Local Residents Print

The American Jobs Creation Act of 2004 imposed new rules for determining who is a bona fide resident of the Virgin Islands. Beginning in tax year 2006, the following three tests must be met in order to be considered a bona resident of the Virgin Islands:

1. Taxpayer must meet the Presence Test
   1. Presence Test: Taxpayers meet the presence test for the tax year if they meet one of the following conditions:
      1. They were present in the Virgin Islands for at least 183 days during the year.
      2. They were present in the U.S. for no more than 90 days during the tax year.
      3. They had $3,000.00 or less of earned income from U.S. sources and were present for more days in the Virgin Islands than in the U.S. during the year.
      4. They had no significant connection to the U.S. during the tax year.
2. Taxpayer must not have another tax home; and
3. Taxpayer must not have a closer connection to the U.S. or a foreign country.

A domestic corporation for Virgin Islands income tax purposes is one that is organized under the laws of the Virgin Islands. A foreign corporation is one that is not organized in the Virgin Islands, including a corporation organized in the United States. A domestic corporation pays income taxes on its worldwide income to the Virgin Islands, generally using Form 1120. A foreign corporation pays V.I. income taxes only on its V.I. source income and its income effectively connected with a Virgin Islands trade or business, using Form 1120F. The subchapter S election of corporations organized in the U.S. is not valid in the Virgin Islands, therefore, such corporations are deemed foreign corporations required to file Form 1120F.