INCOME TAX ABOLISHED

Come January 1st 2005 the BVI will surely feel like paradise not only for the splendour of nature’s little secrets but also because the local government has decided to eliminate income tax for everyone.

Minister of Finance Hon Ronnie W. Skelton announced on Tuesday that under the new international rules, agreed to by the United Kingdom, the BVI is no longer permitted to allow International Business Companies (IBCs) to operate here tax-free, while income tax is being imposed on local businesses.

Effective January 1st 2005 all businesses will be exempt from income tax. At the same time, employees will no longer have to pay income tax based on the Pay As You Earn (PAYE) system. A new payroll tax will be levied at a rate of 16 per cent (8% to be paid by the employer and 8% by the employee). The first $7,500 of employee income will remain tax free.

Hon Skelton said that “these changes represent a serious reform of our tax system”. He expressed his confidence that the tax free reform will be successful and added that all companies registered in the BVI will pay a marginally higher annual licence fee, while IBCs will face a maximum 20 per cent increase in annual licence fees.

The Minister of Finance added that the fees were established many years ago and the slight increase will not have negative effects: “We are confident that the BVI will continue to be a competitive and attractive financial services jurisdiction,” he said.