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Background Notes For U.S. Virgin Islands

No information in file.

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Geography

The U.S. Virgin Islands is comprised of 68 islands and cays located in the Caribbean Basin 1,075 miles east-southeast of Miami, and 50 miles east of Puerto Rico. Three miles separate the two smaller inhabited islands of St.Thomas ( 32 square miles ) and St. John ( 28 square miles ). Both are distinguished by a rugged mountainous topography with numerous sandy beaches and inlets along the shoreline. St. Croix ( 84 square miles ), 40 miles south of St.Thomas, has rolling hills and a broad central plain between the relatively dry east end and the more lush, agricultural west end.

Almost two million visitors come each year to the Virgin Islands, the perfect place for a vacation. The weather is always comfortable, making the Virgin Islands an ideal destination for a vacation the year round. There is a wide range of accommodations, excellent sports, a selection of other things to do, world-class dining, and a reputation for having the best shopping in the Caribbean.

ST.CROIX:

This is the largest of the United States Virgin Islands, 82 square miles in area. There are two distinct towns to visit: Christiansted and Frederiksted. Christiansted has been called the picture-book harbor of the Caribbean; a natural reef just offshore assures a haven for yachts and smaller pleasure craft. The architectural quality and historic interest of the one - time Danish West Indies capital has made part of Christiansted a National Historic Site.

In Christiansted or Frederiksted, you can shop the day away through quaint shops filled with French perfumes, china, crystal, batik clothing and jewelry or take a walking tour of Fort Christiansvaern, Government House, the Steeple Building, the Old Customs House and Fort Frederik. Just off St.Croix is the only U.S. underwater National Monument called Buck Island. The Park itself covers over 850 acres, including the island proper, with a sandy beach and picnic tables. The reef has two major underwater trails- Turtle Bay Trail and East End Trail. There, in a depth of 12 feet, you can snorkel the spectacular nature trail where rare rainbow colored fish, unusual coral formations, deep-water flowers, lobster and seahorses are in abundance.

Moving west along the North Shore, visit the west side of Salt River where Columbus first arrived in the Virgin Islands in November 1493 on his second voyage to the New World. As you head towards Frederiksted, you’ll come upon Creque Dam Road and the 15 acres of the Rain Forest. The dam itself is 150 feet high. You will also go along Mahogany Road, which is lined with mahogany trees, yellow cedar (the territorial flower of the Virgin Islands), bougainvillea, hibiscus and orchids. On your way, be sure to stop along the shore and sample one of our tropical drinks made with “Cruzan” rum.

Frederiksted has its share of shops and shopping and Whim Greathouse, a plantation restored to its original grandeur as it was in the 1700s. With it’s impressive new pier, many cruise ships dock here, approaching the palm-fringed town from the open sea. Frederiksted is known for its continuous shoreline.

The island has fine hotels, wonderful beaches, excellent dining, sights to see and a wide selection of other things one can do and enjoy.

ST.JOHN:

Even though this is the smallest of the Virgin Islands, 28 square miles in size, many say it is the loveliest. Two-thirds of this lovely island is a U.S. National Park. And here you see what the world is like when nature takes care of itself. Spend day after day on beach after beach, each with its own panoramic view. Let a friendly mongoose lead you along a woodline trail. Many of them end on a plateau high in the sky, with another panorama of white beaches, emerald cays and touquoise waters.

The National Park at St.John is terrific for snorkeling. At Trunk Bay, there’s an underwater trail with weighted plaques telling you what you are seeing as you snorkel our spectacular waters. In addition to the National Park, restaurants and places to stay, there is a small town - Cruz Bay. And the smaller one of Coral Bay. In Cruz Bay there are gift shops and well - stocked grocery stores; there are also dive centers and jeep rental services. Once you’ve traveled around the island, you’ll see why its called an unspoiled hideaway.

