Mar 10, 2020

Tax residency of St Kitts and Nevis: who has to pay the 33% corporate tax?

How can a company registered in Nevis become a tax resident of this country and start paying the local corporate tax? We answer this question below.

An offshore company on the island of Nevis

For many years, Nevis was a classical offshore jurisdiction. International business people loved to register companies there first of all because the country offered iron cast protection of their assets against any encroachments from the outer world. When an entrepreneur established a company or a trust in St Kitts and Nevis, he or she could be 100% sure that nobody could take his/ her possessions away.

Nevis was also a popular place where business people opened trade companies and asset management companies including real estate management. As it used to be with any other offshore jurisdiction, setting up a foreign bank account for a Nevis-registered company was relatively easy.

The current de-offshorization policy has made Nevis lose much of its attractiveness for company registration. The most important factor that stops contemporary entrepreneurs from establishing companies in the country is the difficulty in setting up bank accounts for these companies.

Just like all other offshore jurisdictions, Nevis has been forced to change its legislation and strengthen the fight against the practices of money laundering, tax evasion, and financing of terrorism. This has led to the change of rules and the loss of some benefits that Nevis formerly offered.

A company in St Kitts and Nevis and its tax resident status

According to Nevis Island Administration (NIA), the Government of the country will publish amendments to the tax code by September 2020. The amendments will specify the company tax resident status, among other things.

Companies and corporations (business entities) will be considered tax residents of Nevis and thus they will have to pay a corporate tax on their worldwide income if they are managed and controlled from the island.

In case the central company management and control units are not located on Nevis but the company has a ‘Permanent Establishment’ on the island, the corporate tax is to be paid on the income obtained on the territory of the country. This is an OECD Model Tax Convention requirement.

In case the company is neither managed nor controlled from Nevis, nor does it have a permanent establishment, no Nevis taxes are payable.

Currently, the corporate tax rate is Nevis is 33%. This tax rate is among the twenty highest rates in the world. However, more likely than not, Nevis is going to take steps to lower the taxes and to simplify the tax reporting as it wants to keep at least part of the foreign investors.  

A new simplified tax return form is now being designed. Until it is completed, the Government of the country has decided to postpone collecting the taxes payable by April 15, 2020 (end of the fiscal year in the country).

At the same time, all the existing companies must remain in good standing and keep paying the annual registration renewal duties and license fees in a timely manner.

Is it reasonable to establish a company in St Kitts and Nevis today?

Only a couple of years ago, the list of reasons to open a company in this jurisdiction was many times longer than the current one. We would like to stress that a Nevis-registered company is still a wonderful asset protection instrument but opening a foreign bank account for the company is going to be quite problematic.  

We are hundred percent certain that soon Nevis and other small island countries will return to the financial service market bringing new exiting products that will be efficient and legal at the same time. However, today you have to realize very well for what purposes you need a foreign company and what kind of bank account you would like to have.  

The problem of setting up a corporate account in a foreign bank has become especially acute. Non-resident banking is disappearing in all countries of the world and former offshore jurisdictions suffer from it more than others.

The most obvious solution of this problem would be to establish a company and open a bank account in one and the same country. As things stand for now, though, Nevisian banks do not offer services of the high level that you may be used to.

In any case, please clarify the issues pertaining to opening a company and a bank account in St Kitts and Nevis with our consultants. They will gladly (and honestly) answer your questions if you contact them at [email protected].

We would also like to suggest that you should take into consideration some other jurisdictions that offer part of the ‘offshore’ services. When doing so, they remain reputable jurisdictions with well-developed economies.

Of a very large variety of options, we bring the following ones to your attention:

  • Open a company branch in Serbia. The most attractive characteristic of this option is that you can set up a Serbian branch of an existing offshore company and open a European bank account for the branch. This will mean, in effect, opening a European bank account for your offshore company;
  • Open a company in Serbia and a bank account with a Serbian bank. Banks in Serbia come up to the highest international standards but if the company owner also obtains legal residence in Serbia, his or her life is going to be much simpler;
  • Open a company in Gibraltar and set up an account with an international payment system. Today, payment systems are as reliable as traditional banks but they are much more mobile and flexible while much less bureaucratic and expensive than banks. This option will suit you especially well if you work in the IT sphere or are engaged in a gambling business;
  • Open a company in Canada and a corporate account with a local bank. This option is the most popular one with our customers. The unshakable reputation of Canada in the international arena will give you access to whatever opportunities you want. The costs of company establishment and maintenance will be comparatively higher, but the effectiveness of such move cannot be matched; 
  • Open a company and a corporate bank account in Portugal. This has not become a well-tread path yet but currently the tendency is picking up. A company in Portugal will bring you great stability, predictability, and the possibility to work with one and the same bank without any problems over many years.

Nevis and other suchlike jurisdictions provide for interesting instruments of solving particular tasks. At least, this is where they stand now. However, whether your business is narrow and specific or it is broad and general, we can assist you in optimizing your business operations by offering the opportunities to register a company and open a bank account in a jurisdiction that will have adequate taxation rules and protect your assets effectively. Please contact us at [email protected] and we will certainly find an option that will suit you very well. Every problem has a solution.