USVI Income Taxes

Generally, instead of filing returns and paying taxes to the IRS, residents of the USVI, and corporations[3] formed in the USVI, file returns and pay income taxes directly the Virgin Islands Bureau of Internal Revenue[13]. The taxes are at the same rates and use the same forms and rules as the federal income tax under what is called the “mirror system” of taxation.

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The mirror system applies differently to corporations than to individuals. One of the differences is that in addition to the regular corporate tax rate, corporations are also subject to a 10% corporate tax surcharge which brings the maximum corporate graduated rate to 38.5%. There are no local income taxes or surcharges imposed on individuals over and above the mirror system rates so that the overall rate of income tax for individuals is equivalent to the rate that a resident of a state without a state income tax would pay.

One of the results of the mirror system is that a corporation incorporated in the United States, along with a corporation incorporated elsewhere outside of the USVI, is considered foreign for USVI tax purposes.

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U.S. citizens and permanent residents with income from the USVI, but who are not resident there, pay the same total amount of tax as they would if all their income were from U.S. sources, but the tax is apportioned between the United States and the USVI. This is done on IRS form 8689. These individuals file their form 1040 returns, along with the form 8689, with the IRS and they file a copy with the Virgin Islands Bureau of Internal Revenue[13].

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