Corporate tax in Saint Lucia

Summary

Corporate Income Tax Rate (%) 30 (a)
Capital Gains Tax Rate (%) 0
Branch of Nonresident Corporation Tax Rate (%) 30 (a)
Withholding Tax (%)
Payments to Nonresidents
Dividends 0
Interest 15 (b)
Royalties 25 (b)
Rents 0
Management and Technical Services Fees 25 (b)
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0
Carryforward 6

a) This rate applies only to companies that are in good standing with the Inland Revenue Department. Otherwise, the rate is 33.3%.

b) This is a final tax.

Taxes on corporate income and gains

Corporate income tax. Companies that are resident in St. Lucia are subject to corporation tax on their worldwide income, regard­less of whether the income is remitted to St. Lucia. Nonresident companies carrying on business through a branch pay tax on St. Lucia-source income only.

A company is considered to be resident in St. Lucia if it is incor­porated in St. Lucia. A company incorporated outside of St. Lucia is also considered resident in St. Lucia if its management and control are located in St. Lucia.

Income is considered to be St. Lucia-source if the property that constitutes the source is physically located in St. Lucia. Non­resident companies that derive income from St. Lucia (other than through a branch) are not subject to tax in St. Lucia. However, the income is subject to withholding tax when it is paid.

Rates of corporate tax. All domestic companies that are in good standing with the Inland Revenue Department, including branches of nonresident companies, are subject to tax at a basic rate of 30%. Companies that are not in good standing are subject to tax at a rate of 33.3%.

International Business Companies and International Banks estab­lished in the International Business and Financial Services Sector may elect to be exempted from income tax or be liable to tax on their gains and profits at a rate of 1%.

No tax is required to be withheld from dividends, interest, royal­ties, management fees and rents paid to nonresidents by compa­nies operating in the International Business and Financial Services Sector.

Capital gains. Capital gains are not taxed in St. Lucia.

Administration. The fiscal (income) year is the period for which the accounts of the business are normally prepared.

A corporation is required to determine its own tax liability and to prepare and file a corporation tax return within three months after the end of its fiscal year. If a return is not filed on time, the Comptroller of Inland Revenue may levy a penalty of 5% of the tax charged for that income year.

Corporations must prepay tax in three installments. These install­ments must be paid by 25 March, 25 June and 25 September in each year, and each tax prepayment must equal one-third of the preceding year’s tax. Any balance of tax due is paid when the return is filed. Failure to pay an installment of tax is subject to a penalty of 10% of the amount of unpaid tax as well as interest at a rate of 1.04% per month. Any balance of tax not paid by the due date incurs interest at a rate of 1.04% per year for the period dur­ing which it remains unpaid.

Dividends. Dividends paid by companies resident in St. Lucia to nonresidents are not subject to withholding tax in St. Lucia. Divi­dends received by companies resident in St. Lucia from domestic and foreign companies are not included in the companies’ taxable income.

Foreign tax relief. A tax credit is allowed for taxes paid to foreign jurisdictions by St. Lucia resident companies on profits, income or gains earned from such foreign jurisdictions, regardless of whether St. Lucia has entered into a double tax treaty with the foreign jurisdiction. This credit is allowed up to the amount of the St. Lucia taxes payable on the income.

Determination of trading income

General. Taxable income is determined on the basis of accounts prepared in accordance with International Financial Reporting Standards, subject to specific adjustments identified in the Income Tax Act.

Inventories. The authorities generally accept a method of valuation of inventory that conforms to standard accounting practice in the trade or business, provided it is applied consistently. Average cost or first-in, first-out (FIFO) are the generally accepted methods.

Provisions. Reserves or provisions of a general nature for doubt­ful accounts receivable, inventory shrinkage, inventory obsoles­cence and other items are not allowable. However, write-offs of specific amounts or balances are generally allowed if these amounts are calculated in accordance with the guidelines issued by the Inland Revenue Department.

Tax depreciation. Depreciation and amortization reported in the financial statements are not allowed as deductions in calculating taxable income. However, a company may claim capital allow­ances. Annual allowances of between 2.5% and 33.3% are granted on the original cost of fixed assets, calculated on a declining bal­ance. An initial allowance of 20% is also granted with respect to capital expenditure.