ST.THOMAS:

Charlotte Amalie is the capital of the U.S. Virgin Islands and one of the most popular cruise ports in the Caribbean. Charlotte Amalie is where the ships dock and the white and pastel houses with red roofs are heavily sprinkled against a background of emerald hills. Colorful sloops dock along the waterfront, and a few steps back, down alleyways lined with old Danish warehouses, is the world-famous shopping center. Another part of the island looks very much like the countryside of France, with cattle grazing in green fields. The early warehouse buildings and residences are of great distinction and typical of West Indian architecture with hip roofs, arcaded first floors with semicircular headed openings extending to the sidewalk, heavy wood shutters hung on massive and often decorative wrought iron brackets.

To see the island, 33 square miles in size, you can rent a car or take a guided tour. One part of the trip takes you up and up circling and winding hills. Drake’s Seat is where Sir Francis used to sit and count his ships. Be sure to stop at Magens Bay a heart shaped beach considered by National Geographic as one of the ten most beautiful beaches in the world.

In St.Thomas there are fine hotels, restaurants, the largest charter yacht fleet in the Caribbean, an abundance of water sports, golfing, and a variety of other things to do away from the beach.


U.S. Virgin Islands History

The Virgin Islands were discovered by Christopher Columbus in November, 1493, on his second voyage to the new world. He named the islands after the legend of St. Ursula and her 11,000 seagoing virgin martyrs.

The discovery of the Virgin Islands like the rest of the West Indies, was followed by Spain’s assertion of exclusive right to them on the basis of prior discovery.

The concession granted by Spain to other European nations to trade in the West Indies was but the first step towards their establishment of colonies. The decline of Spanish power in the seventeenth century made it increasingly difficult for Spain to protect its monopoly. Accordingly, other nations were able to breach it. The direction of settlement was indicated by Spanish neglect to colonize the smaller islands of the lesser Antilles in favor of the Greater Antilles.

Beginning with the English, followed by the French and the Dutch, the seventeenth century witnessed an increasing invasion of Spanish territorial claims to the West Indies. The crowned “heads” of Europe were eager to exploit the West Indies and colonization was encouraged on a large scale. It was in keeping with this general European trend that Denmark chartered the West Indian Company and established its first colony in St.Thomas in the second half of the 17th century, before expanding its control to St. John, and buying St.Croix from the French in 1733.

For 251 years, under Danish rule, the islands developed as sugar growing, slave holding estates. The islands enjoyed a golden age of commerce and development due to Denmark’s policy of neutrality plus the granting of liberal trading laws. St. Thomas became a key Caribbean port for transshipment between Europe and the Americas. Raw materials were assembled from within the region and exchanged in North America and Europe for processed goods.

On St. Croix and St. John, sugar plantations flourished until the mid-1800’s. Slaves whose labor was used to fuel the plantation economy rebelled in 1848. By the late 1800’s the United States became interested in purchasing the islands, and bought them from Denmark in 1917 for $25,000,000 in gold as a naval base against the German threat to Panama Canal Zone shipping. It took over fifty years of negotiations between Denmark and the United States beginning with the Civil War of 1861, before a purchase agreement was reached on March 31,1917. Hope had now been raised in the islands for better days ahead.

The islands were administered and ruled by the U.S. Navy from 1917 to 1931, a period which was unsatisfactory to the inhabitants of the islands. As the economy began a gradual slow rise, it was dashed again by the impact of Prohibition on the rum industry. Later, toward the end of the depression years, the United States Congress gave the Islands its Territorial Organic Act or Constitution, which defined its administration under the Department of the Interior, with an appointed Governor and an elected local municipal council.

The Virgin Islands Elective Governor Act of August, 1968 essentially increased the political power of the people and their elected representatives in the legislature. Beginning from November 3, 1970 and continuing every four years, qualified Virgin Islanders could elect by majority vote their own governor and jointly with him, a lieutenant governor.

Congresswoman Donna Christian-Green


U.S. Virgin Islands Government

About the Governor/ Lieutenant Governor

The Elected Governor Act of 1968 (PL 90-496) provided for the at-large election of a Governor and a Lieutenant Governor for the Virgin Islands. Previously, the Governor, together with a government secretary, had been appointed by the President of the United States. In 1970, the people of the U.S. Virgin Islands elected their first Governor and Lieutenant Governor.

