BVI Information Exchange and U.S. Trust Reporting

BVI tax information exchange

The Virgin Islands International Tax Authority handles tax information exchange and works to maintain the jurisdiction's exchange framework. Its stated responsibilities include practical aspects of exchange on request and automatic exchange. They also include spontaneous exchange, as well as developing arrangements for tax matters.^[2]

The Common Reporting Standard provides for automatic exchange of financial account information for tax purposes among participating jurisdictions. The BVI enacted the standard through an amendment to its Mutual Legal Assistance (Tax Matters) legislation.^[3]

BVI financial institutions meet their reporting obligations through the BVI Financial Account Reporting System. The portal covers the BVI's U.S. FATCA agreement and CRS arrangement. It also covers the former U.K. CDOT arrangement. It links to lists of reportable and participating jurisdictions.^[3]

The BVI portal provides a framework for financial institution reporting. Whether a particular account is reportable, who its account holder is and what separate U.S. filing requirements apply to a U.S. citizen depend on the applicable rules.^[3]

FATCA agreement status

The U.S. Treasury table identifies the British Virgin Islands agreement as Model 1 and lists its status as in force. The U.S. Treasury describes FATCA as requiring foreign financial institutions to report information to the IRS about accounts held by U.S. taxpayers, including through certain foreign entities.^[4]

Institutions may comply through FATCA regulations or through intergovernmental agreements treated as in effect in their jurisdictions. The listed BVI Model 1 status is therefore part of the published U.S. framework for institutional reporting; it does not resolve the treatment of every individual account.^[4]

Trust business regulation

The BVI Financial Services Commission describes trust business as a regulated activity. It includes acting as a professional trustee or protector. It also includes acting as an administrator, or managing or administering a trust. The Commission states that the Banks and Trust Companies Act and related framework govern supervision of trust business carried on in or from the Virgin Islands.^[1]

IRS reporting for U.S. persons

The IRS identifies Form 3520 as a return U.S. persons use for certain transactions with foreign trusts and ownership under the grantor trust rules. It also covers specified distributions. A U.S. citizen who is treated as an owner under those rules has a Form 3520 reporting category even if there were no trust transactions during the tax year.^[7]

Form 3520 also covers a U.S. person who receives a distribution from a foreign trust. Form 3520 reporting can also apply to loans, uncompensated use of trust property, and certain outstanding obligations for a U.S. owner or beneficiary. The rules have defined triggers and exceptions, so beneficiary status alone does not establish that each of these events occurred.^[7]

Form 3520-A is the annual information return for a foreign trust with a U.S. owner. The IRS says the U.S. owner is responsible for ensuring that the trust files the return and provides annual statements. If the trust does not file, the U.S. owner completes a substitute Form 3520-A and attaches it to the owner's timely filed Form 3520.^[6]

Form 8938 may apply when the total value of specified foreign financial assets in which a U.S. person has an interest exceeds the applicable reporting thresholds. This is a separate asset reporting regime, and the IRS says exceptions to Forms 3520 and 3520-A do not remove any Form 8938 obligation that otherwise applies.^[6]

Forms 3520, 3520-A and 8938 and the FBAR are separate information reporting regimes, and each one has a different subject. Form 3520 concerns specified transactions and ownership, as well as distributions. Form 3520-A concerns foreign trusts with U.S. owners. Form 8938 concerns specified foreign financial assets. FBAR concerns certain foreign accounts.^[6]

British Virgin Islands treaty and FATCA status

The IRS A-to-Z list of U.S. income tax treaty jurisdictions does not include the British Virgin Islands or provide a treaty text link for the territory. The IRS describes treaties as agreements that can reduce or exempt tax on certain income items, with treatment varying by country and income type.^[5]

For U.S. citizens, the IRS says treaties can reduce or exempt foreign taxes on certain income received from sources within foreign countries. When a treaty does not cover an income type, or no treaty exists between the country and the United States, applicable U.S. return instructions and rates govern that income. The IRS list links to treaty texts for particular countries and points readers to Treasury treaty documents for more information.^[5]

Treasury's jurisdiction table lists FATCA information exchange status, while the IRS A-to-Z list addresses income tax treaties. The Model 1 listing does not add the British Virgin Islands to the IRS list of U.S. income tax treaties. Treasury points readers to the IRS FATCA page for taxpayer obligations and administrative guidance.^[4][5]

Questions and answers

Related resources

Related glossary terms

• Section 679: Section 679 addresses certain transfers by U.S. persons to foreign trusts. It generally treats the U.S. transferor as the owner of the part of the trust that comes from the transferred property when the trust has a U.S. beneficiary.
• Foreign grantor trust beneficiary statement: A foreign grantor trust beneficiary statement is part of Form 3520-A. It reports distributions to U.S. beneficiaries and identifies the trust's owner.
• Section 6048: Section 6048 sets information reporting rules for certain foreign trusts. Its parts cover notice of events, U.S. owner duties and beneficiary distributions.

Related articles and guides

• Cayman information exchange and U.S. trust reporting: A reference for U.S. citizens on Cayman Islands CRS and FATCA frameworks, beneficial ownership rules, and IRS reporting forms related to foreign trusts.
• Mauritius reporting rules and U.S. foreign trust forms: Mauritius publishes CRS and beneficial ownership reporting rules. U.S. citizens who own or receive distributions from a foreign trust file the IRS forms.

Tools and official documents

• FATCA agreement lookup: Look up any jurisdiction in the U.S. Treasury FATCA table and see its agreement model and status as the Treasury lists them, with a link to the source.

Related pages

• British Virgin Islands: overview: Start page for this jurisdiction.
• Types of trusts
• Trustee regulation and licensing
• Taxation of trusts