GENERAL INFORMATION
The basic principles of British Virgin Islands trust law derive from those of the English law, as supplemented by BVI statute. The principles of the English common law apply in the BVI by virtue of the provisions of the 1705 Common Law (Declaration of Application) Act (Cap 13) and those of English equity apply by virtue of the West Indies Associated States Supreme Court (Virgin Islands) Act (Cap 80).
The original British Virgin Islands Trustee Act (the “Act”), which was based on the English Trustee Act 1925, has been updated by the Trustee Amendment Act 1993, 2003 and 2013 (the “Amendment Act”).
DEFINITION OF A TRUST
The trust is a well-established concept in common law originated in England during the Middle Ages. A trust, as per the Trustee Act, refers to the legal relationship created either during life or on death by a person (the “Settlor”) who places assets (the “trust fund”) under the control of a trustee or trustees to hold the trust fund for the benefit of certain persons (the “beneficiaries”) or for the achievement of a specified purpose.
TYPES OF TRUST
Discretionary trust: is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor.
Fixed trust: A fixed trust is a trust in which persons have fixed entitlements to all of the income and capital of the trust at all times during the income year. That is, the trustee is bound to make a distribution to the beneficiaries in a fixed or predetermined manner, as set out in the trust deed.
Charitable trust: is an irrevocable trust established for charitable purposes.
Purpose trust: is a type of trust which has no beneficiaries, but instead exists for advancing some non-charitable purpose of some kind.
COMMON USES
• Administration of assets
• Private investments
• Holding vehicle of assets or properties • Shareholding participations • Succession planning • Business preservation • Recurring payments to individuals in this or future generations for subsistence, education, training, clothing and other relief • Substitute for prenuptial agreements
BENEFITS AND ADVANTAGES
• Taxation: The Trust is relieved entirely from local taxation.
• Asset Protection: The Settlor is able to provide long-term protection to his/her assets outside the country of his/her residence or domicile, free from the danger of expropriation by government agencies.
• Flexibility may be provided by including in the Trust Deed certain special clauses, i.e. the possibility of revoking the Trust, allowing the removal of the Trustee and the continuation of the Trust in another jurisdiction should it be thought that worldwide political developments make this a prudent precaution.
TAXATION
BVI trusts without any BVI resident beneficiaries are generally not liable to tax in the BVI. No estate tax, inheritance tax, succession tax, gift tax, rate, duty, levy or other charge is payable by beneficiaries who are not resident in the BVI in respect of any distribution to them by the trustee of any trust.
REVOCABLE OR IRREVOCABLE TRUST
Revocable Trust: this trust may be altered or revoked by its Settlor at any time (given the Settlor is not mentally incapacitated).
Irrevocable Trust: an irrevocable Trust, in contrast to a revocable Trust, is one in which the terms of the Trust cannot be amended or revised by the Settlor, until the terms or purposes of the Trust have been completed.
The Trust Deed should also specify if the Trust is to be irrevocable. If not, it should contain provisions setting out the manner in which its terms can be revoked or amended.
ACCOUNTING RECORDS
On March 30, 2015 the BVI Trustee (Amendment) Act No. 4 introduced the obligation for Trustees to maintain accounting records for trusts. The new obligations indicate that every Trustee shall maintain records and underlying documentation of the trust whether within or outside the BVI and retain these records and underlying documentation for a period of at least five (5) years.
The records and underlying documentation of the trust shall be sufficient to show and explain the trusts’ transactions and must enable the financial position of the Trust to be determined with reasonable accuracy.
The records and underlying documentation includes accounts and records (such as any invoices, contracts or other similar documentation) in relation to all sums of money received and expended by the trust and the matters in respect of which the receipt and expenditure takes place, all sales and purchases of goods by the trust and the assets and liabilities of the Trust.
A Trustee who, without lawful or reasonable excuse, fails to comply with this legal requirement commits an offence and is liable on summary conviction to a fine not exceeding one hundred thousand dollars (US$100,000) or to imprisonment for a term not exceeding five (5) years.
Cost would be as follows:
- Set up fee $US4,400 (plus $200 stamp duty)
This includes using our standard trust document adopted to fit the Settlor’s requirements or a trust document that has been approved by a BVI based lawyer.
- Annual trustee fee $3,300
This is the basic fee. Should there be more than a few activities, there will be an administrative charge based on either time spent or on agreed fees.
Would you like to know more? Then please Contact Us:
info@offshorecompaniesinternational.com
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.
