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Why Domiciling in Anguilla as a VC Entity Works

Venture capital firms, startups, and individuals have been domiciling in places like Dominica, the Cayman Islands, and Anguilla for decades. Many of these Caribbean islands offer generous tax benefits to companies and individuals who put down roots on their shores. They’ve also consistently represented a beneficial way for people to accrue tax-free interest on their investments.

In places like the Cayman Islands, offshore companies pay an annual licensing fee directly to the government instead of taxes. This provides a benefit to the government in the form of direct payments as well as a benefit to the company in the form of significant tax savings.

But the laws that govern International Business Companies (IBCs) in these locations can change. International laws also play a role in how companies domiciled in these areas are affected.

Based on recent events, Anguilla now represents one of the best opportunities for domiciling overseas. If you’re interested in domiciling in Anguilla or if you’re already working within another jurisdiction, such as Dominica, here’s what you need to know about the current state of IBCs in this region.

The Repeal of the Dominica IBC Act

Dominica (not to be confused with The Dominican Republic) enacted the International Business Companies (IBC) Act in 1996. At the time, it was viewed as an invitation to offshore businesses to domicile on the island, providing it with a boost in economic revenue.

However, the Dominican Parliament has since repealed the IBC Act to meet international tax obligations.

According to the country’s Minister of Foreign Affairs, Hon. Dr. Kenneth Darroux, “With very little economic return, the IBCs have exposed Dominica to operational, reputational, and regulatory risks. In addition, the Ministry of Finance, with the Financial Services Unit and the Inland Revenue Division, are required to supervise activities of the IBCs and apply applicable tax laws. The latter is to be enforced if Dominica is to remain compliant with the international obligations. Most of the IBC operations are conducted outside of Dominica and significant financial and human resources are required to effectively supervise and apply the domestic tax laws to this sector.”

The repeal will take effect on January 1st, 2022. Companies registered as IBCs in Dominica must transition to become companies under the Companies Act Chapter 78:04 of the 2017 Revised Laws of Dominica.

There is, of course, another option: Domicile in a different location. There are multiple locations in the region to choose from.

The Benefits of Domiciling in Anguilla

The Cayman Islands are particularly popular among international businesses, and they often make headlines due to the number of well-known corporations domiciled there. Nonetheless, Anguilla is perhaps the most promising location for VCs hoping to domicile in the region.

Anguilla is an internally self-governing territory of the United Kingdom. It has been politically stable since the 1980s after the territory seceded from Saint Kitts and Nevis and became a separate British overseas territory.

Since then, Anguilla has become a popular tourist destination. Due to its few natural resources, the island economy is powered mostly by tourism revenue, offshore incorporation, offshore banking, finance, and fishing.

According to Lonely Planet, Anguilla is a top 10 destination for 2022. “Anguilla’s careful reopening plan made it the destination of choice for CNN contributor Hannah Seligson, who traveled there with her young children in January. She raved about the island’s “aquamarine sea, 33 public beaches, 80-degree temperatures, amazing hotels and food,” as well as its responsible approach to public health amid the pandemic.“

Regarding the adoption of the Virtual City, Honourable Minister Kyle Hodge, Ministry of Economic Development, Commerce, Information Technology & Natural Resources stated in a press release earlier this year that “Anguilla has always been an attractive place for digital nomads. Virtual City enhances our Financial Services Sector and adds value to the FinTech Industry.”

Anguilla has no capital gains, estate, profit, sales, or corporate taxes. As of 2011, the only “tax” it requires of businesses is the “Interim Stabilization Levy,” which is a 3% levy on the gross wages of employees earning over EC$2,000,000 (~US$740,041) per month.

This makes it an ideal location for venture capital firms. Firms domiciling here would be able to maintain significantly more of their funding than if they were required to domicile elsewhere.

The Special Economic Zone Act of 2020

Anguilla’s attractiveness as a haven for crypto companies and venture capital firms was further deepened in March of 2020 when the island passed the Special Economic Zones (SEZ) Act of 2020. Like similar Acts passed in other countries, this Act would establish delineated areas that are subject to differentiated regulation and administration than the rest of the host country.

Anguilla’s SEZ Act establishes an authority that has the power to establish economic zones. It also exempts companies within special economic zones from certain taxes and fees.

In an article published in The Anguillan, Jason Web, CEO of Frontier X and shareholder of The Chord Group which helped Anguilla establish the Act, “One of the most important technology zones in the planet is starting here in Anguilla. We think that Anguilla is going to be a remarkable place of development of new technologies. We think globally this part of the world will be seen as the beginning of a new era of development.”

Consider Domiciling in Anguilla

If you’re currently domiciled in Dominica and you’re ready to move, or if you’re considering domiciling your company in the Caribbean, consider Anguilla as an option. Unlike others in the region, Anguilla is focusing heavily on attracting businesses to its shores for the foreseeable future.

Speaking on behalf of the Chord Group, which announced the launch of Anguilla’s Special Economic Zone (SEZ) – Virtual City earlier in 2021, Chief Development Officer Michael Glass commented “We are very pleased with our Anguilla SEZ. Years in research and development will assure our customers, not only one of the most tech friendly environments anywhere, but a great culture from the elected officials to the Anguillian citizen’s and workforce, and some of the best beaches and resorts in the world.”

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