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St Kitts And Nevis Legislates To Mitigate BEPS

by Jason Gorringe, Lowtax.net, London
25 February, 2016

Saint Kitts and Nevis has announced changes to its international tax rules to tackle base erosion and profit shifting and has raised the rate of the withholding tax that is levied on certain payments to overseas entities.

The changes were included in the Income Tax (Amendment) Bill, 2016, which was passed by the federation's parliament on February 19.

The territory's Prime Minister, Timothy Harris, said: "Economic activities have never been as global as they are today." He said smaller economies, like Saint Kitts and Nevis, have a mobile tax base and as such rely heavily on corporate income and withholding taxes. He said this also means that the economy is susceptible to the negative impact of harmful tax practices, which Government is attempting to avoid.

He said the Ministry of Finance had undertaken an analysis that indicated that the territory's domestic tax rules "are vulnerable to abuse by taxpayers who use different methods to avoid payment of their fair share of taxes to the Government." He said: "Such methods include transfer pricing and other similar earning stripping techniques."

Harris explained that the Income Tax Bill amendment was designed to "provide for all relevant parties to pay their fair share of the withholding tax. In our efforts to provide a level playing field and reduce the potential for the erosion of the tax base, it has become necessary to amend the withholding tax act to clarify branch and head office arrangements for the purposes of the application of the tax."

He said "indemnity protection" was also included to provide protection to local companies that pay the tax on behalf of overseas businesses and to set a new withholding tax rate of 15 percent, up from 10 percent, for all businesses.

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