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Popular island jurisdictions before and what are they now

Only 5 years earlier, offshore zones such as the BVI and Cayman Islands were considered one of the most popular jurisdictions for conducting international business.

Their main advantages were:
  • Zero tax rates;
  • Simplified registration procedure;
  • No currency control;
  • Confidentiality of companies.

What has changed now? Let's take a look at the current situation with island offshore jurisdictions.

British Virgin Islands

The BVI are among the offshore zones that have agreed to cooperate with the OECD and the FATF. As a result, in March 2018 they were moved from the blacklist to the EU grey list.

Around the same time, the BVI Economic Substance Act, 2018 was adopted on the islands. It was updated on February 10, 2020 and supplemented by interpretation rules of the International Tax Authority of the BVI (ITA).

According to this law, in order to prove a significant economic presence in the BVI, it is necessary to:

  • Have a registered local office that matches the type of selected activity and the business size;
  • Hire qualified staff;
  • Relocate management bodies (Board of Directors) to the BVI;
  • Carry out revenue generating activities in the British Virgin Islands;
  • Have an appropriate level of operating expenses.

In 2020, the BVI also adopted amendments to the BVI Securities and Investment Business Act in order to strengthen supervision of closed-ended funds, with the result that the jurisdiction entered the EU white list.

This means that today, registering a company in the BVI implies the presence of a local entreprise conducting significant taxable activities.

Cayman Islands

On February 18, 2020, the EU announced the inclusion of the Cayman Islands on the black list of offshore zones. This decision was made on the basis that the jurisdiction refused to comply with international requirements on tax legislation reforms.

This means that the Cayman Islands still has a preferential tax regime that arouses the interest of a considerable number of entrepreneurs.

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Conclusions

Based on our brief review, we can say that these EU white and blacklisted island jurisdictions lose their attractiveness and are inferior to jurisdictions with more transparent and efficient taxation.

As a result, although the BVIs appeared on the EU’s white list, at the same time, they lost their previous tax incentives. In addition, due to the introduction of requirements for the implementation of Substance, the conditions for maintaining a company in this jurisdiction can no longer be called simple and low-cost.

In turn, the Cayman Islands, although they retained the right to a preferential tax regime, however, for the same reason, they were placed on the EU blacklist. The consequence of this decision is the almost complete disability to open an account for a company from the Cayman Islands, as well as the occurrence of difficulties in carrying out business operations with partners.

In this regard, we recommend that you contact our specialists for individual advice on the selection of the most suitable solution or consider possible alternatives to offshore zones on the EU and OECD lists, for example, opening a company in:

  • England;
  • Australia;
  • Portugal;
  • Singapore;
  • USA.
IQD Consulting legal services

Regardless of whether you consider island or European jurisdictions as a launching pad for starting a business, our employees are ready to offer you a list of relevant and legally sound solutions.

We are ready to advise you in detail regarding the selection of the most appropriate jurisdiction, taking into account the specifics of your business.

To learn more, please use the contact details provided in the letter.

  • The information outlined in the article is actual at the time of its publication.
  • Please refer to our specialists for checking possible solutions for your business.
  • Still have any questions?

    Fill out the form or contact us as you find convenient. Our experts will help you resolve the issue.

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