The governor and lieutenant governor are elected jointly by the casting by each voter of a single vote applicable to both officers. They serve a four-year term and may serve a maximum of two consecutive terms. Apart from members of the Board of Education and Board of Elections, they are the only elected members of the executive branch.

Eligibility

To be eligible for election to the office of Governor or Lieutenant Governor, a person must be at least 30 years old, an eligible voter in the U.S. Virgin Islands, a citizen of the United States, and a bona fide resident of the U.S. Virgin Islands for five years preceding the election.
 

Absence of Governor

In the event of a temporary absence, succession would be in the following order, depending on the person's physical presence in the Virgin Islands:

  1. Lieutenant Governor
  2. Commissioner of Finance
  3. Attorney General
  4. Budget Director
  5. Commissioner of Education
  6. Commissioner of Public Works

Order of succession in the event of a permanent vacancy would be:

  1. President of the Legislature
  2. Vice-President of the Legislature
  3. Commissioner of Finance
  4. Attorney General
  5. Budget Director

The Legislature

The Legislature is one of three coequal branches of the Government of the Virgin Islands of the United States, with its own powers delegated by the Revised Organic Act of 1954, passed by the U.S. Congress, which established our local government.  The other two branches are the Executive Branch, which is headed by the Governor and is responsible for administering the laws passed by the Legislature; and the Courts, usually called the Judiciary, which interprets the laws passed.

The Senators are elected representatives of the people and pass the laws for the people of the Virgin Islands, subject to the veto power of the Governor.  These laws must not be in conflict with any federal rule or law, or in violation of the Constitution of the United States.

The Legislature organizes Committees to plan ways in which the various departments of the Government can operate more effectively.  When a new law or resolution is proposed, it is first written up as a “Bill,” introduced into the Legislature, and given a number and assigned to a Committee.  After the Bill is discussed by the various committees concerned with its content, it is sent to the floor of the Legislature, voted upon by the fifteen Senators, and if passed by a majority of Senators present and voting, it is sent to the Governor for his signature.  When the Governor signs the Bill, it then becomes an “Act” or law of the Virgin Islands Government and will be put into effect.  If the Governor vetoes the bill, the Senators can override the veto by a two-thirds vote of the fifteen member body.

The Legislature may convene in Special Sessions called by the President of the Legislature, by petition to the office of the President of the Legislature signed by a majority of the Senators, or by the Governor of the Virgin Islands.

The legislative power and authority of the Virgin Islands, created by Section 5-A of the Revised Organic Act of the Virgin Islands approved July 22, 1954, as amended, is vested in a legislature consisting of one house, designed as the “Legislature of the Virgin Islands.”

Annually, on the second Monday in January, the Legislature convenes in Regular Session.  In addition to its lawmaking functions, the Legislature performs functions which include fact-finding and similar investigation, receiving and considering requests or petitions from groups and individuals, confirming certain officers appointed by the Governor, and exercising quasi-judicial authority to punish in cases of certain offenses against the Legislature or its members.

The Legislature is composed of fifteen Senators, who serve for two year terms.  It adopts its own rules of procedure, establishes standing committees, maintains its own records, and elects its own officers.  The presiding officer of the Legislature is the President of the Senate.

To be eligible to serve as a member of the Legislature, a person must have attained the age of twenty-one years, be a U.S. citizen, be resident of the Territory for not less than three years, and be a qualified voter of the district from which election is sought.


U.S. Virgin Islands Business Law

Business Opportunities in the USVI

The USVI is a great place to establish a business! In addition to a full range of businesses to serve and supply the local population, opportunities also exist to service the tourist trade in such areas as retail stores and gift shops, hotels, restaurants, and attractions such as dive operations and the like. Better yet, if you establish a qualifying business and hire local employees, your business can be eligible for generous government tax incentives which will eliminate almost all income taxes,and local taxes for ten years or more.

