Heard of many Chinese companies using BVI but have you ever wonder why? Here are the reasons why and what you should know about BVI & how it can be beneficial.

Why So Many Chinese Companies Use the BVI

Asia is surprising in the way it has managed to raise its economy during the past few years and China is probably one of the most spectacular such events out there. With an economy that appears to be stronger than most of the countries out there (if not the strongest one), China has managed to attract the attention of the entire economic world.

However, although you may be familiar with the great lift of the Chinese economy and although you may have heard about the fact that many of the Chinese companies choose to open BVI (British Virgin Islands) offshore companies, you may not fully understand why they do this. If you want to find out more about this topic, then do read on.

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BVI Company Incorporation and What You Should Know about It

The British Virgin Islands, a group of islands in the Caribbean sea, have been offering entrepreneurs from all over the world the chance to incorporate businesses on their soil ever since the middle of the 1980s. In time, these islands have become one of the most popular choices when it comes to offshore incorporation and it is believed that more than 40% of all the offshore companies in the world are found in the British Virgin Islands.

There is at least one very strong reason for which many entrepreneurs out there choose this path: taxes. With zero corporate income tax and with a procedure that is rather straightforward, the British Virgin Islands have become among the main attractions of the economic world.

To incorporate a BVI company, you should know that there are a few steps you will have to take. First of all, make sure that the company’s name includes one of the following words: “Limited”, “Incorporated”, “Societe Anonyme” (or “Sociedad Anonima”) or the abbreviation from one of these words.

Furthermore, you should know that going through the BVI incorporation process will also mean that you will need to register an address for the offshore company in the British Virgin Islands (but that the main office can be registered on any country on Earth).

A minimum of one shareholder and one director will be required for the incorporation as well (and the names of the shareholders and directors are not to be filed with the BVI Register of Companies, nor are they to be made public). Also, you need to know that the maximum number of shares the company is authorized to issue will determine the annual government tax. For up to 50,000 shares, you will have to pay a tax of $350, while for more than 50,000 shares, you will have to pay a tax of $1,100. In addition to this tax, an annual renewal fee will have to be paid.

Chinese Companies – Why do they Choose to Incorporate Offshore BVI Companies?

This question may have popped into the mind of anyone who has ever got acquainted with the fact that many Chinese companies out there have chosen to take this path (as a matter of fact, it is estimated that nearly 80% of China’s net is due to this type of incorporations in Hong Kong, the Cayman Islands and the British Virgin Islands).

The reason behind these actions is very simple to understand: same as with many other entrepreneurs in the world, Chinese business men want to pay as little taxes as possible and incorporating businesses offshore in the British Virgin Islands gives them the chance to save a lot of money they would have paid on taxes. What they basically do is incorporate these offshore companies and wait for the profits to return to China without having to pay taxes on them.

In addition to the taxation system proper (which practices, as mentioned zero corporate taxes), there are some other benefits to incorporating BVI offshore companies as well. For instance, the British Virgin Islands do not impose any kind of stamp duty for the transfer of the shares. Also, BVI companies can easily migrate towards other countries where such migration is allowed as well.

Furthermore, the British Virgin Islands companies are not prohibited from financial assistance when it comes to the purchase of shares in a company. Even more, it is very easy for a BVI company to merge with another BVI company or with a company from any other country in the world and the final status of the merge can belong to either of the two countries involved.

With so many benefits brought by the British Virgin Islands for offshore companies, it is easier to understand why so many Chinese businesses choose to take this path as well. The BVI territory acts as a true tax haven and this is attractive for many entrepreneurs out there, making these islands one of the main attractions for businesses from all over the world and not just from China.