Virgin Islands Real Estate Trends

A recent article by Steven Etkind & Roger Lorence of Sadis & Goldberg LLP describes Sen. Carl Levin, Democrat of Michigan, as having “declared war” on offshore funds managed by U.S. investment advisors with his “Stop Tax Haven Abuse Act” (S. 506).

Sadis & Goldberg LLP represents over five hundred domestic and offshore hedge funds and venture capital funds, registered investment companies, registered investment advisers and broker-dealers.

No doubt, there is much to fear with this proposed legislation.

Interestingly, the US Virgin Islands may be an excellent solution for offshore funds managed by US investment advisors. How?

The US Virgin Islands Economic Development Program administered by the Economic Development Commission (EDC Program).

The US Virgin Islands EDC Program falls under jurisdicton of the US Department of the Interior and is authorized jointly by the United States tax laws (IRC §934 & §937) and the United States Virgin Islands tax laws. It is a legitimate program whose purpose is to draw business to the US Virgin Islands, help the Virgin Islands economy diversify, and is designed to produce significant, positive economic benefits to the Territory of the US Virgin Islands and its residents.

To do so, the US Virgin Islands EDC Program offers various tax incentives, which include:

• 90% exemption on US income tax (results in a top federal tax rate of 3.5%!)
• 100% exemption on 4% gross receipts tax
• 100% exemption on 0.75% real property tax
• 100% exemption on 4.2% excise tax
• 100% exemption on 7% US Customs import duty
• 1% VI Customs Duties instead of 6%

These incentives can allow a fund domiciled and managed in the US Virgin Islands nearly the same efficiencies as the offshore model, but with some great upsides regarding this Congressional Bill.

• Not a tax haven - The US Virgin Islands is a US territory under the US flag and protection.
• No bank secrecy laws - there are no bank secrecy laws that are being utilized to hide assets or transactions.
• Authorized by Congress - the US Virgin Islands Economic Development Program is congressionally approved, legal and transparent..

With the US Virgin Islands EDC Program having such solid legal footing and the “Stop Tax Haven Abuse Act” being such a hot topic in Washington, we encourage domestic and offshore hedge funds and venture capital funds, registered investment companies, registered investment advisers and broker-dealers to consider moving to the USVI.