Establishing a USVI Corporation or Qualifying a Foreign Corporation

Any three individuals may incorporate a USVI corporation by executing (before a notary public) and filing articles of incorporation with the office of the Lieutenant Governor of the Virgin Islands. The corporation is formed as soon as the articles are filed and the filing fee is paid. The incorporators or the directors adopt by-laws to govern the corporation's affairs. The method of incorporation is the same whether a company is being formed as a domestic corporation, an exempt company, or a foreign sales corporation.

The stock of a USVI corporation must be registered and there is a $1,000 minimum capital requirement. Stock may or may not have a par value. The "standard" corporation has 1,000 shares without par value.

A USVI corporation must have three directors (all of whom must be individuals) who manage its affairs. It is also required to have at least three officers: a president (who must be a director), a secretary, and a treasurer. Other officers are allowed as well. A corporation must appoint a local resident agent for service of process.

Corporations organized outside the USVI may qualify to do business in the USVI by filing a copy of their articles of incorporation (or equivalent document), appointing a resident agent, providing some financial information, and paying a fee.

Domestic corporations, and foreign corporations authorized to do business in the U.S. Virgin Islands, are subject to an annual franchise tax and must file an annual report by June 30 of each year. The franchise tax is a minimum of $150 per year.

Moving an Existing Corporation to the USVI

The USVI permits both the inbound and outbound redomiciliation of companies and it is the only jurisdiction under the U.S. flag to allow for both of these options. An inbound redomiciliation is when a company formed outside the USVI wants to move to the USVI and be treated as if it had been formed there. When the company moves into the USVI it can also elect to be treated as an exempt company if it otherwise qualifies.

An outbound redomiciliation, by which a USVI corporation moves its domicile to another jurisdiction, is allowed, provided that the laws of the jurisdiction to which the company wishes to move permits it. The company must first prepare and file whatever documents are required by the other jurisdiction; then an affidavit is filed with the USVI as evidence that the company has continued its existence elsewhere. Then the government issues a certificate of discontinuance. A corporation which has removed its domicile from the USVI is not liable for future franchise or other taxes but it does not avoid liabilities incurred prior to its redomiciliation.


Commercial Guide of U.S. Virgin Islands

No information in file.


Treaties to which U.S. Virgin Islands is a Member

Not Applicable.


U.S. Virgin Islands Labor Law

Legal Holidays
In the U.S. Virgin Islands

Every Sunday

January

January 1 - New Year's Day  
January 6 - Three King's Day
January 15 - Martin Luther King's Birthday

February

Third Monday in February - Presidents’ Day

March

March 31 - Transfer Day

April

Holy Thursday
Good Friday
Easter Monday

May

Last Monday in May - Memorial Day

June

Third Monday in June - Organic Act Day

July

July 3 - V.l. Emancipation Day/Danish West Indies Emancipation
July 4 - Independence Day
Fourth Monday in July - Supplication Day

September

First Monday in September - Labor Day

October

Second Monday in October - Columbus Day & Puerto Rico Friendship Day
Third Monday in October - Local Thanksgiving Day

November

November 1 - Liberty Day
November 11 - Veterans Day
Fourth Thursday in November - Thanksgiving Day  

December

December 25 - Christmas Day
December 26 - Christmas Second Day


U.S. Virgin Islands Environmental Law

Island Resource Foundation Dedicated to solving the environmental problems of deveopment in small tropical islands.


U.S. Virgin Islands's Banking and Finance System

No information in file.


U.S. Virgin Islands Visas and Immigration

No information in file.


U.S. Virgin Islands's Foreign Investment Law

No information in file.


Intellectual Property Rights In U.S. Virgin Islands

No information in file.


U.S. Virgin Islands Taxes

USVI Income Taxes

Generally, instead of filing returns and paying taxes to the IRS, residents of the USVI, and corporations formed in the USVI, file returns and pay income taxes directly the Virgin Islands Bureau of Internal Revenue. The taxes are at the same rates and use the same forms and rules as the federal income tax under what is called the "mirror system" of taxation.

