Double tax agreements will apply to the new tax regime being rolled out

Effective July 1, St Lucia will be introducing a new territorial tax system under which non-resident international business companies (IBCs) are taxed on St Lucia source income only.

This includes but is not limited to income derived from royalties, management charges, commissions and fees. The move represents a substantial change for IBCs registered in the Caribbean territory.

Many companies in Jamaica and other territories have found it convenient to register as an IBC in St Lucia because of taxation and other benefits, which exceed those in their home country. Benefits under St Lucia’s IBC law previously included tax-free status, including no payment of corporate, income, or capital gains taxes.

There was no requirement for a minimum authorised capital or paid up share capital and none of the shareholders and directors names are included in the public records.

Withholding tax charges under the new tax system

Under the new tax system, the gross amount of income is liable to 25 per cent withholding tax (WHT), while WHT of 15 per cent applies to interest. Associations of underwriters are taxed at 30 per cent on 10 per cent of the gross premium arising in St Lucia and life insurance companies are taxed at 30 per cent on 10 per cent of the gross investment income arising in St Lucia.

Any dividend paid by an IBC, which does no business in St Lucia to another IBC or to persons, trusts or other entities, which are not residents, shall be exempt from any tax. Double tax agreements will apply. IBCs themselves are exempt from withholding tax. Benefits under the Eastern Caribbean country’s IBC law previously included tax-free status, including no payment of corporate, income or capital gains taxes.

IBC’s electing to be tax free were not required to file accounting records or financial statements. No audits were also required.