ESCAPING TAXATION ON ACQUIRING REAL ESTATE IN ST VINCENT AND THE GRENADINES
St Vincent and the Grenadines (“SVG”) is best known for its idyllic beaches, rugged mountains and lush vegetation. The islets of Young Island, Mustique, Canouan and the Tobago Cays are major holiday destinations for the world’s super rich. Indeed, these islands represent the most exclusive of Caribbean destinations and many high net worth individuals across the world have acquired homes here. This is particularly true in the case of Mustique. However, the Grenadines are small, and the international investors are now tapping into the main island of St Vincent which is now seen as one of the prime jurisdictions for real estate investment in the Caribbean.
Most of the high net worth individuals who visit, fail to realise, that in addition to the splendid beaches, the islands have some of the best tax planning vehicles available in the region. High value transactions need to be properly structured. As a jurisdiction that has no wealth tax, capital gains tax or inheritance taxes, SVG provides a perfect opportunity for persons fiscally resident abroad to plan their real estate investment in an optimal fashion.
In making their purchase, two major elements of taxes have to be paid. The first is the Alien Land holding Licence, the second is the Stamp Duty.
Alien Land Holding Licence
Persons who are not citizens of SVG require an Alien Landholding Licence issued by the Governor General, prior to acquiring an interest in land. The relevant law provides that such a licence is required where any of the following applies:
- (a) Where 50% (or more) of the nominal value of issued share capital (or outstanding debentures) is held by aliens;
- (b) Where 50% (or more) of the board of directors is comprised of aliens;
- (c) Where 50% (or more) of dividends paid in any 12 month period accrues to the benefit of aliens; and
- (d) Where 50% (or more) of the annual debenture interest payable, accrues to the benefit of aliens.
The licence is granted in respect of a specific property or plot of land and is not assignable. A purchaser must have identified a particular parcel of land and has entered into an agreement for sale with the seller before he can apply for the licence. The agreement for sale will be conditional upon the purchaser obtaining a licence. The licence is permanent and does not require renewal or payment of annual fees. It is obvious that to take advantage of its “permanence”, the licence should be held in the name of a juridical entity, rather than that of a natural person.An application for a licence normally takes between 4 to 6 weeks to be processed, and upon issue, may be subject to conditions, such as the following:.
- (a) That the licence be registered at the Land Registry within 3 months of its grant, or it is void.
- (b) That the Deed of Conveyance be registered at the Land Registry within 3 months of the grant of the licence.
- (c) If the licence is for land only, the holder is required to build a dwelling within 2-5 years of purchase, with such dwelling costing not less than US$250,000.
Licences are not cheap, and could add a further 5% to 6% to the cost of acquisition. Obviously, with creative planning and structuring this cost could be avoided, while remaining full square within the ambit of the law, and thus maintaining the legal integrity of the transaction.
Another cost of acquiring land in SVG, is the stamp duty payable on both sale and purchase. With buyer and seller each paying 5% on the value of the transaction, this charge has a direct bearing on the liquidity in the property market, and is currently a great deterrent to prospective buyers.
However, again, with careful and creative planning, it is possible to escape stamp duty, if not on initial acquisition, certainly on future sale.
Clients who are interested in seeking confidential advice should contact us before applying for a licence or purchasing real estate, so that we may structure their transaction in the most tax efficient manner.
Dennings (Barristers & Solicitors)
P O Box 1639
St Vincent and the Grenadines
Tel: + 1 784 458 2645