When thinking about applying for citizenship in the Caribbean, businessmen are carefully considering all the pros and cons of such step in terms of taxation. Certainly, if the passport of Saint Kitts and Nevis is intended to be used solely as a travel document, the tax status remains unchanged. In cases you are planning to use a new passport for opening accounts with European banks, conducting business from the islands, or to reduce the tax burden, it is better to carefully study the taxation issue beforehand. For this purpose, we have prepared a brief summary of the tax system of St. Kitts and Nevis.
The country’s system of taxation of individuals is considered to be one of the best in the world. In this jurisdiction, global income, inheritance, wealth and gifts are not taxable. Capital gains tax is levied only if the asset is sold within 12 months from the date of acquisition (tax rate is 20%).
To have the right to work on St. Kitts and Nevis, you need to obtain a special permit which costs 1,500 East Caribbean Dollars or XCD (USD 635) per year. Employees pay 5% of their earnings to the social security fund, but the amount of such payment shall not exceed XCD 6500. In addition, there is a fee for housing construction and development. The size chart of the tax varies depending on the annual earnings:
In summer of 2017, Les Khan, CEO of Citizenship by Investment Unit of Saint Kitts and Nevis, said at the conference in Singapore that a new program is planned to be launched in the country. Under the terms of the program, investors will qualify for tax residency of St. Kitts and Nevis if they have lived in the country for 2 months during the year. Also, tax residents will be able to apply for citizenship under preferential treatment subject to additional investments.
Non-resident legal entities pay tax on profits received within the state. Resident legal entities pay tax on the income received all over the world. Resident legal entities are companies that are officially registered in St. Kitts and managed by local directors. Corporate tax rate is 35%. The rate is high, but it involves certain benefits. For example, if St. Nevis companies conduct business with non-residents of St. Nevis, they may be exempt from tax.
A separate item is a tax on profit of non-corporate entrepreneurs. Tax is imposed on a profit of over XCD 12,500 from the supply of goods and over XCD 2,000 from rendering services. The tax rate is 4%.
If dividends, interest or royalties are paid to a resident, the tax is not withheld. If dividends, interest and royalties are received by a non-resident, the tax is 10%. If profits are transferred from a branch office in Saint Kitts and Nevis to a head office overseas, it is subject to a 10% tax.
The size of the property tax is determined based on the market value of the property. The rate ranges from 0.2% to 0.3%, depending on the intended use and location of the property. The profit from leasing property is not taxed. There is no capital gains tax on the sale of real estate.
When transferring a real estate property, a stamp duty is paid. The tax rate ranges from 2% to 18.5%. Stamp duty is paid by the seller. Buyers who are not tax residents of the jurisdiction should obtain a license for land ownership. The cost of such permit is 10% of the purchase price, but not less than 750 XCD. Stamp duty for the transfer of shares is 2% and is paid by the seller.
VAT is levied on the sales of goods and services on the islands and on imports of goods and services to St. Kitts and Nevis. The VAT rate is 17%; in the tourist and hotel sector the rate drops to 10%. The interest rate on certain goods and services can be zero.
How to register with tax authorities and get a tax payer ID? The total value of supplies for professional services should exceed the threshold of 96,000 East Caribbean dollars and 150,000 East Caribbean dollars for other commercial activities. Voluntary registration for VAT is only possible with the consent of the Inland Revenue Department.
Declarations and other tax documents shall be submitted to the department no later than the 15th day of the month following the reporting month. For violation of the deadlines there is a penalty of XCD 100 per month. Late payment fine is 10% of the amount + interest fine of 1.25% per month.
The passport program of St. Kitts and Nevis has been active since 1984 and is the oldest in the world. According to official statistics, during the period from 2005 to 2015, the government issued 10,777 passports for investors and their families, and the number of applicants is growing rapidly every year.
There are two reasons for such popularity. The first one is the opportunities given to new economic citizens of the country. The passport of Saint Kitts and Nevis is the path to a visa-free travel to 150+ countries, obtaining of long-term visas to the United States and Canada, and the protection of assets.
The second benefit is the affordable cost of participation. The minimum threshold for investment in the national fund is $150,000 (the special offer became valid since April 2018). An alternative option of participation is the purchase of real estate for at least $400,000. The cost of participation in the passport program is much lower than in the EU countries. The citizenship of Malta, by comparison, will cost a minimum of €880,000, while Cyprus citizenship will cost minimum € 2 million.