Tax implications of Setting up an incorporation in Nevada, Isle of man, The BVI and Delaware

The Virgin Islands

The Virgin Islands, commonly referred to as the British Virgin Islands (BVI), is a British overseas
territory located in the Caribbean to the east of Puerto Rico. The islands make up part of the Virgin
Islands archipelago; the remaining islands constitute the US Virgin Islands and the Spanish Virgin
Islands.

It is no secret that the British Virgin Islands is a tax haven with zero percent taxation policy- no
capital gains tax, gift tax, inheritance tax, sales tax or value-added tax. This makes BVI popular as an
offshore destination. At one point, almost half of the world’s offshore companies were located in
this archipelago.

The 2021 Corporate Tax Haven Index sees OECD countries or their dependencies take up the top six
spots on the ranking of the world’s greatest enablers of corporate tax abuse. These are, in
descending order, the British Virgin Islands, Cayman and Bermuda. The index ranks each country
based on how intensely the country’s tax and financial systems allow multinational corporations to
shift profit out of the countries where they do business and consequently pay less tax than they
should there. It grades each country’s tax and legal system with a ‘haven score’ out of 100 where a
zero represents no scope for corporate tax abuse and a 100 is unrestrained scope for corporate tax
abuse. The country’s haven score is then combined with the volume of financial activity conducted in
the country by multinational corporations to calculate how much cross-border corporate tax abuse is
facilitated by the country. A higher rank on the index does not necessarily mean a jurisdiction’s
corporate tax laws are more aggressive, but rather that the jurisdiction in practice plays a bigger role
globally in enabling the profit shifting that costs countries billions in lost tax every year.

BVI ranks as first on the list, indicating that BVI is responsible for 6.4% of the world's corporate tax
abuse risks.

BVI offers various tax incentives to offshore companies which makes a top tax haven to thousands of
foreign investors such as:

• Exemptions from income tax, capital gains tax, gift taxes, inheritance taxes and VAT
• Minimum ongoing compliance requirements
• Modern, flexible and commercially minded corporate legislation
• Cost-effective and straight forward incorporation process
• Offering a high level of privacy and confidentiality.
• Most attractive jurisdiction for an offshore business.

There are no capital gains taxes in the BVI.

The BVI has a zero-rated income tax regime. However, payroll taxes are assessed on every employee
and deemed employee for services rendered wholly or mainly in the BVI whether or not the
remuneration is paid in the BVI. Remuneration includes wages and salary however it does not
include dividends paid by a company registered in the BVI and payments made by an employer for
the benefit of an employee to any approved health insurance scheme or pension scheme.
Partners in a partnership and shareholders and members of a company or association carrying on
business in the BVI and who participate, otherwise than as employees, in the income of the business
will be deemed employees for the purposes of payroll tax.

Depending on the size of the enterprise and operations, payroll tax will be assessed at 10 per cent (if
the enterprise employs fewer than 7 persons) or 14 per cent of total annual remuneration paid to
the employee or deemed employee; 8 per cent may be deducted from the employee at source,
whereas the remainder is paid by the employer or self-employed person. No deduction shall be
made in respect of the first US$10,000 of actual remuneration paid to an employee in any financial
year (which currently corresponds with the calendar year).

Payroll tax is generally payable within 21 days of the end of the month in which the remuneration
was paid. An annual return is due within 120 days of the end of the calendar year.

How to set up an offshore company in BVI

Step 1: Eligibility of your new company name. Please note, a name won’t be registered if:

 The name that has already been incorporated with an existing BVI company, or is so
similar that, in the Registrar's opinion, may lead to confusion or misleading.
 The BVI Company Registrar has a name-reservation system, so the name which is
reserved would also be considered an existing name.
 If there is no licence or prior written consent of the Financial Services Commission, a BVI
Business Company may not be registered under a name that contains such “restricted”
words or phrases as "Assurance", "Bank", "Building Society", "Chamber of Commerce",
"Chartered", "Cooperative", "Imperial", "Municipal", "Royal", "Trust", under any other
name that suggests an association with the banking, trust company, insurance, mutual
fund, assurance or reinsurance industry, or the name which suggests the patronage of
royalty or of the British Virgin Islands government.

Step 2: Your British Virgin Islands company details

• Choose a suitable type of entity for your business purpose

• Choose recommended services for your BVI company

Step 3: Payment for Your Favorite British Virgin Islands Company

BVI incorporation fees: Incorporation of companies in BVI costs between US$1,000 - US$1,700
and it is done within 6 working days at 100% successful rate, with fast, easy & highest
confidential secured systems. Although, Companies Incorporated are expected to their
incorporation annually with a renewal fee ranging between US$ 1,500 - US$ 1,795.
Delaware

Delaware, a constituent state of the United States of America. The first of the original 13 states to
ratify the federal Constitution, it occupies a small niche in the Boston–Washington, D.C., urban
corridor along the Middle Atlantic seaboard.

