Generally, the annual renewal fees consist of two parts: (A) mandatory fees, which cover the absolute minimum necessary to maintain the company in good standing, and (B) optional fees, for services that enhance and improve the offshore company, but are not compulsory. Usually, the scope of the optional fees depends on the exact configuration of the offshore company, as it was done at or following the incorporation.
The mandatory fees always include (a) Government fee, (b) Registered Office and Registered Agent fee, (c) compliance fee, (d) economic substance reporting fee.
The Government fee is essentially a fixed amount of state duty that all offshore companies are supposed to pay in lieu of tax. Regardless of the name it´s called (franchise tax, exempt duty, registration fee or otherwise), it is quite simply a fixed fee levied by the Government for the privilege of being incorporated “under the flag” of the particular tax haven country.
The Registered Office and Registered Agent fee is a professional fee, which basically employs the Registered Agent as the official intermediary between the owners of the company and the Government, pays for the usage of the Agents office address as the legal address of the offshore company and covers the minimum custodial and administrative services necessary to comply with the requirements of the Companies Act. As the law requires that in order to be in good standing every offshore company must have a Registered Office and a Registered Agent, this service is mandatory.
BVI law requires that the Registered Agents perform Know Your Customer (KYC) procedure upon the company registration, and keep checking and updating these files constantly thereafter. Verifying a pile of documents regularly, reminding the clients when any document is about to expire as well as collecting and verifying the new documents provided instead of the expired ones take considerable time of our staff. Therefore, once a year the Compliance fee is applied to compensate these tasks.
The BVI Economic Substance (Companies and Limited Partnerships) Act requires all BVI entities to prepare, report and file economic substance declaration about their business annually. For companies not conducting a relevant activity only a fully completed dated and signed ESA Declaration form to us via email annually for Boss filing within 6 months of the Company’s financial year end. Companies conducting business activities within the scope of Relevant Activities, in addition to the ESA Declaration form, must demonstrate a degree of economic substance within the British Virgin Islands.
Therefore a fee for processing and filing Economic Substance Declaration is applied to all BVI entities on a yearly bases.
The optional fees would be payable for offshore company management services, like (a) third-party directorship services; (b) nominee shareholders; (c) third-party account signatory services; (d) mail and fax forwarding, document remailing and call handling, also known as “virtual office” services; (e) miscellaneous secretarial, legal and administrative services, billed either on fixed-fee basis or according to time-spent.
The annual renewal fees are invoiced once a year. They are payable in advance, for the next year. All the companies registered from January to June must pay the annual fees by the end of May every year starting from the next year after the registration, and the companies registered from July to December must pay the annual fees by the end of November every year starting from the next year after the registration. For the companies with more complicated arrangements there may be specific fees that are billed on time-spent basis. These may be invoiced post factum, either monthly or quarterly.
If the payment is not timely made, Government penalty fees will apply. Such penalty fees will increase depending on the time the company has not paid for. After not paying the renewal fees and/or the respective penalty fees for late renewal, the company will be struck off the Register. Once the company is struck off the Register, the company cannot legally operate – it cannot do any business, sign any contracts, operate with its assets, start or defend any legal proceedings. At the same time, the company keeps incurring liabilities and its creditors can make claims and even attain judgment execution. The only thing the company can do while being struck off is to apply for the restoration to the Register however this involves pretty high costs.
