Tax Benefits - individuals

In the USVI, you file using the federal forms, but turn it into the revenue department here and either pay here or get your refund here (which is never guaranteed in a timely manner as they are just getting caught up after 6-7 years of back refunds).  There is no state tax here. Tax rates are based on your income as it would be in the states. 

Posted by: @lyla1515

Hello VIM family,

 

I'm trying to find out any tax advantages of moving to USVI vs the US. 

Can you recommend a good Tax Accountant i could reach out to to discuss? 

My main questions are 

- capital gains rate?

- federal rate? State rate? 

- income tax rate?

 

Also, if anyone has experience on this and any tips / info please share. 

 

thanks!

Are you looking at saving on Crypto? If so, Puerto Rico is the place to be. 

Cap gains same as us

fed tax rate same as us

no state tax

low real estate taxes

PR has some benefits reportedly but details are unknown to me.  

As already said.  Everything is the same except federal taxes are paid to the local VIBIR instead of IRS. Social security and Medicare are still paid to the IRS.  And there is no state tax.  Businesses have a 5% tax on GROSS income.   EDC companies have some huge tax breaks if you are granted those benefits.  

Thanks for the tips) I found a way to save money)

Posted by: @stjohnjulie

And there is no state tax.  Businesses have a 5% tax on GROSS income.

They may not call it a "state tax" here in the VI, but, we most definitely have a "state tax".

We have the Excise Tax which is basically 6% on almost everything entering the territory and the Gross Receipts Tax which is also a tax on almost everything sold in the territory. Put those two together and it amounts to an 11% State Tax. Its actually a bit higher because both are a tax on a tax.

As a business owner, we add both of these hidden taxes to the price of everything we sell although for some weird reason we legally can't show it on an invoice. Every business owner I know does the same.

When all the hidden and not so hidden taxes are added up, the VI is really a high tax state.

Doing business aboveboard can be costly and frustrating.   And to add insult to injury, the IRB spends a lot of time going after business that actually file taxes instead of those who don’t or severely under report.   If you happen to be in an industry where there are several EDC benefit Companys you almost cannot compete if you do not also receive those benefits.  The tax breaks they receive have always baffled me a bit.  If a company needs those kind of breaks to have it make sense to business here then it seems like it indicates something is wrong with the tax structure.   

OP asked about individual taxes. If you file 1040 and are an employee you actually save some money as you don’t subject to gross recipes tax and there is no state income tax. Profits from trading crypto subject to same capital gains in VI as in US mainland. I would imagine IRB would be less aware of how to investigate crypto dealings versus IRS agents. Crypto mining or trading would most likely be done using offshore banking and very anonymously so chances of successful IRB investigation are slim to none. 

EDC started with good intentions to bring business and investment to the islands from elsewhere and provide jobs and employment for locals. Looking at reality it went off the rails. Some businesses got EDC benefits that are plainly detriment to the tax revenue and have not fulfilled the original intention of the EDC. Either EDC commission got fooled or hands were greased. 

Posted by: @STTsailor

OP asked about individual taxes. If you file 1040 and are an employee

This is another thing I see in the USVI that is often times done incorrectly. There are so many people who break the employee vs subcontractor rule.   Employees are so costly to a business and businesses tend to just pay everyone as a (1099) subcontractor to save on taxes, insurances, and all the various reports you need to prepare and file.  

On a side note, many new to island people also file incorrectly.  There are almost no stateside accountants that understand how to (where to) file taxes for USVI residents.  And if you call the IRS hotline they usually don’t know either.  Using a local accountant is advisable if you are unable to or unsure of how to file your taxes here. 

Posted by: @stjohnjulie

Posted by: @STTsailor

OP asked about individual taxes. If you file 1040 and are an employee

Employees are so costly to a business and businesses tend to just pay everyone as a (1099) subcontractor to save on taxes, insurances, and all the various reports you need to prepare and file.

We do this with our one and only "part time" worker (I don't refer to him as an employee). I feel justified to 1099 him because he can't find the inner strength to get to work before 10AM, comes and goes as he pleases and chooses which tasks suit his particular mood on any given day. We stopped enforcing a work schedule for him and if he doesn't show up, we just outsource what he would have done, which is more profitable anyway. If there is no work on a particular day, I text him and tell him not to come in. When covid struck, he quit for the better part of the year, which was fine with us. When he decided it was safe to go outside again, we let him come back on the same "casual" terms. He's a crypto currency fanatic and never seems to be short of money. I'm not sure if all that makes him a legitimate 1099'er but I don't really care either. If push came to shove, we could easily do without his "services" altogether.

Posted by: @vicanuck

Posted by: @stjohnjulie

Posted by: @STTsailor

OP asked about individual taxes. If you file 1040 and are an employee

Employees are so costly to a business and businesses tend to just pay everyone as a (1099) subcontractor to save on taxes, insurances, and all the various reports you need to prepare and file.

We do this with our one and only "part time" worker (I don't refer to him as an employee). I feel justified to 1099 him because he can't find the inner strength to get to work before 10AM, comes and goes as he pleases and chooses which tasks suit his particular mood on any given day.

Lol. He sounds closer to a 1099’er than what most do.  So I understand your justification.   

Another thing about employees is overtime. We have a pretty strict overtime pay schedule that doesn’t make a lot of sense to me. And all the various forms for employment taxes are manual which can be time consuming.   Definitely one of my least favorite tasks!