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GRENADA: COUNTRY AND FOREIGN INVESTMENT REGIME


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BACK TO GRENADA INFORMATION: BUSINESS, TAXATION AND OFFSHORE


Grenada Geography

Grenada is the largest of a group of Caribbean islands, north of Trinidad and Tobago. Smaller Grenadines, also forming part of the jurisdiction, are Carriacou, Petit Martinique, Rhonde Island, Caille Island, Diamond Island, Large Island, Saline Island and Frigate Island.

Grenada is volcanic in origin, with central mountains; the highest point is Mount Saint Catherine, 840 m. There are extensive, sandy beaches, and many reefs.

Most of the population lives on Grenada itself, with major towns including the capital St. George's, Grenville and Gouyave. The largest settlement on the other islands is Hillsborough on Carriacou.

The climate is tropical, tempered by northeast trade winds. Grenada is on the southern edge of the hurricane belt, but the occasional hurricanes can be devastating. After Hurricane Janet in 1955, with winds of 115 mph, came Hurricane Ivan in 2004 and Hurricane Emily in 2005, both of which caused serious damage.

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Grenada History, Population, Language and Culture

Christopher Columbus sailed past Grenada in 1498, but the native Carib Indians successfully repelled Spanish, French and English colonizers. A French colony was established in the 17th century, but eventually the island was ceded to the British under the Treaty of Versailles in 1783.

The British imported African slaves and established sugar plantations, which were staffed by indentured Indian immigrants after the abolition of slavery.

In 1877 Grenada became a Crown Colony, and in 1967 it became an associate state within the British Commonwealth before gaining independence in 1974.

Despite its British history, the island retains many French cultural influences.

The population of just under 90,000 (July 2007 est.) is around 82% black, 13% mixed black and European, and 5% European and East Indian. Religious denominations are: Roman Catholic 53%, Anglican 13.8%, other Protestant 33.2%.

English is the official language; a French patois is also spoken.

In 1979, an attempt was made to set up a socialist/communist state in Grenada. Four years later, at the request of the Governor General, the United States, Jamaica, and the Eastern Caribbean States intervened militarily to restore democracy.

Launching their now famous "rescue mission," the allied forces restored order, and in December of 1984 a general election re-established democratic government.

The tourist industry has developed rapidly; but the island has taken care to preserve its beautiful scenery, including some rain forest and its coral reefs.

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Grenada Government

Grenada has a constitutional monarchy with a Westminster-style parliament. The Queen is the Head of State, represented by a governor-general.

Following legislative elections, the leader of the majority party or the leader of the majority coalition is usually appointed prime minister by the governor general. The bi-cameral Parliament consists of the Senate (a 13-member body, 10 appointed by the government and three by the leader of the opposition) and the House of Representatives (15 seats; members are elected by popular vote to serve five-year terms).

The administration of the islands of the Grenadines group is divided between Saint Vincent and the Grenadines and Grenada.

Elections were last held on 27 November 2003, and are next set to take place in 2008.

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Grenada Economy and Currency

Grenada is sometimes known as the 'spice island'; cinnamon, cloves, ginger, mace, and especially nutmeg (represented on the national flag) are important exports.

Grenada now relies on tourism as its main source of foreign exchange, especially since the construction of an international airport in 1985. The development of an offshore financial industry has also contributed to growth in national output.

Economic progress was satisfactory until the setback of the 2004/2005 hurricanes. The category 4 Hurricane Ivan damaged or destroyed 90% of homes.

Grenada is recovering with remarkable speed, due to the climate, energetic domestic efforts and substantial international assistance.

Major short-term concerns are the rising fiscal deficit and the deterioration in the external account balance. Grenada shares a common central bank and a common currency (the East Caribbean Dollar) with seven other members of the Organisation of Eastern Caribbean States (OECS).

Minister of Finance Anthony Boatswain's 2005 budget included a 50% reduction in the tax payable on residential properties and a controversial levy on payrolls in order to establish a Grenada Reconstruction and Development Fund.

Presenting his budget for 2007 in December 2006, Boatswain predicted a 10% increase in revenues and a 6% fiscal surplus as a result of strengthened revenue collection techniques.

According to the International Monetary Fund (IMF), real GDP growth averaged 7% per year during 2005-06, and is projected at about 3% in 2007, and 4% beyond, reflecting a further strengthening of tourism, the recent initiation of several major tourism projects, and a gradual recovery of agriculture. Inflation has remained low, buttressed by the regional currency board arrangement.

However, the IMF also noted in a report on the Grenadian economy in October 2007 that other structural reforms have suffered delays, including legislative action to reform the tax concessions regime, creating a one-stop shop for investors, strengthening the capacity to evaluate and prioritize capital projects, and modernizing the public sector.

 

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Grenada Entry and Residence

In most cases, visas are not required for travel to Grenada; entry permits are usually valid for 3 months.

Non-Grenadians wishing to work in Grenada must first obtain a work permit from the Ministry of Labour, St. George's, Grenada. The annual cost at the time of writing is USD188 for CARICOM nationals, USD562 for Commonwealth and United States nationals, and USD750 for others.

Non-Grenadians wishing to purchase land in Grenada are required to apply to the Government for an Aliens Land Holding Permit. Alien Landholding Licenses cost 10% of the value of the land.

An applicant for permanent residence must have been living on the island for a period of at least 5 years. Documents required will include a birth certificate, police record, current bank statement, doctors certificate and about 6 passport photos, plus a letter of recommendation.

A tax of around (USD20) is levied per person for visits over 24 hours, applicable to persons 12 years and over. For children aged 5 to 12 years, the tax is USD10. Children under 5 are exempt. The tax is payable at the airport upon departure from Grenada.

