BVI Offshore Trust Formation Services
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Overview of BVI Trust Formation
In the financial industry, the name British Virgin Islands speaks for itself. It is the world’s largest and leading financial centre, also renowned for the abbreviation BVI. According to estimates, more than half of all offshore entities worldwide are incorporated in the British Virgin Islands. BVI business companies are so popular in Asia that the BVI Financial Services Commission has established a representative office in Hong Kong to operate in the time zone convenient for Asian clients. BVI trust formation is also a popular choice, specifically when it comes to holding the shares of BVI companies.
Despite its narrow specialisation in corporate services and company formations, this jurisdiction has developed international trust legislation, including very compelling BVI purpose trust laws. As expected for a British Overseas Territory, BVI trust law is based on the principles of English common law and equity. Nevertheless, the BVI trust formation offers more advantages than the UK trusts.
The advantages of a BVI corporate or trust structure are many. It is a well-regulated leading financial centre with access to the best professionals and a court system well suited to the management and protection of private wealth.
Why Set Up a BVI Trust?
The BVI company and trust services are widely used worldwide. The BVI as a financial centre is a benchmark for the offshore industry as a whole. There are plenty of highly skilled and qualified services providers, lawyers and financial advisors in the BVI that cater to the financial industry.
- The tax-free environment of operation of British Virgin Islands trusts
- Excellent reputation of the British Overseas Territory and key financial centre
- Court of appeal is the Judicial Committee of the Privy Council in England
- BVI Trusts have a high level of confidentiality
- Fast BVI trust formation
- Limited provisions to ignore foreign judgments.
- No forced heirship rules are applicable
- Purpose trusts are allowed
- A settlor can be a beneficiary
- Low to moderate level of BVI trust cost
- Private Trust Companies are allowed for the BVI trust formation
- Non-charitable purpose trusts are allowed
- Reduced interference of a trustee in VISTA trusts
- Excellent choice for a BVI company ownership
Process of BVI trust formation
The process of the trust formation in BVI is quite straightforward:
Stage 1
Choosing a trust name and deciding on the structure of the trust
Stage 2
Providing KYC documents, completing forms and drafting and executing the trust deed
Stage 3
Registration of the trust and transfer of assets into the trust
Required Documents For BVI Trust Formation
To form an offshore trust in BVI the following KYC documents are required:
- Certified copy of proof of ID for the settlor, all beneficiaries, protectors and co-trustees
- Certified proof of address for the settlor, all beneficiaries, protectors and co-trustees
- Reference letter from a banking institution, notary, attorney or auditor
- KYC form provided by your personal manager in Astra Trust
For more information click below to receive certification instructions and requirements.
Taxation Of Offshore Trusts In BVI
| Corporate Income Tax | 0% |
| Withholding tax | 0% |
| Gift tax | 0% |
| Capital gains tax | 0% |
| Inheritance tax | 0% |
| Wealth tax | 0% |
| Exchange Controls | No |
Taxation of BVI Trust
The British Virgin Islands is a classic tax haven with no income tax applicable. Therefore, a BVI trust’s tax position is rather simple, as a BVI trust generally has no tax liabilities in the BVI. Unlike other offshore financial centres that have a territorial tax system or only provide relief for offshore trusts by special laws, the BVI is a jurisdiction with no income tax.
In general, BVI offshore trusts are exempt from BVI income tax, capital gains tax, inheritance tax, succession tax, gift tax and estate taxes. This means that any income or gains generated by the trust, as well as any distributions made to beneficiaries, are not subject to BVI taxation.
Any endowments, transfers or gifts made to the trust upon the BVI trust formation are not taxable in the BVI. As there is no capital gains tax, any operations of the trustee with trust assets, including any profits from such operations, are not taxable in the BVI. The distributions to beneficiaries made by the trust or private trust company in BVI are not taxable.
There are no currency controls in the British Virgin Islands and the official currency is the United States Dollar.
British Virgin Islands Trust Legislation
The British Virgin Islands is a self-governing overseas territory of the United Kingdom. As such, the BVI legal system is based on English law, with locally adopted variations. BVI trust legislation is innovative and flexible, making local trusts very popular for asset protection and estate planning.
