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Advantages of BVI mutual funds
British Virgin Islands is the global leader in registration of offshore mutual funds. More than 2000 mutual funds are currently registered in the BVI, with the total of over 200 billion US dollars under management. The popularity of the BVI as the prime location for offshore mutual funds grows daily, as investment professionals increasingly recognize the benefits of this tax haven jurisdiction.
For an investment professional, a mutual fund is a vehicle that enables more efficient use of existing research and investment expertise and resources. As an additional product to market to one's client base, the properly structured offshore fund offers a number of features that distinguish it from a traditional mutual fund:
Minimum or zero tax on capital gains, incomes, profits and dividends that accrue to the Fund. This would usually allow the Fund to outperform its peers domiciled in a high-tax jurisdictio. Tax exempt status in the offshore jurisdiction enables the fund to reinvest the approximately 30% taxes on profits and gains that would otherwise be payable in high tax jurisdictions, without the need to obtain investment company or similar status. The individual investors should nevertheless remain aware of the fact that at the time when their investments are redeemed or when dividends are received from the offshore fund, such personal income may be subject to tax in their domicile country, at receipt.
Greater operational flexibility and a lower level of regulation makes it easier to establish and administer the funds. Consequently, formation and operating costs are significantly reduced. Lower costs means funds can be offered at zero or low load and with competitive management fees from the investor's point of view. Furthermore, greater flexibility is generally available, in terms of both fund structure and the investment portfolio. Offshore investment funds have access to the widest possible variety of investment instruments and may often pursue more aggressive investment strategies than if they were registered in a "traditional" jurisdiction.
Minimum tax on fees, commission income and profits earned by the Fund Managers, Advisors and Administrators, registered and regulated in an offshore financial centre. This may provide a competitive advantage to these professionals, for instance, by giving them an opportunity to charge lesser fees and commissions than do their competitors, who happen to be located in high-tax jurisdictions.
No big back office operation is required, since all administration, execution and shareholder relations can be subcontracted out. By having clients invest in a fund in which they buy and hold shares rather than, for example, a discretionary managed account, all of the contract notes, advices, statements and other client transaction paperwork may be dispensed with. Investors simply receive a monthly or quarterly NAV certificate and annual or semi-annual financial statement.
When choosing BVI as an offshore financial center in which to establish and administer mutual funds, there are a number of factors to consider:
BVI is a well-regulated jurisdiction with a long and proven track record.
BVI as British Dependent Territory has an outstanding political and social stability.
BVI has featuring modern telecommunications infrastructure.
US dollar is the official currency in the BVI and there are no exchange controls.
A BVI mutual fund is subject to zero taxation on its profits and capital gains. Under the new corporate legislation there is no more legal distinction between domestic and offshore entities.
There are no minimum capital requirements for a BVI mutual fund, neither there are any restrictions as to the type, denomination, number, classes and designation of rights of shares that can be created.
There are no statutory limitations as regards the investment policies, investment instruments and borrowing powers of a BVI mutual fund, as such conditions are only prescribed by internal documents of the fund itself, which are determined by the promoters and managers of the fund.
Experienced, licensed professionals are available to undertake all aspects of the establishment and administration of the fund. This enables the sponsor to sub-contract all of the back office functions with confidence and on a cost effective basis.
The mutual funds legislation allows outsourcing of any of such functions to foreign providers and establishes a fast and straightforward procedure for recognition of such providers.
Regulation under the newly-in-force Mutual Funds Act 1996 supports the integrity of the Territory's financial services sector. The light handed regulatory scheme focuses on ensuring that only fit and proper persons are involved in any aspect of mutual fund operations in the BVI.
Incorporation of BVI Off-shore Mutual Funds. Steps to set up operational BVI offshore Mutual Fund.
If you have more questions about BVI mutual funds please contact us.
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