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Grenada Business Enviroment

Grenada has approximate 700 miles (1,127 km) of roads, many of which have been newly resurfaced or rebuilt.

The country's major seaport is St. George's, the capital, where the sheltered natural harbour features an 800 foot pier with berth space for two to three vessels at a minimum depth of 30 feet. A general ports development, completed in 1985, provides a 250 foot schooner berth with 18 feet depth, a container park and other operational improvements. The port has 27,500 square feet of transit shed space and supporting warehouse and bond storage facility with the aim of separating cruise ship and cargo activities.

Grenada has two airports, a 1,300 foot airstrip in Carriacou, and the 9,000 foot International Airport at Point Salines capable of servicing the largest aircraft in the world. There is a departure tax per person payable at the airport upon leaving Grenada.

Power is supplied by the Grenada Electricity Services Ltd. (GRENTEL) from diesels. Upgrading of the system is continuous. The non-industrial current is 220 volts, single phase, 50 cycles. For industrial use, 410 volts, three phase, 50 cycle power is available.

The National Telecommunications Regulatory Commission of Grenada was established pursuant to the Eastern Caribbean Telecommunications Authority (ECTEL), ECTEL Treaty (Act 30 of 2000) and the Telecommunications Act (Act 31 of 2000) to regulate the newly liberalized telecommunications market in Grenada, Carriacou and Petit Martinique.

The country's water is supplied by the National Water and Sewage Authority (NAWASCO) from a series of catchments, rivers and deep wells. The water is clean and safe to drink.

All companies/businesses operating in Grenada must register with the National Insurance Scheme and pay 4% (at the time of writing) of an employee's salary/wage plus a matched 4% from the employer.

Businesses must also be registered with the Department of Inland Revenue with respect to the payment of General Consumption Tax (GCT) on the sale of goods and services as follows:

  • 10% on goods produced by local manufacturers;
  • 10% on the service of overseas calls;
  • 8% on food and beverages served in hotels and guest houses;
  • 5% on all other services.

In January 2007, the government published a White Paper proposing the introduction of a Value Added Tax. It stated that it was committed to the introduction of VAT (which would replace the GCT) by January 2008.

According to the government, rates of VAT would be:

  • Goods and Services – 15%
  • Zero Rate Goods and Services - 0%
  • Hotel Accommodation – 10%

VAT also replaced the Airport Departure Tax and the Motor Vehicle Purchase Tax (levied at rates of up to 15%).

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Grenada Foreign Investment

Grenada welcomes all investments into the economy which it believes would have the positive effects of increasing domestic income, employment, foreign exchange earnings or savings, and transferring appropriate technology and know-how to the local economy.

Some of the best prospects for new investments have been identified in tourism, information services, banking and insurance, and transportation.

The Government will not grant permission to non-nationals to invest in various activities including the retail and distribution trade, taxi and self-drive services, resturants and catering, night clubs and services such as hair-dressing, laundry and dry cleaning, movie houses, travel agencies, real estate agencies, and certain types of domestic manufacturing.

Where an operation to be established through foreign investment will be based mainly on the processing or assembly of foreign materials or components which are produced and paid for outside of Grenada, the Government will more easily approve 100% non-resident ownership but still welcomes and encourages opportunities for equity participation by residents.

Generally, there are no restrictions on remittances of capital, earnings on, and liquidation proceeds from direct non-resident investment in Grenada. Profits or dividends arising in connection with a non-resident investment duly registered with the Ministry of Finance will be approved for remittance.

The Government of Grenada has offered a wide range of incentives to potential investors. These include:

Under the Hotels Aid Act CAP 139 of 1935:

  • Duty free importation of article of hotel equipment and building material meant exclusively for the construction and operation of the hotel.
  • Drawback of custom duties on articles of hotel equipment and building materials purchased in Grenada for the hotel.
  • Complete or partial exemption from payment of tax on income arising from the operation of the hotel.

Under the Fiscal Incentives Act No.41 of 1974 (for manufacturing operations):

  • Waiver of duties and taxes on the importation of plant, machinery, equipment, spare parts, raw materials and vehicles;
  • Tax holidays periods as follows: up to 15 years, where the local value added is at least 50%, or for an 'Enclave Enterprise' producing exclusively for export to countries outside the CARICOM region; up to 12 years, where the local value added is not less than 25%; up to 10 years, where the local value added is not less than 10%.

Note: The Tax Holiday guarantees the waiver of payment of any tax on income, and duties on material, equipment, spare parts and components to be used in manufacturing during the period specified.

In its 2006 budget, the Grenada government announced that:

"As part of the measures to improve the investment climate, Government will also undertake the following tax reform measures:

i. Effective January 1st, 2006, Government will not grant any new tax holidays or renew existing ones. Instead, Incentives will be provided in the form of tax write-offs for investments, and after June 1st, 2006, through accelerated depreciation with loss carry forward. To this end the Income Tax Act will be amended by April 2006.

ii. By May 31st, 2006, Government will repeal the Investment Code Incentives Act, and the Qualified Enterprise Act, which in fact will become unnecessary, once the new incentives regime for Income Tax is in place."

Following the changes, concessions are available under the Investment Act, Income Tax Act and Common External Tariff. Businesses involved in a broad range of services and manufacturing activities, as well as tourism and agriculture, can qualify for the incentives, which include:

  • Accelerated depreciation - 50% on plant & machinery and 10% on building.
  • Investment allowance - 100% write off on total investment.
    Carry forward of losses for 5 years.
  • 100% relief from customs duties and taxes on plant, equipment & raw materials.
  • Deductible expenditure incurred for marketing, training, research and development.
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