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LOWTAX OFFSHORE

ST. KITTS AND NEVIS: OFFSHORE BUSINESS SECTORS


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BACK TO ST. KITTS AND NEVIS INFORMATION: BUSINESS, TAXATION AND OFFSHORE

On this Page:

- ST. KITTS AND NEVIS BANKING
- ST. KITTS AND NEVIS INSURANCE
- ST. KITTS AND NEVIS TRUSTS
-NEVIS INVESTMENT FUNDS


St Kitts and Nevis has made steady progress in developing its financial services sector since securing its removal from the Financial Action Task Force (FATF) and Organisation of Economic Cooperation and Development (OECD) blacklists in 2002, but has had to develop new legislation and financial products to ensure that it stayed off the list.

Nevis emerged as an offshore jurisdiction after enacting its Nevis Business Corporation Ordinance in 1984, based upon American corporate law of the state of Delaware. Under the Constitution adopted when St.Kitts and Nevis became fully independent in 1983, Nevis has its own Legislative Assembly which swiftly took advantage of its autonomous powers to pass the Ordinance, which was followed by Trust, LLC and Mutual Fund legislation.

Although St Kitts has aimed primarily at attracting industrial and tourist investment with very tax-friendly incentive legislation, Nevis's achievements in attracting offshore companies inspired St.Kitts to establish its own offshore regime in 1996 with a new Companies Act and Trusts Act. Still, St. Kitts continues to hope that by concentrating on industrial investment it will develop a less competitive and consequently more harmonious relationship with Nevis.

In an attempt to broaden the Federation's attractions, the St Kitts government introduced two new pieces of legislation in 2002: the Merchant Shipping Act and the Foundation Act (2003). The new Merchant Shipping Act makes provisions for the registration of ships and pleasure vessels in St. Kitts. Since its launch in February 2005, over 500 ships having been registered with a total deadweight of over 650,000 tonnes. The revenue from this activity increased from ECD250,000 in 2006 to over ECD1 million for 2007. The St. Kitts & Nevis International Ship Registry is also finalising plans to increase its attractiveness to yacht and pleasure vessel owners, which will again both assist local owners of such craft and increase the numbers of such craft on the Ship Registry.

The Foundation Act provides for the formation of private Foundations. The Foundation Act is expected to enhance the attractiveness of St. Kitts as an international financial center through the introduction of a civil law concept into the traditionally common-law system.

All offshore finance businesses in the Federation need authorisation under the Financial Services (Regulations) Order, 1997. This includes deposit-taking business, investment business, insurance business, trust business and corporate service provision.

The Nevis Multiform Foundations Ordinance came into force on October 1st 2005. It introduces a flexible hybrid multiform of foundation into the Nevis international financial services regime.

St. Kitts had 1,680 companies on the register as of 31st December 2005.

This section of the Lowtax.net site describes the most important types of offshore business activity carried out from St Kitts and Nevis.


St. Kitts and Nevis Banking

Domestic banking is regulated by the Banking Act 1991 and non-domestic banking falls under the Financial Servicers (Regulations) Order 1997. Nevis has its own Offshore Banking Ordinance 1996.

Two types of banking licenses are granted under the Federation's 1997 Financial Services (Regulations) Order. 'Unrestricted' licenses require minimum financial resources of 1,350,000 East Caribbean dollars ($500,000), while for 'restricted' licenses the level is only 135,000 East Caribbean dollars ($50,000).

The Confidential Relationship Act, 1985 for St. Kitts-Nevis offers complete confidentiality should foreign authorities seek private banking and financial records. Prison terms are mandatory for violation of the statute.

The banking system consists of the Government owned St Kitts-Nevis National Bank, the Development Bank of St Kitts and Nevis, the privately-owned Bank of Nevis and the Bank of Nevis International, First Caribbean International, Royal Bank of Canada, Bank of Nova Scotia, RBTT Bank, the Nevis Co-operative Credit Union, the St Kitts Co-operative Credit Union and the Foundation for National Development.

The National Bank, which is the largest commercial bank in the Eastern Caribbean Currency Union has assets in excess of a billion dollars. By mid-2005 the assets of commercial banks had reached $3 bn.

The Nevis Offshore Banking Ordinance 1996 defines offshore banking as follows:

  • Receiving of foreign funds through the acceptance of foreign money, deposits payable upon receipt demand or after a fixed period or after notice;
  • The sale or placement of foreign bonds certifcates, notes or other debt obligations or other securities, or
  • Any other similar activities involving foreign money or foreign securities, and
  • Either in whole or in part using foreign funds so acquired for loans, advances and investments whether in Nevis or elsewhere.

Licences under the Banking Ordinance are issued to eligible companies or qualified foreign banks. An eligible company must be a wholly owned subsidiary of a local bank regulated by the Eastern Caribbean Central Bank that is licensed under the Banking Act to do business in Nevis. A qualified foreign bank is a foreign bank that is licensed under the Banking Act, or is foreign bank with minimum capitalization and assets, as prescribed by the Minister, that is not licensed under the Banking Act but is licensed to do domestic banking in its jurisdiction of incorporation.

