Employer Tax Contributions

Tax Type	Rate	Base
Social Security (Employer Share)	6.2%	Up to $176,100 of wages
Medicare (Employer Share)	1.45%	No limit
FUTA (Federal Unemployment Tax Act)	0.6% (net)	First $7,000 of wages
Virgin Islands Unemployment Insurance (UI)	2.46% to 5.4%	Varies by employer, up to $31,000 of wages

Filing & Compliance

• Quarterly Filings: Employers must file Form 941VI, Employer's Quarterly Withholding Tax Return, by the last day of the month following the end of the quarter.
• Annual Wage Statements: Furnish Form W-2VI to each employee by January 31.
• Annual Transmittal: Submit Form W-3SS (transmitting W-2VI forms) to the Social Security Administration by February 2.

In the U.S. Virgin Islands, employee tax deductions and contributions encompass various areas, including income tax, social security, unemployment insurance, and specific programs like the Economic Development Commission (EDC) tax incentive program.

Income Tax

• Mirror Code: The U.S. Virgin Islands mirrors the U.S. Internal Revenue Code for income tax purposes, meaning residents generally follow similar rules and use comparable forms. However, income tax is paid to the Virgin Islands Bureau of Internal Revenue (BIR), not the IRS.
• Tax Rates: While the tax brackets and rules are mirrored, the effective tax rate can be significantly lower for participants in specific programs like the EDC. Under the EDC, personal income tax can be reduced by up to 90%.
• Standard Deductions and Exemptions: Residents generally claim standard deductions and personal exemptions similar to those under U.S. federal law. However, Earned Income Credit is not available to Puerto Rico residents working in the USVI.
• Form 8689: For allocation of income tax to the USVI, residents use Form 8689, following guidelines provided by the IRS.

Social Security and Medicare (FICA)

• Same Rates and Procedures: Social Security and Medicare taxes are withheld and remitted following the same procedures and rates as in the United States, using Circular E (Publication 15) for guidance.

Unemployment Insurance

• Employer and Employee Contributions: Both employers and employees contribute to the unemployment insurance fund.
• 2025 Rates: As of January 1, 2025:
  • Taxable Wage Base (TWB): $31,100
  • Maximum Weekly Benefit Amount (MWBA): $648
  • Average employer contribution rate: 4.06%, ranging from 2.46% to 5.4% based on the assigned interval group.
• FUTA Credit Reduction: For 2025, the U.S. Virgin Islands faces a potential FUTA credit reduction of 4.5%. This could increase employer costs.

Economic Development Commission (EDC) Tax Incentive Program

• Significant Tax Benefits: The EDC offers substantial tax incentives for eligible businesses and individuals:
  • Up to 90% reduction in personal and corporate income tax.
  • 100% exemption on excise, property, and gross receipts taxes.
  • Reduced customs duty (1% instead of the standard 6%).
• Eligibility Requirements: Requirements include:
  • Employing at least ten USVI residents full-time who have resided in the territory for at least one year.
  • Investing a minimum of $100,000 (excluding inventory) in a qualifying business.
  • Meeting specific requirements outlined in the Internal Revenue Code.

Filing and Payment Deadlines

Due to the impact of Tropical Storm Ernesto, various tax filing and payment deadlines between August 13, 2024, and February 3, 2025, were extended to February 3, 2025, for eligible individuals and businesses in the U.S. Virgin Islands. This includes estimated tax payments, payroll tax returns, and extensions for 2023 tax returns. As of today, February 5, 2025, this deadline has passed. Always confirm the most up-to-date information and deadlines with official sources.