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10. INCENTIVES AND SPECIAL REGIMES

Various incentives are available to investors wishing to establish businesses in Saint Lucia under the Fiscal Incentives Act. The incentives are granted to the companies engaged in manufacturing and export activities and are capital-intensive companies. The incentives under the Fiscal Incentives Act have been extended to certain categories of business activities and services to benefit more local businesses, such as professional services, creative industries, information and communication technologies, and spa and wellness services. The incentives include exemption from customs duties and excise tax on plant, equipment, machinery, spare parts, raw materials, and components.

Income tax incentives and other fiscal concessions are governed by the Fiscal Incentives Act, the Tourism Incentives Act, the Special Development Areas Act, and other concessions granted by the Cabinet of Ministers.

Under the Fiscal Incentives Act, approved enterprises engaged in the manufacture of an approved product and or into eligible services are granted tax holidays and exemption from import duties.

Certain tax and import duty exemptions are granted to approved tourism projects under the Tourism Incentive Act.

Investment Incentives

Companies Eligible for Investment Incentives are categorised as follows:

  • Group I enterprise – local value-added is 50% or more of the amount realized from sales;
  • Group II enterprise - local value-added is 25% or more (less than 50%) of the amount realized from sales;
  • Group III enterprise - local value-added is 10% or more (less than 25%) of the amount realized from sales;
  • Enclave enterprise - enterprise producing exclusively for export to countries other than the CARICOM Member States; and
  • Capital intensive enterprise - capital investment is not less than XCD 25 million.

In determining the length of the tax holiday, the extent of local value-added to approved products is considered. 'Local value-added' means the amount (as a percentage of the total sales) by which the amount of sales of a product (for a period of 12 months) exceeds the aggregate amount of certain expenses/ costs incurred on foreign supplies such as the value of imported raw material, depreciation on imported plant and machinery/ equipment, profits distributed directly or indirectly to companies not resident in Member State, etc.

Following incentives are available:

  • 100% corporate tax (CIT) exemption for a period of 15 years is granted to Group I, enclave, and capital-intensive enterprises. Group II enterprises are eligible for 12 years, and Group III enterprises are eligible for 10 years of tax holiday;
  • An additional income tax exemption for 5 years is allowed to manufacturing and processing industries that have exhausted the previous limit of 15 years. The additional exemption is based on the level of investment and consists of a 50% corporate tax exemption for new investment from XCD 1 million up to XCD 5 million, and a 75% corporate tax exemption for new investment in excess of XCD 5 million.
  • Operating losses incurred during the tax holiday period is allowed to be carried forward (after the end of the tax holiday period) for a period of 5 years;
  • Exemption from tax on dividends paid to shareholders;
  • Duty-free importation of raw material, machinery, components, spare parts and other inputs used in manufacturing, subject to certain conditions;
  • Export allowance (i.e., reduction in corporate tax liability) ranging from 25% - 50% of export profits is granted to companies engaged in export of approved products to specified countries, subject to certain conditions.

Hotel and Tourism Incentives

Tax and import duty exemptions are granted to approved tourism projects under the Tourism Incentive Act. Incentives are granted to new hotels or on the extension of existing hotels established in Saint Lucia. The incentives are granted by way of exemption, subject to the approval from the appropriate authorities.

Following Incentives are granted:

  • Corporate tax exemption for a period of up to 15 years is available to new hotels;
  • Corporate tax exemption for a period of up to 10 years is available to existing hotels; and
  • Exemption from import duty on import of construction materials, articles, or equipment, subject to certain conditions.

International Business Companies (IBC)

In order to comply with the requirements of the OECD with regard to harmful taxation, the government has introduced amendments to the IBC regime, including that no new IBCs will be registered during the period 1 January 2018 to 31 December 2018. IBCs registered after 1 January 2019 are subject to tax under the new territorial tax regime (see Sec. 5.1.). IBCs registered prior to 1 January 2018 will continue to be governed under the earlier regime until 30 June 2021, i.e., IBCs which had elected to pay 1% tax will continue to be liable to pay tax on the basis of their worldwide income and not benefit from the territorial tax regime which provides an exemption for foreign-sourced income. However, such IBCs may opt-out of being grandfathered and move into the new regime.

An IBC is a company incorporated under the International Business Companies Act in Saint Lucia but operates outside of the Saint Lucia region. Effective from 1 January 2019, IBCs will be permitted to do business locally (previously, IBCs were not permitted to do business with residents and could target only non-resident customers). IBCs are now allowed to own immovable property in the country (previously allowed only on lease for its own business operations. However, an IBC is not allowed to conduct banking, trust, insurance, or re-insurance business activities without a specific license. Saint Lucian IBC is one of the world’s finest offshore formation vehicles, due to its simplicity, low annual fees, and flexibility.

