Last Updated: April 2026
The US Virgin Islands offers tax incentives that rival Puerto Rico's Act 60 — in some respects exceeding them for qualifying individuals and businesses. The EDC program has attracted finance professionals, fund managers, and entrepreneurs to St. Croix and St. Thomas. However, USVI bona fide residency requirements are stricter than Puerto Rico's, the incentive program requires active business operations in the USVI, and the islands' smaller size and more limited infrastructure make it a less mainstream option than Puerto Rico. This guide covers the mirror code system, the EDC benefits, the residency requirements, and how USVI compares to Puerto Rico Act 60.
The EDC application is more involved than Puerto Rico's Act 60 process — and the business substance requirement is real.
To receive EDC benefits: your business must be approved by the EDC Board; the business must be domiciled in and operating from the USVI; you must be a bona fide USVI resident and the principal shareholder or employee of the qualifying business; the business must create local USVI employment (generally 1–5 or more full-time jobs); the business must maintain physical office space in the USVI; the business must meet capital investment thresholds (varies by business type). Application process: file an application with the USVI Economic Development Authority (EDA/EDC); pay application fees; appear before the EDC Board for a hearing; if approved, sign a benefits agreement specifying your obligations; compliance reporting required annually.
The IRS has successfully challenged USVI EDC arrangements where: the business had no genuine USVI operations (just a registered address); the individual was not a genuine USVI resident; the 'USVI income' was actually US-source income improperly characterised. The IRS and Justice Department have pursued criminal tax fraud cases involving USVI schemes — the program is legitimate when used correctly but has attracted aggressive promoters selling it as a simple solution without genuine relocation. Work only with attorneys and CPAs who have experience with genuine USVI EDC implementations.
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USVI EDC applications, bona fide residency requirements, and IRS audit defence require specialist counsel. TaxHub connects you with CPAs experienced in US territory tax benefits.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Get USVI Tax Benefit Planning Help →No — passive investment in a US business does not qualify for USVI EDC benefits. The EDC requires real economic activity in the USVI: a USVI-based business, local employment, and physical operations. If you run an investment fund and want USVI EDC benefits, you need to establish the fund management company in the USVI, move your management operations there, hire local employees, and maintain genuine USVI business activity. Simply moving your domicile to USVI while continuing to manage US investments from USVI may work if the management activity is genuinely performed in USVI — but the IRS scrutinises USVI fund managers very carefully.
For a hedge fund manager with primarily capital gains income: Puerto Rico Act 60 is cleaner — 0% PR capital gains on post-move appreciation, straightforward process, large existing community. USVI EDC could provide 90% reduction on management fees (ordinary income) in addition to capital gains benefits — but requires EDC application, demonstrated local employment, and stricter residency. USVI is more appropriate for managers with significant fee income (management fees are ordinary income, not capital gains — Act 60 doesn't help with these as directly as EDC does). The choice depends on your income mix: primarily capital gains → Puerto Rico Act 60; significant fee/ordinary income + capital gains → USVI EDC may be worth the added complexity.