The U.S. Virgin Islands Export Corporation (VIEXCO) structure was created under legislation sponsored by Export Assist and signed by the USVI governor on December 29, 2001. This new export-related corporation has an annual license fee and flat annual franchise tax, however it has

• no corporate income tax
• no gross receipts tax
• no graduated franchise tax

thereby subjecting the corporation to virtually no taxation beyond the license fee and flat franchise tax.

The VIEXCO must only include qualified U.S. export property and pass the U.S. export destination tests. Export Assist would perform all of the export economic activities (e.g. foreign economic processes), accounting and general management duties contracted for by the VIEXCO.

VIEXCO Services and Finance
This structure consists of services and finance performed outside of the United States on behalf of the U.S. exporter. The services include export economic activities to support Section 482 Transfer Pricing. The financing includes export working capital, the purchase of invoices for shipments made to overseas locations, and sales to unrelated buyers.

The publicly-traded export corporation may take advantage of the U.S. Virgin Islands legislation by setting up an export-related service corporation (VIEXCO). As illustrated below, the VIEXCO would contract with the exporter to receive a services fee for the performance of export economic activities using a Section 482 Transfer Pricing model.

The primary tax advantage of the VIEXCO Services and Finance Plan is not only to maximize the exporter’s deferred export income into VIEXCO, but also to avoid the Subpart F tax.

VIEXCO Buy/Sell and Finance
The publicly-traded export corporation may take advantage of the U.S. Virgin Islands legislation by setting up an export-related corporation (VIEXCO) that would benefit from a buy/sell and finance structure designed to avoid Subpart F exposure. As illustrated in the VIEXCO Buy/Sell and Finance Structure for the publicly-traded corporation below, the VIEXCO would hire contract manufacturing services from the U.S. exporter or worldwide independent contractor. Then the VIEXCO would own the export property from the purchase order to the sale and sell the export property manufactured by the U.S. exporter to unrelated customers. The property must meet the export property definition and the U.S. content rules set forth by the tax code and the regulations.

The financing component of this plan could include export working capital, the purchase of invoices for international shipments made to overseas locations, and sales to unrelated buyers. In addition, the VIEXCO could finance both short- and medium-term export transactions. The medium-term transactions could be financed through its branch corporation dedicated solely to financing.

This structure allows the publicly-traded export corporation to avoid Subpart F exposure both on export sales and on interest from financing customers.

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