IBCs registered on or after 1 January 2019 are governed by the following provisions:

  • IBCs will be considered as tax resident in St. Lucia and income will be subject to tax under the new territorial tax regime (see Sec. 5.4.);
  • Existing stamp duty exemptions are no longer applicable, subject to certain exceptions;
  • IBCs are required to:
    • File annual tax returns based on annual unaudited financial statements;
    • Fulfill certain substance requirements based on their core economic activity;
    • Comply with the monitoring requirements as prescribed; and
    • Provide other documents required by the competent authority.

Under the erstwhile regime, the following benefits are available until 30 June 2021 for an IBC registered prior to 1 January 2019:

  • Option to either be exempted from corporate tax or pay a concessional corporate tax on their profits at the rate of 1%;
  • In case an IBC elects to pay tax in Saint Lucia then all transactions and payments made to any Caribbean Community (CARICOM) member country are not subject to tax under CARICOM double tax agreement;
  • Exemption from payment of business license fees, stamp duties, capital gains taxes;
  • No exchange control requirement;
  • A tax-exempt IBC is not required to audit or file their financial statements; and
  • No tax is withheld on remittances and distributions of dividends, royalties, interest, management fees or other income paid by IBCs to persons outside Saint Lucia. Supplies to an IBC are also deemed to be an export, and VAT is applied at the rate of 0%.

International Trusts

Non-residents can form International Trusts in Saint Lucia either for a purpose, i.e., charitable or non-charitable, or for protection of assets. Protective trusts have a maximum lifespan of 120 years. Purpose trusts, i.e., charitable and non-charitable, may be perpetual with an unlimited time span.

In order to comply with the requirements of the OECD with regard to harmful taxation, the International Trust Act has been amended to provide that no new trusts will be registered effective from 1 December 2018. Trusts registered prior to 1 December 2018 will continue to be governed under the earlier regime until 30 June 2021. However, such trusts are not permitted to acquire any new assets or engage in a purpose other than the purpose for which they were established.

Under the erstwhile regime, international trusts registered prior to 1 December 2018 are eligible for the following benefits until 30 June 2021:

  • Exemption from corporate tax;
  • Exemption from stamp duty applicable on all instruments and transactions performed by the trustee involving trusts;
  • No foreign currency exchange controls; and
  • The beneficiaries are exempt from all taxes, subject to certain conditions.

Incentives under Special Development Areas Act

The Special Development Areas Act provides incentives to investors/developers for investing in specific businesses in specially designated areas that are endowed with the necessary infrastructure and amenities for business development.  The special development areas are Vieux Fort, Anse La Raye, Soufriere, Canaries, and Dennery.

The businesses that qualify for tax incentives are facilities directed towards the improvement or expansion of services related to the tourism sector, water-based activities, tourism projects highlighting the heritage and natural environment of Saint Lucia, arts and cultural investments, agricultural-based activities, fisheries-based activities, construction of conference centres, residential complexes, commercial or industrial buildings, including office complexes, etc.

The following concessions/benefits are available to the investors:

  • Concession on import duty, stamp duty and consumption tax on inputs for the construction of new buildings and the renovation or refurbishment of existing buildings;
  • Concession on land and house tax;
  • Concession on stamp duty on the initial purchase of property;
  • Lower corporate taxes; and
  • Higher capital allowances/accelerated depreciation.

Free Zone Incentives

The Saint Lucia Free Zone is an enclosed area treated for customs purposes as lying outside the customs territory of the country. The Saint Lucia Free Zone is located in Vieux Fort. Investors/developers which have been issued a license to operate within the free zone may conduct trade or business activities, including manufacturing, commercial, office, warehousing, professional, or other activities.

The following concessions/benefits are available to the investors:

  • Exemption from customs duties;
  • No foreign currency exchange controls;
  • Exemption from taxes on dividends for the first 20 years of operation;
  • No work permit fees for management personnel of Free Zone business;
  • No import or export licenses; and
  • Exemption from corporate tax for the first five years, thereafter, limited tax range with a maximum rate of 8%.

COVID-19 Emergency Measures

In response to the COVID-19 pandemic, Saint Lucia announced that companies retaining their staff are granted a tax credit of 30% of the employee’s full salary. The tax credit will be tiered based on the number of employees that are retained by the company. In order to claim the tax credit, companies are required to obtain a tax clearance certificate to substantiate that they are not indebted to the tax authorities for the payment of taxes.