The BVI vs Cayman Islands – Both are excellent and prestigious tax-free jurisdictions. They appear as a top choice if you’re planning for an offshore company formation.
However, each jurisdiction has its own pros and cons. And you need the basic understanding to choose the best option for yourself.
In today’s article, let’s unlock the secret of the BVI and the Cayman Islands – the similarities, differences, and the impact they have on your offshore company.
1. The BVI and Cayman Islands: At a glance
Generally, the British Virgin Islands and the Cayman Islands are famous tax havens in the world.
Both are British Overseas Territories in the Caribbean Sea. They also have an independent legal and judicial system.
1.1. The British Virgin Islands
The BVI consists of around 60 islands in the Caribbean Sea.
It’s very famous as one of the most stable jurisdictions in terms of political and economic perspectives.
Besides, The BVI is also among the world’s most prevalent offshore jurisdictions.
Specifically, the ICIJ revealed that there were 40% of the world’s offshore companies opt for BVI to start their business.
The types of business entities in the BVI are diverse in size, functions, and features.
According to the FSC’s Statistical Bulletin, over 372,911 Business Companies (BCs) were on the Register as of September 2021. This has affirmed the country as one of the leading centers for your company incorporation.
For a full breakdown of the BVI Business Company, discover our article and make the best choice for your business right now!
1.2. The Cayman Islands
On the other side, the Cayman Islands is also a stand-out option in your consideration list of setting up an offshore company.
Cayman Islands is in the western Caribbean Sea.
The country’s legal system shares many common features with that of the BVI. This is due to the fact that both are based on English common law jurisdiction.
When it comes to the business climate, Cayman is a premier offshore financial hub for multinational corporations and an ideal country of domicile for offshore investment funds.
A Cayman Islands LLC is one of the most common business structures in the country.
You can use it for a range of purposes. For instance, investment funds, joint venture companies, private equity transactions, securitizations, and many more.
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2. Similarities of The BVI and Cayman Islands
In terms of similarities, there’re several things that you need to consider.
2.1. Common benefits
Other than their famous reputation, both jurisdictions offer certain benefits for your offshore companies, including:
- Tax advantages
Both countries impose NO corporate tax, capital gains, gift taxes, inheritance taxes, sales taxes, and value-added taxes.
As long as your offshore company conducts business outside their territories, you don’t have to pay these taxes.
Your dividends, interests, and royalties are also tax-exempt.
- Corporate flexibility
BVI Business Companies and the Cayman Islands Exempted Companies are flexible corporate structures. This means you can incorporate your business with ease.
Also, there’s no requirement for corporate directors to be ordinarily residents of the country. So you don’t have to hire a nominee director for your company.
Looking to kick start your own business in the Cayman Islands? An Exempted Company can help you gain an entrepreneur edge – instantly.
- Fast registration system
You can form a business company in the BVI or an exempted company in the Cayman Islands in 2 to 3 working days.
- Fewer requirements
There are no capitalization requirements for your company.
Moreover, you don’t have to hold an annual shareholder meeting or submit financial records.
- Privacy
Both jurisdictions offer a high level of privacy.
The information of your directors, shareholders, officers will not be open to public access.
2.2. Business bank account
Due to the strict control over business banking in these 2 countries, you’ll need to rely on offshore banks or EMI alternatives to maintain your business finances.
In several cases, companies from BVI are more likely to get approval for EMI and have higher success rates with offshore bank applications.
To start comparing your banking options, check out our Banking Tool to unlock the full list of available banks, all tailored to your specific needs. So you can see which one is the right fit for your business.
2.3. Economic Substance
Relevant entities in BVI and Cayman Islands are now subject to Economic Substance Rules.
- The BVI
The in-scope entities for economic substance rules are BVI companies and BVI limited partnerships (with or without legal personality).
The BVI investment fund businesses are exempt from these requirements.
- Cayman Islands
The in-scope entities include company incorporate outside Cayman and registered under the Companies Law, limited liability company, limited liability partnership.
Exemption cases include domestic company; investment fund business, and non tax-resident company.
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3. The BVI vs Cayman Islands: What are the differences?
Despite the same benefits, the 2 countries are different in many ways.
Let’s imagine you’re opening an offshore company and considering between The BVI vs The Cayman Islands.
The criteria below are contributing factors that lead you to the final decision.
- Cost of incorporation
The operation cost for the Cayman offshore company is higher than most jurisdictions, including the British Virgin Islands.
You may have to pay additional charges before and after your company incorporation.
To avoid costly mistakes, consider using an all-in-one formation package from a trusted incorporation service firm. It can help you can save more money and resources.
- Confidentiality
If you’re seeking the best place to keep your company’s information, the BVI is a good choice.
The BVI’s confidentiality seems to outweigh Cayman Islands as it has a more powerful regulatory system and strict confidentiality requirements for companies.
- Stamp duty
In the BVI, stamp duty on transactions to or by a business company is free of tax (e.g. transfers of property or assets, shares, debt obligations, or securities).
Yet, you still have to pay tax for your land-ownership transaction in BVI.
For Cayman Islands, although no stamp duty is payable on transfers of shares, it’s still payable on certain documents at a nominal rate.
- Investment fund
In both the BVI and Cayman Islands, you’ll need to audit your investment funds. However, there’s no local audit requirement for the BVI companies.
There’re no custodial requirements for Cayman Islands companies. Conversely, the custodian is required for the BVI companies, but you may obtain an exemption.
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4. The BVI vs Cayman Islands: Which to choose?
You can see that both the BVI and Cayman Islands are remarkable jurisdictions for offshore company formation and business growth.
Choosing between the BVI and Cayman Islands seems to be a tough decision. It depends greatly on your company’s goals and objectives, so make sure you give a thorough consideration.
If you’re still confused about the BVI vs the Cayman Islands and need more advice on how to set up your offshore companies, click away to get a free consultant or drop us a message via service@bbcincorp.com.
