ST VINCENT AND GRENADINES THE NEW DESTINATION FOR INVESTING IN CARIBBEAN REAL ESTATE
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 the prime jurisdiction 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.
Persons who are not citizens of SVG require an Alien Landholding Licence issued by the Governor General, prior to acquiring an interest in land. In structuring such deals, the real property would normally be owned by a SVG company, the shares of which should ideally be owned by a second company. Where this second company is incorporated in SVG, it should ideally be an international business company (“IBC”) or a limited liability company (“LLC”). Where the IBC format is used, the hybrid company (limited by guarantee but having a share capital) is the optimal vehicle for this purpose. The requisite licence should be applied for in the name of the underlying company in whose name the land will be held.
As a further alternative, the shares of the second company could be owned by a local trustee pursuant to the terms of an SVG international trust, established as a reserved powers settlement. Under a reserved powers trust, the client retains a strong element of control, and will also be director of the company whose shares are subject matter to the trust. Section 36 of the International Business Companies Act provides that the sole responsibility of the trustees shall be to hold the shares, without having any duty to interfere in the management of the company whose shares constitute the trust property.
On the issue of taxation, all IBC’s, LLC’s, and international trusts established in SVG are exempt from local taxation and are instead given a 25 year tax exemption certificate by the registrar upon formation or registration. This total exemption from local taxation (especially as regards companies) is not always beneficial to shareholders. Some may be at a disadvantage if they are unable to prove to the tax authorities in their home country that the dividends they receive or the corporate profits from which such dividends were paid, have not been charged to SVG tax.
The IBC and LLC legislation go some way towards providing a solution. Such companies may make an irrevocable election to either (a) remain totally exempt as provided by the status quo, or (b) pay corporate income tax at the rate of 1% on their annual profits. Those companies that choose to pay the 1% tax must file annual tax returns and comply with the requisite provisions of income tax legislation.
Nevertheless, this option is an extremely good tax planning tool for persons and companies fiscally resident in the Caribbean Single Market or Caricom region, the Member States of which have ratified a multilateral Double Taxation Agreement. This “Treaty” provides that income arising in one Member State by a resident of another shall be taxed only in the source country, and taxed only once. It further exempts dividends payable by a company resident in one Member State from taxation not only in the country in which the income arises but also in the country in which the shareholder is resident.
It is clear that SVG has a lot to offer as an offshore financial centre. Clients who wish to acquire real estate investments and set up their offshore structures in an independent common law jurisdiction which retains the Privy Council as its highest court, need not look any further.
P O Box 1639
St Vincent and the Grenadines
T e l: + 1 784 458 2645