The Virgin Islands Tax Sharing Agreement is a comprehensive agreement that governs the allocation and distribution of tax revenues between the United States and the U.S. Virgin Islands. This agreement is crucial for ensuring a fair and efficient tax system that benefits both parties involved. Under the tax sharing agreement, the U.S. Virgin Islands, as a U.S. territory, has the authority to levy and collect local taxes such as income tax, excise tax, and property tax. However, due to its territorial status, the U.S. Virgin Islands also receives financial assistance from the U.S. government to support its economy and public services. The tax sharing agreement establishes a framework for the allocation of tax revenues between the U.S. federal government and the U.S. Virgin Islands government. It ensures that a portion of the local tax revenues collected goes to the U.S. Treasury to reimburse the federal government for the financial support provided to the U.S. Virgin Islands. The agreement also outlines the formulas and procedures for determining the distribution of tax revenues. Different types of taxes, such as income tax and excise tax, may have their own separate allocation methods to ensure a fair distribution based on various factors such as population, economic indicators, or specific needs of the U.S. Virgin Islands. Additionally, the tax sharing agreement may include provisions for periodic reviews and adjustments to the allocation formulas. This allows for adaptations to change in economic conditions, tax laws, or any other factors that could impact the distribution of tax revenues. It is important to note that the U.S. Virgin Islands Tax Sharing Agreement may have different variations or amendments over time. One such notable agreement is the "Revised Treaty of Friendship, Commerce, and Navigation Between the United States of America and the Government of the Virgin Islands." This treaty, signed in 1954, covers various aspects of U.S.-Virgin Islands relations, including tax matters. In summary, the Virgin Islands Tax Sharing Agreement is a vital agreement that determines the allocation and distribution of tax revenues between the U.S. federal government and the U.S. Virgin Islands government. While there may be different types or variations of this agreement, they all seek to establish a fair and efficient tax system that supports the economic development and public services of the U.S. Virgin Islands while ensuring appropriate financial support from the U.S. government.
Virgin Islands Tax Sharing Agreement
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FAQ
The BVI Agreement will promote a closer bilateral relationship between Australia and the BVI by eliminating double taxation of certain income derived by individuals, specifically government employees, students and business apprentices.
The U.S. Virgin Islands is not included within any tax treaties to which the United States is a party. The U.S. Virgin Islands government does not have the legal authority to enter into tax treaties with foreign countries on its own behalf.
The Mirror Code As far as taxes go, Congress requires that the USVI impose an income tax that "mirrors" the U.S. federal income tax found in United States Code, Title 26 (also known as the "Internal Revenue Code" or "IRC").
US Virgin Islands is not a tax haven or offshore jurisdiction, but USVI companies (or corporations) could be established as "USVI Exempt Companies" with partial or full exemption from local and US federal income taxes.
A USVI corporation pays an effective tax rate of approximately 23.1% on its eligible income, and with the 90% tax credit the effective rate is 2.31% (salaries and other forms of compensation such as guaranteed payments are fully taxable).
USVI Tax Incentives & The Economic Development Commission up to 90% reduction in corporate and personal income tax; 100% exemption on other taxes, including business property and gross receipt taxes; U.S. currency, courts, and flag protection; rental space at below market rates in sponsored industrial parks.
An individual who qualifies as a bona fide resident of the U.S. Virgin Islands (or who files a joint U.S. return with a U.S. citizen or resident with U.S. Virgin Islands income) will generally have no U.S. tax liability so long as the taxpayer reports all income from all sources on the return filed with the U.S. Virgin ...
The USVI has its own income tax system based on the same laws and tax rates that apply in the United States. An important factor in USVI taxation is whether, during the entire tax year, you are a bona fide resident of the USVI.