The mirror system applies differently to corporations than to individuals. One of the differences is that in addition to the regular corporate tax rate, corporations are also subject to a 10% corporate tax surcharge which brings the maximum corporate graduated rate to 38.5%. There are no local income taxes or surcharges imposed on individuals over and above the mirror system rates so that the overall rate of income tax for individuals is equivalent to the rate that a resident of a state without a state income tax would pay.

One of the results of the mirror system is that a corporation incorporated in the United States, along with a corporation incorporated elsewhere outside of the USVI, is considered foreign for USVI tax purposes.

U.S. citizens and permanent residents with income from the USVI, but who are not resident there, pay the same total amount of tax as they would if all their income were from U.S. sources, but the tax is apportioned between the United States and the USVI. This is done on IRS form 8689. These individuals file their form 1040 returns, along with the form 8689, with the IRS and they file a copy with the Virgin Islands Bureau of Internal Revenue.

Other USVI Taxes

There are no sales taxes in the USVI. There are several other taxes that do apply, however, including the following:

While all of the taxes described here generally apply to USVI businesses, there are exemptions from all of them for exempt companies and foreign sales corporations. In addition, beneficiaries of the Industrial Development Program are exempt from all of these taxes except for customs duties, where a special one percent rate applies.

Real Property Taxes.

USVI real property is subject to an annual tax at a rate of 1.25% of assessed value. Assessed value is defined by statute to be 60% of actual value.

Gross Receipts Taxes.

The USVI imposes a tax of 4% on the gross receipts of USVI businesses. Businesses with annual gross receipts of less than $150,000 are exempt from tax on their first $5,000 per month of gross receipts.

Excise Taxes and Customs Duties

Articles imported into the U.S. Virgin Islands for use or resale in a trade or business are subject to an excise tax. Because the USVI is outside the U.S. customs zone, foreign (non-U.S.) made goods are also subject to a customs duty which is separate from the U.S. customs duty. The rate of excise tax on most goods is 4%, while the rate on certain products, such as cigarettes, is higher. Alcoholic beverages are subject to a flat rate based on volume. Certain other goods are subject to a lower rate of excise tax, and most tourist items, such as jewelry, watches, crystal, artwork, electronic goods, and leather goods, are exempt entirely. Tourist items are also exempt from the 6% U.S. Virgin Islands customs duty. Table of contents

Tax Free Entities in the USVI - USVI Exempt Companies

There are three types of entities that can be established in the USVI which are either fully or partially exempt from USVI taxes and U.S. federal income taxes. One type of entity is a USVI corporation which obtains the benefits of the Virgin Islands Industrial Development Program for its business activities in the USVI. These companies are fully exempt from most local taxes and receive a 90% exemption from USVI income taxes. They also enjoy a special customs duty rate of one percent. These companies are generally not subject to U.S. federal income taxes on their USVI operations.

Another tax free entity is a USVI foreign sales corporation (FSC) which pays no local taxes except for a nominal annual fee. Thousands of USVI FSCs have been set up by U.S. exporters as a means to reduce U.S. federal income taxes on their export sales by about 15%.

For foreign persons, even more generous exemptions are available through the use of the third type of tax-free entity: a USVI exempt company. The USVI is the only jurisdiction in the world where a non-U.S. person can establish a tax-free entity under the U.S. flag. USVI exempt companies are often used as holding companies for portfolio investments, for the ownership of aircraft that are registered with the U.S. Federal Aviation Administration, or as captive insurance companies. There are a number of other offshore tax planning structures that can take advantage of USVI exempt companies.

Except in the case of certain captive insurance companies, U.S. and USVI citizens, residents, and companies are prohibited from owning, directly or indirectly, ten percent or more of the stock of a USVI exempt company. With respect to income from all sources except those in the United States or the USVI, an exempt company is entirely free of all U.S. and USVI income taxes. Furthermore, except for a nominal annual franchise fee ($1,000), an exempt company is free from all local taxes as well. These tax benefits are guaranteed for 20 years by contract with the USVI government. The identity of the owner of a USVI exempt companies is not public information but it is subject to disclosure to the Virgin Islands Bureau of Internal Revenue or the IRS upon proper request.