UK-qualified legal practitioners may participate in BVI trust litigation and be admitted to practice law in the BVI courts. The British Virgin Islands is a member of the group of countries that make up the Eastern Caribbean court system. Nevertheless, the court of final appeal for the resolution of BVI trust disputes remains the Judicial Committee of the UK Privy Council.
BVI VISTA Trust
The jurisdiction offers a wide variety and flexibility of legislation for establishing trusts. The standard discretionary, fixed interest, reserved powers, the charitable purposes trusts are complemented by the VISTA trust in BVI. The Virgin Islands Special Trusts Act 2003 introduced a very flexible solution dedicated to resolving the so-called Bartlett problem by the limitation of trustee’s duty of supervision over controlled underlying companies.
Section 3 of the Virgin Islands Special Trusts Act (VISTA) allows for the creation of a trust of company shares which can be managed by the directors of the company without the intervention or interference of the trustee. In this way, the BVI VISTA trust resolves an issue that often makes both the trustee and the settlor uncomfortable. On the one hand, the VISTA legislation relieves the trustee of the duty to supervise the business decisions made by the board of the underlying company. On the other hand, the settlor can retain full control over the day-to-day management of the company and its business without any interference from the trustee.
As for the BVI VISTA trust disadvantages, it should be noted that it can hold only the shares of the BVI company. Nevertheless, it can be a perfect instrument for complex transactions or succession planning with the use of BVI companies.
Common Law Rules
Common law rules apply in the BVI, whose legislation is based almost entirely on English law. This includes the applicability of the Statute of Elizabeth and some other common law rules in the BVI.
Perpetuity Period and Accumulation Period
The BVI discretionary trust has a maximum perpetuity period of 360 years. The BVI trust perpetuity period can be less than 360 years as indicated in the trust instrument. Exceptions are the charitable and statutory purpose trusts, which are unlimited in duration. The VISTA trust does not have any limitations with regard to the perpetuity period.
Fraudulent conveyance
BVI legislation does not repeal the Statute of Elizabeth approach that is reflected in the Conveyancing and Law of Property Act 1961. Where a BVI trust acts as a vehicle for holding assets obtained by fraudulent means, such a trust can be recognised by the court as a sham and the transfer of property into the trust as void.
This part of the legislation is sometimes seen as a disadvantage by potential settlors who wish to avoid any trust disputes. Nevertheless, the BVI offshore centre is bound to reflect the approach that has existed in the United Kingdom for centuries.
Burden of Proof
There are no special provisions for the BVI discretionary trust as to the burden of proof of a fraudulent transfer by a creditor.
Foreign Judgments
BVI trust law does not contain any legal provisions that would allow foreign judgments to be ignored and not enforced. In addition, The Hague Trust Convention is applicable to a BVI trust.
Forced Heirship
BVI legislation contains provisions to avoid the forced heirship laws applicable to the settlor and beneficiaries in their home jurisdictions. There are no forced heirship rules in BVI legislation.
Bankruptcy
BVI trust legislation does not contain provisions for protection from subsequent bankruptcy after the assets have been transferred into the trust.
Spendthrift Beneficiaries
A BVI discretionary trust can be set up as a spendthrift trust to protect the beneficiary and the trust. Provisions to limit the beneficiary’s share or to terminate it in the event of bankruptcy or substantial liabilities can be included in the trust instrument or declaration of trust.
The Following Laws Are Applicable to BVI trust Formation:
British Virgin Islands Trust Structure
Settlor – According to BVI trust law, a settlor is a person who transfers property by way of gift or who makes a testamentary disposition on trust or to a trust. It can be either an individual or a legal entity. The settlor must at all times have the capacity to transfer the property into the BVI trust for the trust to be valid.
The settlor of a British Virgin Islands trust can also be a beneficiary and can have certain reserved powers in relation to the trust.
It is possible to use a nominee as a settlor to enhance the privacy of a trust.
The settlor may give the trustee a letter of wishes to guide the trustee on the management of the BVI trust. Such a letter, however, cannot be binding in the case of a discretionary trust.
