ST. KITTS AND NEVIS: OFFSHORE LEGAL AND TAX REGIMES

St.Kitts and Nevis offshore legislation, which applies on both islands, includes the Companies Act 1996 and the Trusts Act 1996. A Merchant Shipping Act and Foundation Act were added in 2002 and 2003.

St Kitts and Nevis has however aimed primarily at attracting industrial and tourist investment with very tax-friendly incentive legislation under the Fiscal Incentives Act 1974 and the Hotel Aids Ordinance.

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. Trusts are created under the Nevis International Exempt Trust Ordinance of 1994, as amended to September 2000. Limited Liability Companies (LLCs) which have emerged as Nevis's star product, are formed under the Nevis Limited Liability Company Ordinance, 1995. Mutual funds were added to Nevis's offshore product range with the Nevis International Mutual Funds Ordinance 2004. Captive insurance companies were added by the Captive Insurance Companies Act 2006.

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.

St Kitts and Nevis maintains a high level of confidentiality for offshore entities under the Confidential Relationships Act of 1985. The Confidentiality Act safeguards investors by prohibiting disclosure of any information obtained in the course of business. The law is considered to provide the most rigid secrecy in the Caribbean region as it applies to banks and professionals as well as Government officials.

Click on any of the forms for a description of its legal basis.

In addition, there are free zones whose occupants don't have to have offshore status as such, but which offer benefits broadly similar to those available to offshore companies; see Investment Incentive Schemes for details.

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St. Kitts and Nevis Tax Treatment of Offshore Operations

See Domestic Corporate Taxes for the general principles of St Kitts and Nevis corporate taxation.

Whether under Federation legislation or Nevisvian legislation, offshore entities in St Kitts and Nevis are exempt from Corporate Income Tax, Withholding Tax and Capital Gains Tax, as long as they carry on business only with non-residents of the Federation. However, the various laws make it clear that an exempt entity does not lose its tax waivers because of certain activities within the Federation including signing contracts or concluding arrangements for employing residents, purchasing goods and services, and exercising other powers to carry on its business such as holding directors' and members' meetings, transacting banking and reinsurance business, and conducting securities transactions or serving as adviser to Federation residents who enjoy exempt status.

At the time of writing, St Kitts and Nevis companies paid the following fees:

An Exempt Private Company (St Kitts and Nevis) pays an annual fee of US$200 to the government on filing of the annual return.

An International Business Company (Nevis) pays an annual fee of US$200 to the government (no annual return is required). Capital duty is US$200 based on an authorised share capital of 1,000 shares at no par value or on $100,000 of par value shares.

An Exempt Limited Partnership (St Kitts and Nevis) pays an annual registration fee of US$200 to the government.

A Limited Liability Company (Nevis) pays an annual registration fee of US$220 to the government.

A Trust (St Kitts and Nevis) pays an annual fee of US$200 to the government along with a statutory declaration of exempt status.

An International Exempt Trust (Nevis) pays an annual registration fee of US$220 to the government.

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St. Kitts and Nevis Regulation Of Banking

Offshore banking falls under the Financial Services (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).

Fees for a banking license are: on filing of first application (not refundable) - for all applications, USD 1,000; on granting or renewal of authorisation for an unrestricted business, USD 8,000, and for a restricted business, USD 4,000.

The Nevis Offshore Banking Ordinance 1996 (as amended) 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.

Nevis offshore banks pay tax as follows:

• 2½% on all profits and gains up to ten million dollars;
• 2% on all profits and gains in amounts exceeding ten million dollars but not exceeding twenty million dollars;
• 1½% on all profits and gains in amounts exceeding twenty million dollars but not exceeding thirty million dollars; and
• 1% on all profits and gains in amounts exceeding thirty million dollars.

However, a licensee and the Minister may enter into an agreement determining the amount to be paid as income tax in lieu of other taxes on income by the licensee in respect of the business it does from within Nevis.

The Minister may by order exempt a licensee in respect of its business from all or so much of any duty payable under the Customs Act in respect of any goods imported by the licensee in respect of its business as the Minister deems expedient, if the licensee in respect of its business satisfies the Minister that the goods concerned are not being made or manufactured in Nevis, are essential as equipment or fixtures for doing business from within Nevis and are not merely goods that will be used up or expended in the ordinary course of business.

Where the Minister is satisfied that a licensee must use the services of specially qualified persons in order to do its business effectively from within Nevis and that it is unable to acquire those services in Nevis, and it is unable to retain or hire those services from outside Nevis without special tax benefits being made available, the Minister may authorise an offshore benefit provision for the employment of those specially qualified persons, whereby a prescribed percentage of an employee's or contractor's salary or fees from a licensee:

• is exempt from any duty or tax in Nevis;
• may be paid in a foreign currency;
• may be paid in some other prescribed manner in another currency or otherwise.

Fees charged by the Nevisvian government in respect of an Offshore Banking Business are as follows:

• Government License Fee USD 15,000;
• Government Due Diligence Fee 600;
• Incorporation Fee 1,400.

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St. Kitts and Nevis Regulation Of Trusts

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.

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.

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.

Nevis trusts are exempt from all forms of taxation and exchange controls provided that transactions take place only with non-residents. The trustee may be either a trust company licensed to do business in Nevis or a company incorporated under the Corporation Ordinance (ie an International Business Company). There is no registration requirement other than for the Trust's name, name of the Trustee and the registered office address.

There is a US$25,000 bond requirement prior to the commencement of an action or proceeding against trust property.

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St. Kitts and Nevis Taxation of Foreign Employees of Offshore Operations

There is no personal income tax in St Kitts and Nevis but foreign nationals working in the country are required to obtain a work permit for which, at the time of writing, there is an annual charge of 1,500 East Caribbean dollars ($635). Persons or companies remitting payments to persons or companies outside of the nation must deduct a 10% withholding tax on profits, administration or management and head office expenses, technical service fees, accounting and audit expenses, royalties, non-life insurance premiums and rents.

There is no capital gains tax other than on short-term investments, but the St. Kitts and Nevis house tax of 5%, payable in two installments a year, applies on annual rental value of a property, with a 25% rebate on residential property. The controversial Alien Landowners Tax places a 14% levy paid by buyers and 4% by sellers on residences. Although it also applies to commercial land, it is subject to negotiations on a case-by-case basis. A 1% sales tax on gross sales, a hotel tax of 5% and a 2% tax on foreign currency transfers are in effect.

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St. Kitts and Nevis Employment & Residence

Work permits are granted on application by employers, provided that no local worker is available, and involve the production of a number of documents, including health certificates.

The Nevisian Banking Ordinance gives discretion to the responsible Minister to reduce taxes and other conditions for the foreign employees of an enterprise which has had trouble sourcing suitable labour locally.

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