St Kitts and Nevis: An Update on the Taxation of Non-Resident International Companies
What is the Good News?
The period of uncertainty regarding the future of Nevis companies is coming to an end and the future for Nevis looks more positive.
In summary, companies that can demonstrate they are non-resident, that is companies with central management and control outside Nevis and no permanent establishment in Nevis, may continue to enjoy a tax neutral environment.
In 2019, we reported that the Federal Government of St Kitts & Nevis had commissioned an in-depth consultation with Ernst & Young, for the express purpose of reviewing the Federal Income Tax Act, Cap 20.22.
The collaboration was commissioned to find a long-term solution to the changes in the Nevis Business Corporation Ordinance (“NBCO”) and the Nevis Limited Liability Company Ordinance (“NLLCO”) that were enacted in December 2018.
We are now pleased to confirm that this review process is nearing an end and we have received confirmation from the Nevis Island Administration (“NIA”) that there is a commitment, by the Federal Government, to make an announcement as early as September 2020.
What are the Expected Changes?
The NIA confirmed that the expected changes will be based around the definition of tax residency. An assessment will be based on where a company has its central management and control. Treatment of a permanent establishment, with no management and control in Nevis, has also been considered.
Defined Tax Residence Status and Different Tax Treatments
The NIA have identified three possible tax outcomes:
- A company with central management and control and with a permanent establishment within the Federation, would be taxed on their worldwide income.
- A company without central management and control but with a permanent establishment within the Federation, would be taxed on the income generated in or the income remitted to the Federation.
- A company without central management and control or a permanent establishment within the Federation, would not be liable for taxation in the federation.
All companies would need to file a simplified tax return by the 15th April each year (this filing requirement and the payment of any due tax has been deferred to allow time for the Federal Government to make necessary amendments to the act).
The Government intends to release more details on the definitions of ‘Central Management and Control’ as well as ‘Permanent Establishment’.
Associated Benefits: Nevis Companies.
- Companies that can demonstrate they are non-resident, that is companies with central management and control outside Nevis and no permanent establishment in Nevis, may continue to enjoy a tax neutral environment.
- Non-resident companies are likely to continue to enjoy no withholding tax liabilities.
- Companies should always, however, be issued with a tax number, to enable appropriate filings to take place.
- There are no planned substance requirements.
- The continued enjoyment of the existing confidential nature of Nevis companies with maintenance of the privacy of ownership from a public register.