Delaware has earned a worldwide reputation as the most business-friendly state in which to form an
LLC or corporation. More than 65 percent of all Fortune 500 companies and more than half of all
publicly-traded companies in the U.S. are incorporated in the state of Delaware.

Income deriving from business conducted in Delaware is taxed at a rate of 8.7%; the state has no
provision for a minimum corporate income tax. In addition, all companies must pay a franchise tax,
regardless of where they conduct business.

Delaware companies also enjoy incomparable tax savings such as:

 There is no state income tax for Delaware corporations that conduct business out of
state.
 No inheritance tax on stock held by non-Delaware residents.
 No state sales tax on intangible personal property (such as royalty payments)
 Share of stock owned by non-resident aliens are not subject to Delaware taxes.

In addition, Delaware corporations not operating in the state of Delaware do not need to acquire a
business license in Delaware.

Delaware Franchise Tax

Franchise Tax is the fee imposed by the State of Delaware for the right or privilege to own a
Delaware company. The tax has no bearing on income or company activity; it is simply required by
the State of Delaware to maintain the good standing status of your company.

The due date of your Delaware Franchise Tax payment varies, depending on your company type.

Delaware Franchise Taxes for corporations are due by March 1 of every year. If the tax is not paid on
or before March 1, the state imposes a $200 late penalty, plus a monthly interest fee of 1.5%.

Delaware LLC Franchise Taxes are due by June 1 of every year. The limited partnership (LP) Franchise
Tax is also due by June 1 of every year. If the tax is not paid on or before June 1, the state imposes a
$200 late penalty, plus a monthly interest fee of 1.5%.

Corporations, LLCs and LPs are taxed in arrears, meaning the tax due by each due date is for the
previous calendar year. The franchise tax is due even if the business didn’t conduct any activity or
lost money. If your company is no longer operating, it’s important to close your Delaware business
and end these fees.

Delaware Employer Identification Number (EIN)

After forming a Delaware corporation or LLC (limited liability company), the next step is to get an EIN
number also known as an Employer Identification Number or Federal Tax ID Number.

The Federal Tax ID Number is necessary for an LLC or corporation to lawfully conduct business
activities, especially if you're operating a business in the United States. All U.S. companies are
required to apply for an EIN when they open a U.S. bank account, obtain loans, hire employees and
more.
 How much does it cost to incorporate in Delaware, USA?

The cost to form a corporation or LLC in Delaware is one of the lowest in the country (and the
world). Cost of incorporating in Delaware, USA From US$ 845 Service Fees Done within 2 working
days 100% successful rate Fast, easy & highest confidential via secured systems Dedicated support
(24/7).

Jurisdiction State Legislations Federal Legislation

Nevada corporate income tax
There is no corporate income tax, Nevada is A corporation organised or created in the United
an attractive state for starting and States under the law of the United States or of any
incorporating a company. However, state is a domestic corporation. A domestic
corporations operating in the state still must corporation is a resident corporation even though
pay corporate income tax at the federal level. it does no business or owns no property in the
State income tax is not levied by the state to United States.
corporate bodies, individuals, or businesses.
No provisions exist for a sales tax or value-added
State sales tax rate is 6.85 percent. tax (VAT) at the federal level;
Sales Tax is statutorily imposed on the sale,
transfer, barter, licensing, lease, rental, use or
other consumption of tangible personal
property in Nevada. Persons who are in the
business of selling or transferring tangible
personal property are liable to sales tax at
6.85%

The Nevada Commerce Tax return:

The Commerce Tax is based on a taxpayer's
Nevada gross receipts over $4 million, earned
from July 1, 2019 through June 30, 2020.
Businesses with less than $4 million of Nevada
gross receipts are not required to file a return.

The Commerce Tax is a tax on Nevada-sitused

gross receipts. The tax rate varies, depending
on the type or classification of earned
business revenue. (The rates by industry
sector are set forth in Nev. Rev. Stat. Sections
363C.300 to 363C.560.)

NRS 363C.430  Publishing, software and

data processing (NAICS 511, 512, 515 and
518).

1.  The publishing, software and data

processing business category (NAICS 511, 512,
515 and 518) includes all business entities
primarily engaged in:
 (b) Motion picture and sound recording,
including, without limitation, the production
and distribution of motion pictures and sound
recordings;

(c) Broadcasting, except on the Internet,

including, without limitation, creating content
or acquiring the right to distribute content and
subsequently broadcast the content; and

2.  The amount of the commerce tax for a

business entity included in this category is
the amount obtained by subtracting
$4,000,000 from the Nevada gross revenue of
the business entity for the taxable year and
multiplying that amount by 0.253 percent.

NRS 363C.520  Arts, entertainment and

recreation (NAICS 71).

