Governor David Barwich sighns the International Business Companies Ordinance. (Photo: BVI BEACON)

 

On June 7, The BVI Beacon turned 40. To celebrate, it is re-publishing some of the biggest stories from its archives over the past four decades. The article below originally ran on July 19, 1984.

 

With the signing into law of the International Business Companies Ordinance, 1984, last Friday, the BVI government moved to recoup revenues lost when the United States of America terminated its Double Taxation Treaty with the territory on 31st December, 1982.

But the benefits could be slow in coming.

“We do not know what will be the final outcome in so far as revenue is concerned,” Chief Minister Cyril B. Romney predicted at the signing ceremony. “We will remain very hopeful that it (IBC) will, in fact, do for us a lot of the things that we hoped would happen following the removal of the double taxation relief agreements between the BVI and the United States of America,” Mr. Romney said.

Governor David R. Barwich signed the bill into law at noon on 13th July in the presence of government ministers, members of the opposition, other government officials and representatives from the legal and financial community, who spearheaded and drafted the bill during the Stoutt administration.

The Double Taxation Treaty had allowed BVI-registered US companies to receive credit in the US for taxes already paid in the BVI.

For example, such a company taxed at a rate of 40 percent in the US, would pay only a 25 percent US tax if it had already paid a 15 percent BVI tax.

No clear-cut figures appear to as yet exist on the impact of the treaty’s termination on the BVI economy. But recent government statistics show a 23.4 per cent decline in total BVI banking assets in 1983 from 1984 levels.

To help stimulate economic activity, the IBC, “allows for the ease of operation of offshore companies,” Mr. Romney explained.

He cautioned that it will raise revenues based on predetermined fees for the use of the jurisdiction.

It will not generate revenues based on the companies’ income.

Two sectors of the business community that might benefit directly from the IBC could be lawyers and chartered accountants, who would act as registered agents for companies set up under the bill.

Companies prohibited from operating under the IBC include those doing business with BVI residents; owning BVI real property; accepting bank deposits and accepting insurance contracts. For fees ranging from $300 to $1,000, the IBC will provide the following privileges:

• Exempt companies from BVI income tax and stamp tax.
• Allow companies to transfer and purchase their own shares.
• Protect shareholders’ interests in the event of seizure of corporate property by jurisdictions outside the BVI.
• Permit members to dissent from planned mergers or consolidations.
• Allow for bearer shares.
• Permit companies already in existence to continue operating if they meet certain requirements.

Companies set up under the IBC will be prohibited from holding land in the BVI.