourced or effectively connected income;
  • 90% credit against personal income tax due on distributions from the business granted benefits for bona fide resident owners of the U.S. Virgin Islands;
  • A 100% exemption on real property taxes utilized in the business for which benefits have been granted;
  • A 100% exemption from gross receipts taxes on receipts from the business for which benefits have been granted;
  • A 100% exemption from excise taxes for certain material imported for use in the business;
  • An exemption from withholding tax with respect to payments of interest and a four percent (4%) withholding rate on the payments of dividends and royalties;
  • A reduction in customs duties to one percent (1%) on raw materials and component parts brought into the USVI;

In order to be eligible for benefits the RT Park beneficiary must agree to the following:

  • Run all of its electronic transactions through web servers physically located within the U.S;
  • Perform all of its e-commerce transactions with the approved or preferred e-commerce partners;
  • Perform its worldwide banking with approved banking partners or financial institutions located in the USVI;
  • Operate its business in a legal and ethical manner;
  • Collaborate and interact with UVI in workforce development initiatives and joint research as opportunities become available;
  • Participate with RTPark and UVI in a Community Reinvestment Program;
  • Comply with all applicable RTPark and governmental regulations regarding conducting business activities in RTPark and the USVI;

USVI HOTEL DEVELOPMENT ACT

The Government of the United States Virgin Islands enacted the “Hotel Development Program” (the “HDP”) through Act No. 7301. The stated purpose of the HDP is to encourage and promote Development of hotel facilities in the Virgin Islands and provide incentives for the development and construction of hotels and resorts, including commercial facilities, and other facilities for the accommodation and entertainment of tourists and visitors.

For each approved project that is granted benefits under the HDP, the Virgin Islands Economic Development Authority (“EDA”) will establish a separate Trust Fund, which will collect monies from the hotel and casino taxes generated from the approved project. The Trust Fund shall then be utilized by the EDA to reduce the hotel development notes incurred for the development of the approved project.

HDP requirements include:

  • Local Employee Requirement. During the entire period that hotel and casino taxes are being directed toward repayment of loans by the project developer, not less than 80% of the persons employed in the operation, maintenance, and management of the hotel facilities must be legal residents of the Virgin Islands for not less than five (5) years prior to employment, or a graduate of a Virgin Islands high school. However, under limited circumstances the Department of Labor may provide a waiver of the local requirement upon application.
  • Preference to VI Resident in Employment of Construction. In constructing hotel facilities, the hotel operators shall give preference in employment to residents of the Virgin Islands.
  • Annual Contribution. All beneficiaries of the HDP are required to pay an annual sum of $500,000.00 to the Government of the Virgin Islands to be deposited into the Tourism Revolving Fund to be used exclusively by the Department of Tourism for marketing. $20,000 of the contribution shall be set aside for a scholarship program for students from the Territory whose college major is Hotel Management. In addition, each beneficiary of the HDP will be required to contribute $2500annually for the creation and management of a database designed to recruit Virgin Islanders living abroad.

The following taxes will be allocated to the Trust Fund for use in payment of HDP beneficiary debt:

  • Hotel Occupancy Tax. Pursuant to Title 33, Chapter 3, Section 54 all tax collected and remitted to the Government of the Virgin Islands by any hotelkeeper or innkeeper at the current rate of ten percent (10%) of the gross room rate or rental.
  • Casino Gross Revenue Tax. Pursuant to Title 32, Chapter, 21, Section 515 the annual tax on casino gross revenues is eight percent (8%) during the first two years of operations; ten percent (10%) during the third and fourth year of operations; and twelve percent (12%) on each succeeding year of operations. The HDP also provides the option to the developer to increase its Casino Gross Revenue Tax to thirty-five percent (35%) until the debt is retired, at which point the casino gross revenue tax will revert back to twelve percent (12%). Currently, casions are only authorized on the island of St. Croix.

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