Trustee – A trustee is an individual or corporation appointed to hold a trust fund for the benefit of the beneficiaries or for a certain purpose. Trust law requires a BVI trust to have at least one trustee, which is usually a BVI trust company licensed in accordance with the BVI Banks and Trust Companies Act. Alternatively, a BVI private trust company can act as a trustee of a BVI trust. In this case, there is no requirement for such BVI trust companies to apply for a BVI trust licence.
A BVI trust may have several trustees. The co-trustee can be an individual or a corporation of any nationality and residency. There is no requirement for the co-trustee to be licensed in the BVI or to carry on trust company business.
Protector – Upon the creation of a trust, a settlor of the trust may appoint a protector or a committee of protectors. This appointment in the trust is optional and not essential for the BVI trust registration. The protector’s main function is to supervise the trustee to ensure that the trust fund is managed and distributed in accordance with the trust deed and the settlor’s intentions. The protector’s powers might include the power to remove and re-appoint a trustee, the power to add and exclude beneficiaries or powers to approve certain acts of the trustee.
A protector of a BVI trust can be a settlor, beneficiary or third party to the trust. The protector does not have a fiduciary duty to the beneficiaries of the trust, unlike a trustee, unless the trust deed specifically outlines that the protector owes fiduciary duties to the beneficiaries of the trust.
Beneficiaries – the beneficiaries of a BVI trust are persons or a class of persons who benefit from the trust. A beneficiary is appointed by the settlor to benefit from the trust fund. The settlor may appoint himself as a beneficiary and/or any other individual or class of beneficiaries at his discretion.
The BVI trust instrument may stipulate terms for the addition of a person as a beneficiary, the exclusion of a beneficiary or the imposition of an obligation on a beneficiary as a condition of benefit under the trust.
A BVI trust can be set up as a purpose trust with a partly or completely non-charitable purpose. The purpose cannot be unlawful or immoral and must be specific and reasonable. In the case of purpose trusts, an enforcer must be appointed to ensure that the trustee acts in accordance with the declared purpose. BVI purpose trust formation is as simple and easy as discretionary trust formation.
Need Help To Set Up A BVI Trust?
Privacy of a BVI Trust
A BVI trust provides a high degree of privacy. Information about beneficiaries, settlors, trustees and protectors is stored securely at the registered office of the trust. There is no requirement to disclose sensitive information when registering a trust with the BVI trust register.
Privacy matters need to be considered when establishing a PTC. According to BVI private trust company legislation, it can be formed as a standard BC company. Information on the directors and UBOs of such a company will therefore be filed with the Registry of Corporate Affairs via VIRRGIN (the Virtual Integrated Registry and Regulatory General Information Network) and BOSS (the Beneficial Ownership Secure Search system).
The beneficiaries of a BVI trust might be entitled to receive information about the trust from the trustee. In addition, reporting requirements such as FATA and CRS need to be considered and carefully planned.
If you are interested in the formation of a BVI trust or VISTA trust, do not hesitate to contact us.
The team of Astra Trust has the necessary experience and can assist you in any matters regarding the trust establishment.
FAQs in Relation to BVI Trust Formation
How do I set up a trust in the BVI?
Contact Astra Trust, decide on the type of trust, and submit required documents. The process is straightforward with our expert guidance.
What are the benefits of a BVI trust?
A BVI trust offers confidentiality, asset protection, and tax advantages for individuals looking to safeguard their wealth and assets. It is also a perfect instrument for estate planning.
How much does it cost to set up a trust in the BVI?
It largely depends on the type of structure you would like to establish. While a discretionary trust might have moderate to low costs, a private trust company formation can add up to the costs. The costs also depend on the complexity of structure and difficulty of administration of the trust.
How is a BVI trust different from a trust in other jurisdictions?
A BVI trust is known for its flexible and modern trust laws, making it a popular choice for individuals seeking a secure and efficient trust structure.
Are BVI trusts subject to any taxes?
BVI trusts are not subject to income, capital gains, or estate taxes in the British Virgin Islands, making them an attractive option for wealth preservation.
Are BVI trusts regulated by any authorities?
BVI trust services providers are regulated by the British Virgin Islands Financial Services Commission to ensure compliance with trust laws and regulations
