TAX INCENTIVES
TAX INCENTIVES
Our team of experienced attorneys and business strategists will discuss the opportunities available through the U.S. Virgin Islands Tax Incentives Programs. Tax incentives for qualified businesses in the U.S. Virgin Islands, are available for a period ranging from 10 to 30 years. Our staff will guide you through the application process and then help you manage the complex rules that govern the businesses that participate in these programs.
The U.S. Virgin Islands Tax Incentive policy was enacted by the United States Congress in 1960, see section 934 of the Internal Revenue Code, which permits the U.S. Virgin Islands to grant tax incentives to approved beneficiaries for income that is sourced and/or connected to the Territory.
The U.S. Virgin Islands (“USVI”) Economic Development Commission’s tax program provides significant tax incentives for qualified business development in the territory. We represent clients in all aspects of their requests to receive economic benefits.
For approved companies, those that are in the USVI, and earn their income in the Virgin Islands may qualify for many of the following incentives:
- 90% reduction in corporate income tax
- 90% reduction in personal income tax
- 100% exemption on gross receipt tax
- 100% exemption on business property tax
- 100% exemption on excise tax payments
- Reduction in the customs duty from the standard 6% to 1%
- Tax reduction on royalty income from software developed in the USVI and sold to non-US customers
- Availability of rental space at below market rates in the St. Croix and St. Thomas Industrial Parks
The RTPark, which operates as a Protected Cell Corporation and an autonomous instrumentality of the USVI Government, offers numerous tax exemptions and reductions, the most notable of which is a 90% reduction on tax liability for the business and also for direct and indirect owners of beneficiaries if the owners are bona fide residents of the USVI.
Tax Benefits Granted to RTPark Businesses:
- Up to a 90 percent Income Tax Reduction
- Withholding Tax Exemption
- Gross Receipts Tax Exemption
- Excise Tax Exemption
- Real Property Tax Exemption
- One to Six percent Customs Duties Reduction
- Full list of Tax Benefits
- RTPark Beneficiary Tax Savings Example
The Enterprise Zone Commission (EZC) offers a unique and attractive tax incentive program for companies located in our historic towns. The EZC’s mandate is to revitalize once vital vibrant communities that are now considered to be distressed. In achieving this objective within the Territory, the EZC seeks to provide appropriate investments, tax benefits, and regulatory relief of sufficient importance to encourage the business community to commit financially.
Below are some of the benefits your business can reap if eligible for the EZC tax incentive program:
- 90% reduction in corporate income tax
- 90% reduction in personal income tax
- 100% exemption on gross receipt tax
- 100% exemption on business property tax
The Hotel Development Program is designed to assist in the development of new hotels, resorts and other related tourism facilities in the U.S. Virgin Islands. The legislation allows hotel developers to use a portion of their hotel occupancy and casino taxes to repay long-term loans, which can help in obtaining financing for projects.
Monies generated from the Hotel Development and Finance Program are deposited into a separate hotel development and finance trust fund which is established for each approved project.
Currently, there is a proposed extension and expansion of the Hotel Development Act of 2011. The extension and expansion of the Act, which was originally limited to the islands of St. Croix, St. Thomas and St. John, will allow ample time for the application process for developers considering investment in any of the islands, including Water Island, a quiet 492-acre island, located in Charlotte Amalie harbor just off St. Thomas.
The U.S. Virgin Islands adopted tax increment financing in 2008 to promote development and economic growth in underdeveloped areas, preserve and enhance the tax base of areas needing redevelopment and restore and revitalize undeveloped communities.
Tax Increment Financing (TIF) is a technique used by local governments to finance development or redevelopment activities. It is a mechanism used to capture the future tax revenue benefits of real estate improvement to pay the present costs of the public improvements. Interested businesses can apply for two different types of TIF in the U.S. Virgin Islands:
Project Based: This is for a single project involving one or more pieces of land that uses TIF only for that project.
District Based: This option is ideal for large tracts of land targeted and identified for redevelopment. Projects that develop within the district may be eligible to use TIF as a source of financing or as property values increase, TIF may be used for loan programs.
TIF may be used to finance a variety of costs and improvements pertaining to public infrastructure, land acquisition, demolition and utilities, including the following:
- Sewer expansion and repair
- Water supply
- Street construction
- Affordable/low income housing
- Libraries
- Schools
- Traffic control
- Park improvements
- Parking structure
- Utility lines
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