U.S. Export Incentives Using USVI Foreign Sales Corporations

The U.S. Internal Revenue Code authorizes the establishment of foreign sales corporations (FSCs) in the U.S. Virgin Islands. FSCs are established by U.S. exporters in order to reduce their income tax on profits from export sales by approximately 15%.

Since the FSC program was established by Congress in 1984, more FSCs have been established in the U.S. Virgin Islands than in any other jurisdiction in the world. They have come to take advantage of the professional infrastructure and the excellent communications and transportation links between the USVI and the U.S. mainland, as well as for the tax benefits. Local benefits for FSCs include complete exemption from all local taxes and Virgin Islands income taxes, except for a nominal annual franchise tax and license fee. Benefits are guaranteed by a contract with the government for up to thirty years.

FSCs are usually established with the assistance of a licensed USVI FSC management company, many of which have offices in the United States mainland as well.

A regular FSC (one with export sales in excess of $5 million annually) is required to hold its annual meetings in the U.S. Virgin Islands, although this can be handled by a management company if desired. A small FSC (one with export sales of $5 million or less annually) does not have to hold such meetings.

Small FSCs must pay a flat annual franchise tax to the USVI government of either $400 or $900 depending on the volume of sales. The annual franchise tax for regular FSCs starts at $1,000.

Offshore Tax Planning

As a result of the generous tax exemptions available to foreign sales corporations, the USVI has become an offshore tax planning center. While foreign sales corporations are formed for the specific and limited purpose of saving taxes on export profits, USVI exempt companies are formed for numerous different purposes.

A USVI exempt company ought to be utilized rather than an offshore entity formed in another jurisdiction in any situation where U.S. flag protection is either desirable or essential to the purposes of the company.

For example, USVI exempt companies benefit from coverage under U.S. bi-lateral investment treaties and treaties of friendship commerce and navigation and are therefore ideal for persons who seek political stability and the protection of U.S. laws and treaties. Holding assets through a USVI exempt company covered by such treaties helps protect them from expropriation by an unfriendly government.

Another use for a USVI exempt company is where there is a desire to have access to United States courts for dispute resolution. By incorporating an exempt company in the USVI, the United States courts located in the Virgin Islands would generally have jurisdiction over disputes involving the company notwithstanding the fact that its business activities take place elsewhere.

USVI exempt companies are also useful as financing entities for foreign persons who are required by banks to keep accounts in U.S dollars in order to borrow money. This would be particularly appropriate if the country where the investment is to be made requires local entities to keep accounts in local currencies.

The USVI redomiciliation statute can be used to move a tax-free company from another jurisdiction into the USVI.

USVI exempt companies can also be used by foreign persons who wish to register their aircraft with the Federal Aviation Administration or to establish captive insurance companies.


General Economic Information of U.S. Virgin Islands

U.S. Virgin Islands Socio-Economic Data from the Inter-American Development Bank. This is the source for all the hard economic data you need. The particular country page is slow loading, but well worth the wait for you economic gurus.


U.S. Virgin Islands Tourism

The U.S. Virgin Islands Tourist Guide


U.S. Virgin Islands's Legal System

No information in file.


General Information

Living languages of U.S. Virgin Islands So, you think that English is the only language spoken in U.S. Virgin Islands? Well, check this out!


Importing and Exporting

TradePort's online tutorial on importing and exporting.

Reducing the Risk of Trade Disputes for Exporters

U.S. Harmonized Tarrif Schedule


Marketing

International Trade Association (U.S. Dept. of Commerce dedicated to helping U.S. businesses compete in the global marketplace.


Backgound Notes Geography History

Government Business Law Commercial Guide

Treaties Labor Law Environmental Law

Banking & Finance Visas & Immigration Foreign Investment

Intellectual Property Taxes General Economic Info

Tourism Legal System General Information

Importing & Exporting Marketing



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