The United States Virgin Islands (“USVI”) is an unincorporated territory of the United States.[1] But that doesn’t mean that they’re subject to exactly the same laws as in the United States—especially when it comes to taxes.
The Mirror Code
As a territory, the U.S. Congress is empowered to “make all needful Rules and Regulations respecting” the USVI.[2] As far as taxes go, Congress requires that the USVI impose an income tax that “mirrors” the U.S. federal income tax found in United States Code, Title 26 (also known as the “Internal Revenue Code” or “IRC”).[3] Because of this requirement, USVI’s income tax law is commonly called a “mirror code.” One of the basic principles used in the application of the “mirror code” is the substitution principle, according to which “Virgin Islands” generally is substituted for “United States” wherever that phrase appears in the IRC.[4]