1.  The arts, entertainment and recreation

business category (NAICS 71) includes all
business entities primarily engaged in
operating facilities or providing services to
meet varied cultural, entertainment and
recreational interests of their patrons.

2.  The amount of the commerce tax for a

business entity included in this category is the
amount obtained by subtracting $4,000,000
from the Nevada gross revenue of the
business entity for the taxable year and
multiplying that amount by 0.24 percent.

(Added to NRS by 2015, 2894)

Companies’ resident in the Isle of Man are taxed

on their worldwide income and are required to file
an annual income tax return reporting worldwide
taxable profits calculated in line with local
legislation and practice.

The standard rate of corporate income tax in the

Isle of Man is 0%. The 0% rate was introduced on 6
April 2006 and applies to the profits of accounts
that form the basis of a company’s 2006/07
income tax assessments and any subsequent
accounting periods.
 A non-resident company incorporated outside the
Isle of Man but having a place of business or a
Isle of Man No State legislation in Isle of man permanent establishment (PE) on the Isle of Man
will be taxed on the profit attributable to the Isle of
Man establishment.

There are three rates of corporate income tax

(CIT).
The 10% rate applies to income from a banking
business carried on in the Isle of Man on the basis
of a deposit taking licence issued by the Isle of Man
Financial Services Authority, and
retail activities (i.e. the sale of goods to consumers
through retail premises) carried on in the Isle of
Man, but only if that profit exceeds 500,000 Isle of
Man pounds (IMP) in the year.

The 20% rate applies to income derived from real

estate situated in the Isle of Man.

The 0% rate applies to all other income.

Foreign-derived intangible income (FDII)

Foreign Derived Intangible Income (FDII) is a
special category of earnings that come from the
sale of products related to intellectual property
(IP). If a U.S. company holds IP in the U.S., such as
patents or trademarks, and has sales to foreign
customers based on that IP, the profits from those
sales face a lower tax rate.

For tax years beginning after 2017 and before 1

January 2026, Section 250 allows as a deduction an
amount equal to 37.5% of a domestic corporation’s
FDII plus 50% of the GILTI amount included in gross
income of the domestic corporation under new
Section 951A (discussed in the Income
determination section). FDII is not limited to sales
or licenses of intangible property, or services
provided using intangible property.

VAT: VAT is a transaction-based tax applied on the

domestic supply of most goods and services and is
currently charged at a standard rate of 20%.

Some supplies are charged at 0%, including food,

books and publications, and public transport, and
there is also a 5% rate applied to domestic
property repairs, amongst other things. Finally,
some supplies are exempt from VAT, including
 insurance and financial services, betting and
gaming, education, and healthcare.

Foreign Tax Credit: Foreign tax paid in respect of

profits that are subject to tax at a rate above 0% in
the Isle of Man will be offset against the liability
arising in accordance with any relevant tax treaty
in place.

Witholding Tax: WHT should be deducted from

certain payments made to non-residents by Isle of
Man resident companies as follows:

Rent from Manx land and property: 20% if paid to

either a company or to an individual.

Dividends: WHT is not required.

Loan interest and royalties: WHT is generally not

required, but there are certain exceptions that may
apply.

Other: The Assessor of Income Tax in the Isle of

Man has the power to require WHT, at a rate
determined by the Assessor (typically 20%), on
payments of taxable income made to a non-
resident (e.g. payments made to non-resident sub-
contractors).

References

http://www.tax-rates.org/nevada/corporate-income-tax

https://taxsummaries.pwc.com/united-states/corporate/taxes-on-corporate-income

https://www.gov.im/categories/tax-vat-and-your-money/income-tax-and-national-insurance/
business-and-corporations/

https://home.kpmg/dp/en/home/services/tax/family-office-and-private-client/tax-in-the-isle-of-
man.html

https://taxsummaries.pwc.com/isle-of-man/corporate/taxes-on-corporate-income

https://taxfoundation.org/nevada-approves-commerce-tax-new-tax-business-gross-receipts/

https://www.leg.state.nv.us/nrs/NRS-363C.html#NRS363CSec300

Panama

The corporate tax rate is 25%. For entities in which the State owns more than 40% of the shares, the
corporate income tax rate is 30% (25% in case it is a telecommunications company). Companies with
USD 1.5M or more income are subject to an alternative minimum tax which, when calculated, is
1.17% of gross taxable income. If the AMT results in a loss or ETR over 25%, the company may apply
for a waiver within 5 days of submitting their corporate income tax return. Free trade zones will be
taxed on sales made toward domestic territory, while other special regimes may apply from cero to
5% tax rate.

Mauritius

Certain resident companies (those designated as GBL1 under the Companies Act) are taxed at a flat
rate of 15% and benefit from a foreign tax credit equal to the amount of foreign taxes paid, up to a
limit of the amount of tax due in Mauritius. In the absence of proof of the actual amount of foreign
tax paid, it is presumed to be 80% of the Mauritian tax due.