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Feds Approve Capital Tax Break Zones in the USVI – St. Thomas Source
Second, it receives a 10 percent reduction in federal capital gains tax if it holds the investment in the tax break zone for at least five years, and an additional five percent reduction if it holds the investment for at least seven years.
Third, it avoids federal capital gains tax altogether on any further appreciation in its investment in the tax break zone.
That is, if the company ultimately sells its investment in the tax break zone for $35 million after seven years – a gain of $25 million – it will defer capital gains tax on the original $10 million gain until the date of the sale, reduce the amount of that capital gain by 15 percent, and pay no capital gains tax at all on the $15 million appreciated gain.
There is a long history of Congress encouraging the territories to try to spur development with tax breaks. These new tax breaks join the 90 to 100 percent breaks on corporate income tax, gross receipts tax, property tax and excise tax the territory gives through the Economic Development Commission and through the University of the Virgin Islands Research and Technology Park.
In 2016, Mapp proposed a plan to boost the economy over five years, which relied heavily on hopes of massive growth in the number of entities taking advantage of the territory’s tax break programs.
The U.S. Virgin Islands were among 18 states and territories approved in what the Treasury Department termed the “first round” of approved tax break zones. The others were: American Samoa; Arizona; California; Colorado; Georgia; Idaho; Kentucky; Michigan; Mississippi; Nebraska; New Jersey; Oklahoma; Puerto Rico; South Carolina; South Dakota; Vermont; and Wisconsin.
Q&A Interview of AprilQ: Tell us about your background and your company, Newland Real Estate. A: As a second-generation Newland Real Estate Broker, I grew up in beautiful St. Thomas and had an early exposure to the skills and know how of the US Virgin Islands luxury real estate market. I crafted my expertise by the age of 18, making me the youngest real estate agent in the area. My last 40 years in the field have garnered the respect and credibility for knowing the ins and outs of this industry and niche market. There are a very limited number of brokers who sell high-end properties in the Caribbean in the $20M plus range, so I pride myself on being the exclusive broker for private islands sold under the US flag and high end commercial and residential properties. Newland Real Estate was founded in 1957 after my parents moved from Long Beach Michigan City, Indiana to St. Thomas. It was then that they founded the St. Thomas-St. John Board of Realtors and the Territorial Association of Realtors. Newland Real Estate has been family-owned since then and my mission is to keep it a successful Newland family business for generations to come. Q: Who is your target audience? A: My properties are all very exclusive and high-end, geared towards those who can afford it and plan to turn them into something longstanding. My buyers are, more often than not, well established, wealthy, and have the luxurious freedom to invest in business opportunities, or splurge on a second, or third property just because they can. It really takes that special billionaire that has the funds to own his/her own island. There are only 2 islands left in the US Virgin Islands for sale, so once they’re sold, they are maybe gone for good. There is also a sense of legacy building for some of my buyers. They are interested in purchasing as to keep the property in the family for many generations. This means that the turnover for these properties is very low, so once an exclusive island comes on the market, potential buyers have to be quick. There are many types of buyers for such large purchases: individuals, investors, and development companies. I prefer to sell to individual owners than to developers for the fluidity and seamlessness of transactions that come with it. I recently closed on two islands to individual buyers very quickly because we negated the long process that would otherwise come with developers, including: permit application; obtaining investor funds; and abiding by zoning laws. However, if that is the desire, I know exactly what has to be done, who to go to, and so if that is absolutely the direction my future buyer wants to go in, I become an essential part of that and make sure it is executed in the most efficient and expedited way possible. Q: What are some challenges you face in the market? A: Getting the word out to clients can be a challenge because these prominent properties are not publicly marketed so many buyers may not be readily aware of my listings. I choose not to market through advertisement because these are special locations that many of the high profile sellers would like to keep private and confidential, and I honor that discretion. Many of my buyers find me through referrals. I make sure no one knows the people I am working with and who is