CLEARWATER

CONSULTING
CONCEPTS, LLLP
A United States Virgin Islands
Economic Development Commission
Beneficiary

________________________________________________
The U.S. Virgin Islands Economic Development Commission is authorized to
grant federal tax incentives to local USVI businesses (“Beneficiaries”) pursuant
to a federal mandate by the United States Congress codified in Internal
Revenue Code Sections 934 and 937
 U.S. Virgin Islands
Economic Development Commission

What Do You Get?

• Federal Income Tax: 90% reduction

• State Income Tax: None in USVI
• Sales Tax: None in USVI
• Gross Receipts Tax: 100% exemption from 4% USVI tax
• U.S. Territory: No expatriation and repatriation of money since it is a
U.S. Territory
• Other: Various other tax benefits are also available (i.e. duty taxes
on imports and exports)
 U.S. Virgin Islands
Economic Development Commission

What Does Clearwater Give to USVI?

• Hiring and training of local resident USVI employees

• Purchasing of all goods and services locally from eligible suppliers
approved by the EDC
• Significant annual charitable contributions to local charities
• Taxes are paid to the USVI Bureau of Internal Revenue (“BIR”) and
stay within the USVI economy
 U.S. Virgin Islands
Economic Development Commission

Why Does it Exist and Work?

• Mutual Trade-Off:
EDC beneficiaries save taxes in exchange for providing much needed
private sector stimulation of the USVI economy through providing
employment and career opportunities for local residents, local procurement
of goods and services, and increased tax revenues from business revenues
that otherwise would not exist within the USVI.

• Trickle Down Economics:

Sales of real estate, automobiles, groceries, home services, goods and
services for other local business, etc…

The existence of the EDC Program and its beneficiary companies such as
Clearwater in the U.S Virgin Islands is immensely important to the economy
of the U.S Virgin Islands.
 U.S. Virgin Islands
Economic Development Commission

What Do You Need to Do?

• USVI Source Income:

For personal service income, only the reasonable value of
personal services performed outside of the United States
qualifies for EDC tax benefits

• USVI Bona Fide Resident:

- Generally, you must be physically present in the USVI for at least
183 days during a given tax year or you must meet one of
several exceptions to the 183 day physical presence test
(and other factors such as obtaining a VI drivers license)
- Alternatively, a USVI C Corporation as the “USVI resident”
 CLEARWATER CONSULTING
CONCEPTS, LLLP
General Partner Provides
Management and Resources

• Employees and human resources

• 2 fully-functional, high-end resort offices:
- Ritz-Carlton Resort
- Elysian Resort
• EDC compliance and government filings
• Accounting
• Documentation of work
• Tax planning
CLEARWATER CONSULTING
CONCEPTS, LLLP
Manager of General Partner
and
Chief Executive Officer

Theodore C. “Teddy” Skokos, Jr.

Tax Attorney
 Clearwater Consulting
Concepts, LLLP
Flexibility for Limited Partners

• No ten year EDC commitment

• No leases of office space
• No binding agreements for length of participation
• No exit strategy concerns
• No EDC compliance concerns
 Clearwater Consulting
Concepts, LLLP
Costs

• Management fees are paid to the General Partner (based upon

annual net partnership revenues) in exchange for benefits of the
EDC Certificate, turnkey business solution including high-end resort
offices, telephone lines and systems, fax machines, copiers,
printers, T-1 internet line, high-end video conferencing equipment
with HDTV plasma displays and other common business resources.

• If applicable, additional costs may include:

– Dedicated Clearwater employees
– Compensation study by independent expert to determine
reasonableness of fees paid to Clearwater for tax purposes
– Tax opinion letter / attorney fees for your specific circumstances
 Example: Individual Partner
Facts:

John Doe meets the requirements to be taxed as a bona-fide resident

of the USVI and becomes a limited partner in Clearwater Consulting
Concepts, LLLP.

John works one full year in St. Thomas generating net revenues for
Clearwater sourced outside of the United States in the amount of
$1,000,000. Additionally, John generates $1,000,000 of income
sourced from within the United States through various investments
and other United States business income.
Example: Individual Partner
A. EDC Income $ 1,000,000
Non-EDC Income (i.e. U.S. Source) 1,000,000
B. Total Income $ 2,000,000
C. Federal Tax Rate x 35%
D. Federal Tax (Before EDC Credit) $ 700,000
E. % of EDC Income to Total Income (A ÷ B) x 50%
F. Federal Tax Subject to EDC Exemption (D x E) $ 350,000
G. EDC Exemption Percentage x 90%
H. Federal Tax Savings (EDC Credit) (F x G) $ 315,000
 Example: C Corporation Partner
Facts:

John Doe does not intend to meet the requirements to be taxed as a

bona fide resident of the USVI. John owns 100% of a USVI C
Corporation that becomes a limited partner in Clearwater Consulting
Concepts, LLLP.

John works for 3 months during the year in St. Thomas generating net
revenues for Clearwater sourced outside of the United States in the
amount of $1,000,000.
Example: C Corporation Partner
CORPORATION
A. EDC Income $ 1,000,000
B. Federal Tax Rate (assuming a 35% marginal tax rate) x 35%
C. Federal Tax (Before EDC Credit) 350,000
D. EDC Exemption Credit Percentage x 90%
E. Federal Tax After EDC Credit (3.5% + 10% VI Surtax) $ 38,500

SHAREHOLDER (NON-USVI RESIDENT)

F. Corporate Dividend (A – E) $ 961,500
G. Federal Tax Rate on Corporate Dividends x 15%
H. Federal Tax $ 144,225

I. Total Federal Tax (E + H) $ 182,725

J. Federal Tax Savings (C – I) $ 167,275
Example: C Corporation Partner
CORPORATION
A. EDC Income $ 1,000,000
B. Federal Tax Rate (assuming a 35% marginal tax rate) x 35%
C. Federal Tax (Before EDC Credit) 350,000
D. EDC Exemption Credit Percentage x 90%
E. Federal Tax After EDC Credit (3.5% + 10% VI Surtax) $ 38,500

SHAREHOLDER (USVI RESIDENT)

F. Corporate Dividend (A – E) $ 961,500
G. Federal Tax Rate on Corporate Dividends x 1.5%
H. Federal Tax $ 14,423

I. Total Federal Tax (E + H) $ 52,923

J. Federal Tax Savings (C – I) $ 297,077