An eligible company must be incorporated under the Companies Act as a company limited by shares, and must have objects or business activity restricted to offshore banking from within Nevis. It must have at least one director who is a citizen of St. Kitts and Nevis with a residence in Nevis. The minimum Authorised Capital must be at least ECD2 Million, of which not less than ECD1 Million has been Subscribed and Paid Up in cash, such cash being deposited in an account maintained by the Permanent Secretary at the Eastern Caribbean Central Bank.

Not later than four months after the close of its financial year, a licensee must forward to the Permanent Secretary copies of its balance sheet and profit and loss account and the full and correct names of the directors of the licensee. The balance sheet and the profit and loss account must bear on its face the certificate of an auditor.

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St. Kitts and Nevis Insurance

See Offshore Business Review – Insurance for a more general treatment of captive insurance companies.

Non-domestic insurance and assurance businesses must be licensed under the Insurance Act. The Federation's 1997 Financial Services (Regulations) Order set the following minimum net assets for applicants wishing to engage in insurance business: long-term and general insurance business, 810,000 East Caribbean dollars ($300,000), reduced to 540,000 East Caribbean dollars ($200,000) for long-term but not general insurance, and further lowered to 270,000 East Caribbean dollars ($100,000) for general but not long-term insurance.

In July, 2004, the Nevis Ministry of Finance and Development in Nevis announced the passage of the Nevis International Insurance Ordinance. The Ordinance is divided into six sections, and provides for the licensing and regulation of general insurance, captive insurance and reinsurance companies. It is compulsory for insurance companies to have a physical presence in Nevis, whether via a resident manager or a fully trained registered agent, with adequate knowledge and experience of the insurance industry.

In 2006, lawmakers on Nevis approved an amendment to the jurisdiction's insurance law that clarified and tightened up certain sections of the legislation to combat fraud. The Nevis International Insurance (Amendment) Ordinance, 2006 updated the Nevis International Insurance Act of 2004, and, according to then Premier Vance Amory, was drafted to "eliminate loopholes which could be exploited by persons who do not really care what they do in international business."

In June 2006, St Kitts and Nevis Prime Minister and Minister of Finance, Dr Denzil Douglas, revealed on a promotional trip to Switzerland that the government would soon introduce captive insurance legislation. According to Douglas, the new captive insurance vehicle will be "extremely competitive", with low licence fees for small captives with premiums of less than US$1.5 million.

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St. Kitts and Nevis Trusts

Trust management has become an important business for St Kitts and Nevis.

Like all offshore finance businesses in the Federation, trust management companies need authorisation under the Financial Services (Regulations) Order, 1997. Under the Order, applicants wishing to establish a trust business handling both unrestricted and restricted business must have net assets of 540,000 east Caribbean dollars ($200,000) or its equivalent in other currencies, reduced to 54,000 east Caribbean dollars ($20,000) for restricted business.

Nevis trusts are formed under the Nevis International Exempt Trust Ordinance of 1994, as amended to September 2000. The Trust Ordinance includes special provisions to enhance the use of Nevis as a preferred jurisdiction for the establishment of Asset Protection Trusts.

The St Kitts and Nevis Trusts Act 1996 was a replacement for the 1961 Trustee Ordinance modeled after the 1925 English Trusts Act, and also contains modern asset protection provisions.

For fuller details of the St Kitts and Nevis trust regimes, see Forms of Company. For details of fees payable, see Offshore Legal and Tax Regimes.

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St Kitts and Nevis Investment Fund Management (Nevis)

Investment funds may be formed in Nevis under the Nevis International Mutual Funds Ordinance 2004. A mutual fund is defined under the Ordinance as a company incorporated, a partnership formed, a unit trust organized or other similar body formed under the laws of Nevis or any other jurisdiction which collects and pools investor funds for the purpose of collective investment.

The definition includes umbrella funds whose shares are split into a number of different classes of funds or sub-funds. It also includes a fund which has one or more investors which are mutual funds not registered or recognized by the Ordinance.

The Ordinance divides mutual funds into three classes:

  • Public Funds, offering shares or units to the general public and which are required to be registered;
  • Private Funds, offering shares on a private basis with no more than 50 investors and which are required to be recognized by the Minister of Finance upon proof that it is lawfully constituted; and
  • Professional Funds, available only to professional investors with an initial investment of not less than USD100,000. These are also required to be recognized by the Minister of Finance, but can be fully operational for a period of 14 days without being recognized under the Ordinance.

The Ordinance allows a licensed or recognized mutual fund of an approved jurisdiction to be continued or redomiciled in Nevis. Also, Managers or Administrators who are not resident or domicile in Nevis and who are authorized to provide services under the laws of a recognized jurisdiction may operate from within Nevis after receiving written permission from the Minister of Finance.

The Nevis International Mutual Funds Regulations 2007 set the annual licence renewal fee at USD300 for Public Funds and USD200 for Private Funds and Professional Funds. The 2007 Regulations have allowed mutual funds to register in Nevis since 1st January, 2008.

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