VietNamNet Bridge - British Virgin Islands (BVI) is an archipelago of about 153 km2, with GDP of more than $1 billion but businesses registered here have invested $19.3 billion into Vietnam.

The words "tax haven" or "pure heaven" refer to the BVI and some other places in the world - the economies that eliminate almost all taxes on businesses. This is the ideal destination for global corporations. BVI currently has more than 850,000 enterprises, many times more than the population of 28,000 of this Caribbean island nation.

The businesses registered in BIV not only operate in BVI but they bring a huge amount of capital to invest around the world and in recent years, tens of billion US dollars of direct investment capital (FDI) were poured into Vietnam from BIV.

According to the Ministry of Planning and Investment, by the end of 2015, BVI was among the top 5 countries and territories investing in Vietnam, besides South Korea, Japan, Singapore and Taiwan. BVI had 623 investment projects, with total capital amounted to $19.3 billion.

Some large projects invested by companies from BVI are Vinacapital Trade Center Company Limited with $325 million invested in commercial centers, hotels, office building, hotel services, and real estate; GVD Vietnam Company Limited with $300 million invested in apartments and travel services; Worldon Vietnam Co., Ltd. with registered investment of $300 million to produce high-end garments in HCM City; CJ CGV Vietnam Co. with the nationwide chain of cinemas.

Recently, the Foreign Investment Department said that the US direct investment flows to Vietnam not only comes from the companies founded in the US but also through a number of their branches operating in the BVI such as the case of Intel, Chevron, Procter & Gamble or ConocoPhillips.

In the field of indirect investment on the stock market, the most famous investment fund of BVI in Vietnam is Dragon Capital. Founded in 1994 in BVI, Dragon Capital is the oldest foreign investment fund in Vietnam, with total assets of approximately $1.25 billion. Its investment portfolio consists of stocks, bonds, real estate, and clean technology.

As of May 10, the biggest investments of Dragon Capital in Vietnam are: VND3,564 billion in the Vietnam Dairy Products JSC (Vinamilk), VND1,143 billion in the Asia Commercial Bank (ACB); VND888 billion at FPT; VND1,131 billion at the HCM City Securities Company; VND969 billion in the Hoa Phat Group; and VND1,880 billion in Masan.

In addition, the fund holds stakes in the Saigon Securities Company (SSI), REE, Phu Nhuan Jewelry JSC (PNJ), Hoa Sen Corporation, Phu My Fertilizer. Its Chief Executive Officer is Dominic Scriven.

Founded in 2006 in BVI, Vietnam Asset Management Limited (VAM) is also an investment fund investing largely into pharmaceutical, food, beverage, and biotech companies.

Some other financial institutions formed in tax havens that have poured money into Vietnam are Indochina Capital Adviser, PXP Vietnam Asset Management Ltd., Vietnam Holding Asset Management Ltd., Clear Water Capital Partners Singapore PTE...

According to the Panama papers, BVI is taking the lead of the tax havens with 113,648 offshore companies established by the law firm Mossack Fonseca while Panama has only 48,400 companies.

This "tax haven" has long become an attractive destination of world investors. Establishing companies in the BVI and investing in other countries optimizes costs for transnational corporations.

Companies and investors will not be taxed on profit of the transfer of shares and dividends. Nearly 100% of taxes are abolished. Inherited assets are not subject to tax.

In particular, the companies established in BVI can invest in other countries and earn billions of dollars of profit. They don’t have to declare this to governments.

The only financial obligation of the companies in BVI is payment of $350 of establishment costs and a similar amount to maintain business operations annually. The time for registering a new company may be only a day.

Financial mechanisms in BVI are liberal, without having to submit financial reports or declaration of the owner.

BVI Enterprise Law 2004 allows the establishment of enterprises with a shareholder and a member of the Board of Directors. Companies don’t need to have legal capital, their stocks don’t need par value, there is no secretariat, and there is no need to report to the authorities about the changes ... Enterprises have complete freedom to operate here. Confidentiality of information in BVI is high.

That's why the BVI is accused of being a tax haven, an ideal place for transfer pricing, money laundering, slush fund ... for the global financial world.

Experts said that BVI allows shareholders to transfer overseas profits to this island without declaring it to the tax authorities.

They said Vietnam should be careful and closely manage the firms established in the BVI in terms of legal and financial obligations.

Businesses can take advantage of the liberal financial mechanism in the BVI to evade tax, conduct transfer pricing and money laundering.

Experts also said that bogus companies are also established in the BVI, impersonating famous companies in other country to swindle.

To manage the risks and limit the impact of tax havens, the Vietnamese Government has signed agreements to avoid double taxation with the same earnings with countries such as Singapore, the US, France ... However, taxing once is not attractive enough compared to the full exemption of taxes from tax havens.

According to statistics from the Ministry of Planning & Investment, many tax havens around the world have invested strongly in Vietnam.

By the end of 2015, Cayman Islands had 67 projects with approximately $6.3 billion, Luxembourg with $1.9 billion, Bermuda with six projects worth about $232 million, Panama with $51 million, Bahamas $108 million, New Zealand $96 million, Macao $57 million, and the Isle of Man $35 million.

Enterprises in the two financial centers also have large tax competitiveness as Singapore and Hong Kong (China) also heavily invested in Vietnam with $35 billion and $15.5 billion, respectively.

Source: VNE

Translated by Khuyen Bui