buying what property to respect the privacy of my buyers – AND sellers. This builds my credibility and the trust level clients have in my team. Many people are aware of my major recordbreaking sales even though I don’t talk much about what I’ve done—somehow people just know. Q: How are you changing the landscape of the US Virgin Islands? A: I am very dedicated to keeping the landscape of this area as in tact as possible, being sensitive to the natural environment. Many individuals are very thankful for what I do to contribute and give back to our community. There was a beach property that the US Virgin Islands Government wanted to keep undeveloped and proprietary, but it was too expensive to gather the funds. What I was able to do was go to a Senator, who helped the Government find the funds necessary in order to buy it and keep it in its natural state. The community is still very thankful to me to this day for that sale. Q:Who is your ideal buyer? A: The ideal buyer is not only financially capable, but also able to make swift independent decisions. I am also interested in finding someone who is environmentally sensitive (can understand how – and the importance of – to keep the water, corals, and reefs in tact as much as possible); someone who is willing to view the property in person – the sign of a real buyer; and finally, someone who understands that these are high quality properties that need to be treated with respect. Q: What is your mission? A: Now that my son has joined the company, I am focused on building the Newland Real Estate Company to be a family business that will stay with us for generations. My mission is to maintain the high level of integrity and loyalty amongst our current and future clients through our growth. Some of the most successful businesses in the world are family-owned and I believe that building a company that survives many generations is special.
EDC Tax Incentives
The United States Virgin Islands (USVI) is more than just an ideal tourism destination in the Caribbean with its pristine beaches, wonderful sunshine, great duty-free shopping, and intriguing historic monuments. It is also the ideal location for doing business and maximizing your company's profits.
The USVI offers a very unique tax incentives program for qualified businesses through the Economic Development Authority and its Economic Development Commission or EDC Program. We encourage global companies in the areas of manufacturing, service businesses, high-technology assembly plants and outsourcing companies such as call centers, as well as, other diverse businesses to qualify for the Economic Development Commission Program. Our goal is to provide the necessary incentives to make your business expansion or relocation a reality.
Our general mandate is:
- To promote the growth, development and diversification of the economy of the U.S. Virgin Islands.
- To benefit the people of the U.S. Virgin Islands by discovering and developing to the fullest possible extent the human and economic resources available.
- To establish capital and preserve job opportunities for residents of the U.S. Virgin Islands.
- To promote capital formation for economic development in the U.S. Virgin Islands.
It is also our mission to encourage and assist in the creation, development and expansion of business and industry. By locating your business or qualified portion thereof to the U.S. Virgin Islands, you may be eligible to receive the above-listed tax incentives for your business for a period ranging from 20 to 30 years.
Benefits and advantages for businesses in the EDC program can be up to:
- 90% reduction in corporate income tax
- 90% reduction in personal income tax
- 100% exemption on gross receipt tax
- 100% exemption on business property tax
- 100% exemption on excise tax payments
- Reduction in the customs duty from the standard 6% to 1%
- Tax reduction on royalty income from software developed in the USVI and sold to non-US customers
- Availability of rental space at below market rates in the St. Croix and St. Thomas Economic Development Parks
Investors in the U.S. Virgin Islands also enjoy:
- A business-friendly environment
- An educated labor force
- U.S. currency, courts and flag protection
- World-class telecommunications
- "Made in the USA" labeling
- Duty free, quota free exporting of USVI-made goods into the United States
- Shipping advantages
- Availability of prime rental space
- Easy air access to and from the United States, South America, Europe and other Caribbean Islands
Jones Act Exemption:
- The U.S. Virgin Islands is exempt from the Jones Act, a cabotage law, which requires freight moving between U.S. ports to be carried on U.S. flag vessels.
- Freight between U.S. ports (including Puerto Rico) and the U.S.V.I. may be carried on foreign flag vessels.
We encourage you to peruse this site for additional information on qualifying and applying for benefits under our program, and we look forward to serving you!
For more information call April at (340) 643-4347 or email at firstname.lastname@example.org