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Enhanced Certainty Regarding St Kitts & Nevis Companies
Guidance on Tax Residence and Taxable Presence in St Kitts & Nevis
In September 2020, the Federation of St Kitts & Nevis published new guidelines relating to companies registered in this jurisdiction and the definition of tax residence.
A summary of this guidance is detailed below:
Tax Residence: Definition
Tax residence determines whether a company will be subject to worldwide taxation in St Kitts & Nevis.
- Tax residence is determined by the central management and control test, as established under common law.
Whether a company is tax resident is determined separately from where it has its legal ‘seat’.
If a company is incorporated in St Kitts & Nevis, it does not necessarily mean that it will be tax resident in this jurisdiction. Equally, it is possible for a company to be incorporated outside of St Kitts & Nevis and to be tax resident within it, if centrally managed and controlled in St Kitts & Nevis. The converse is also applicable.
Management and Control: Clarification
Generally, central management and control will be located in the jurisdiction where the Board of Directors (BoD) convene and make management decisions, on behalf of the company.
This will be further substantiated where:
- The BoD is comprised of individuals suitably qualified and capable of managing the affairs of the company;
- The key strategic decisions of the company (especially relating to its capital structure, business strategy, investments, and dividend policy) are made at the BoD meetings; and
- Documentation (e.g. minutes of the BoD meetings), clearly indicate that such meetings are the medium through which the strategic decision-making of the company is carried out.
The delegation of corporate secretarial type functions to third parties in St Kitts & Nevis, is not sufficient to consider these companies having central management and control undertaken in this jurisdiction.
A St Kitts & Nevis ‘Business Enterprise’
Where a company is not tax resident in St Kitts & Nevis, it needs to consider whether it has sufficient operational presence in St Kitts & Nevis to be considered to be a ‘Business Enterprise’. If so, it would then be considered taxable in this jurisdiction.
Definition of a ‘Business Enterprise’
A non-resident company will have a taxable presence in the Federation where it has a ‘Business Enterprise’ in St Kitts & Nevis, which is being run along commercial lines for profit.
To meet ‘Business Enterprise’ criteria, it is necessary for the business to have a physical presence in St Kitts & Nevis, for example by having an office or branch located in this jurisdiction.
Circumstances Not Meeting ‘Business Enterprise’ Criteria
Actions undertaken to ensure that the company complies with its corporate requirements in St Kitts & Nevis, such as the establishment of a financial business account, and investment in equity holdings in the Federation, will not necessarily mean that the non-resident company has a ‘Business Enterprise’ in St Kitts & Nevis.
The delegation of; corporate secretarial, shareholder stewardship, or other administrative functions to corporate service providers in St Kitts & Nevis, does not in itself lead to the creation of a ‘Business Enterprise’.
Liability to Taxation
Where a company has a ‘Business Enterprise’ in the Federation, it will be liable to tax on income generated through the activities undertaken by this entity in St Kitts & Nevis.
Alternatively, where a company is not tax resident in the Federation and does not have a ‘Business Enterprise’ in the Federation, it would fall outside the scope of tax and would not be taxable in St Kitts & Nevis.
Dixcart has had an office in St Kitts & Nevis for over 20 years. We are experienced in offering comprehensive professional advice to clients wishing to establish a company or ‘Business Enterprise’ in this jurisdiction. We can also provide expertise regarding the potential tax advantages and liabilities that are legitimately available.