How to choose an offshore vehicle – Cayman Islands or BVI?
Offshore incorporation can be an intelligent business move for companies looking to do international business. An offshore company is a business entity established outside of its primary location of operation. It usually holds the same functions as a typical company but usually has additional benefits of asset protections, privacy and tax savings. The tax structures and laws that apply to offshore companies are often less demanding, and as a result, these businesses are required to disclose less information and tax dollars to the public.
Two incredibly well-known offshore jurisdictions for company incorporation are the Cayman Islands and the British Virgin Islands (“BVI”). The Cayman Islands is an autonomous British Overseas Territory in the western Caribbean Sea, slightly west of Jamaica. Its primary industries include tourism, shipping, and financial services – specifically the licensing of foreign companies. It has long been considered a major offshore financial haven for businesses and individuals.
The BVI is also an autonomous British Overseas Territory in the western Caribbean Sea, slightly east of Puerto Rico. Over half of BVI’s income comes from foreign business licensing; as a result, it has been widely labelled and used as a tax haven by many international firms. The two of these jurisdictions are the most popular places of incorporation for offshore businesses and are widely known and considered for their unique benefits.
There are plenty of shared advantages to incorporating in either the Cayman Islands or the BVI. Most offshore jurisdictions exempt you from local taxes, capital gains tax, debt obligations tax, and other securities tax. Your company is not subject to any additional fees on top of what you pay in your country of operation. Offshore incorporation will save you money on tax receipts.
Assets and information are kept much more private and secure from the government, as most offshore jurisdictions keep the details of companies, owners, and accounts registered with them strictly confidential.
Incorporating in either the Cayman Islands or the BVI is incredibly quick and painless. Once incorporated, both systems are incredibly easy to maintain. There is no requirement for an annual meeting in the jurisdiction, and annual fees are relatively low.
Both the Cayman Islands and the BVI are in high international standing with international tax and monetary authorities, including the Organization for Economic Co-operation and Development (OECD). Furthermore, their reputable regulatory environments make them well-recognized around the globe, which makes doing business with banks and other financial institutions quite simple.
Many of the procedures and advantages of incorporating in one of these jurisdictions are shared by the other. When deciding between the two or between other offshore jurisdictions, it is essential to understand the nuanced differences in fee systems, maintenance, legal structure, and general usage to make the best decision for your company.
Between the BVI and the Cayman Islands, there are a few notable differences to take into account. The process and costs involved with incorporating in the BVI are generally lower than that of the Cayman Islands. Annual fees in the BVI generally range from US$350 – US$1100, whereas the Cayman Islands’ rates range from US$732 – US$3,010.
The Cayman Islands incorporations are more readily suited to take on mergers and acquisitions privately and effectively. As well, they have access to much more control over application timing via express postal and registration services. They are more able to distribute and register charges privately and can take advantage of politically stable and favourable laws to act more efficiently and effectively.
BVI incorporations do, however, lend more flexibility with approvals and director actions, and are equally as reputable as Cayman Islands incorporations. BVI incorporation is a much more cost-effective choice and is the preferred option for debt issuing and trust.
Aside from structural and management differences, each incorporation is slightly more useful for different categories of offshore or international work. BVI incorporation is generally more favourable for more straightforward businesses looking to do international trade or investment. The process is simpler, and costs are lower. On the other hand, incorporating in the Cayman Islands is more advantageous when looking to invest in hedge funds or when your business requires more transparency.
Deciding on which offshore jurisdiction to incorporate your business in is a question of purpose, budgeting, and nuance. It is best to understand your options and to make a well-informed decision depending on your business needs and objectives. For more information on offshore incorporation and consultation, please contact our Managing Partner, Mr. Alan Chiu, or our Consultant, Mr. Sander Ting.
Alan Chiu, Managing Partner
Sander Ting, Consultant