Relief for losses. Losses may be carried forward six years to offset income derived in those years. However, for any year, the deduc­tion with respect to the prior-year losses may not exceed one-half of the taxable income for that year. Losses may not be carried back.

Groups of companies. A member of a group of companies (the surrendering company) may surrender current trading losses to another member of the group (the claimant company). The claim­ant company may then claim a deduction for the losses in calcu­lating its taxable income. This deduction may not exceed half of the taxable income of the claimant company.

To qualify for group relief, the surrendering company and the claimant company must be resident in St. Lucia and must be members of the same group throughout the fiscal year for which group relief is claimed. Two companies are members of the same group if one is a 51% subsidiary of the other or both are 51% subsidiaries of a third company. In determining whether a com­pany is a 51% subsidiary of another company, share capital is excluded if profits from sales of such shares would be trading receipts of the direct owner of the shares. Share capital is also excluded if it is owned directly or indirectly in a company not resident in St. Lucia. In addition, the parent company must be beneficially entitled to at least 51% of the profits available for distribution to shareholders of the subsidiary and to at least 51% of the subsidiary’s assets available for distribution to sharehold­ers of the subsidiary on a winding up.

Trading losses may not be surrendered to the extent that they include the following:

  • The surrendering company’s capital allowances
  • Expenses payable to a group member that are claimed as deduc­tions but are not included in the income of that group member for the same fiscal year

Group relief is available only if the claimant company has used its capital allowances and offset its loss carryforwards against its current profits. A claim for group relief must be made within two years after the end of the surrendering company’s fiscal year, and the surrendering company must consent to the relief. Group relief is not available to International Business Companies, International Banks and other companies granted special tax concessions.

Consolidated group returns may not be filed with the tax author­ities.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax (VAT), on the supply
of goods and services in St. Lucia
and on goods imported into St. Lucia
Standard rate 15
Hotel accommodation and specified
goods and services supplied by providers
in the tourism sector
10
Basic food items 0
Excise tax, on imports of vehicles; this
tax is imposed in addition to the VAT
15 to 85
Import duty 5 to 45
National insurance contributions, on
monthly insurable earnings up to
XCD5,000; paid by
Employer 5
Employee 5
Self-employed individual 10

Miscellaneous matters

Foreign-exchange controls. St. Lucia does not impose foreign-exchange controls.

Debt-to-equity rules. St. Lucia does not impose thin-capitalization rules.

Anti-avoidance legislation. Anti-avoidance provisions may be applied to transactions effected for the main purpose of avoid­ance or reduction of tax liability.

Treaty withholding tax rates

The following treaty withholding tax rates apply to income re­ceived in St. Lucia.

Dividends Interest Royalties
% % %
Caribbean Community and Common Market (a) 0 15 15
Switzerland (b) — (c) — (d) 0

 

a) This is the Caribbean Community and Common Market (CARICOM) double tax treaty. Income is taxed in the country of source only.

b) This is the 1954 treaty between the United Kingdom and Switzerland, which was extended by exchange of notes to St. Lucia under Article XXI.

c) The treaty does not contain a dividend article. Consequently, the normal Swiss withholding tax rate applies.

d) The treaty does not contain an interest article. Consequently, the normal Swiss withholding tax rate applies.

For payments from St. Lucia, the following treaty withholding tax rates apply (however, see the paragraph after the footnotes).

Caribbean Community Dividends

%

Interest

%

Royalties

%

and Common Market (a) 0 15 15
Switzerland (b) 0 (c) 15 (d) 0
Non-treaty countries 0 15 25

a) This is the CARICOM double tax treaty. Income is taxed in the country of source only.

b) This is the 1954 treaty between the United Kingdom and Switzerland which was extended by exchange of notes to St. Lucia under Article XXI.

c) The treaty does not contain a dividend article. Consequently, the normal withholding tax rate applies.

d) The treaty does not contain an interest article. Consequently, the normal with‑
holding tax rate applies.

No tax is withheld from dividends, interest, management fees and royalties paid to nonresidents by International Business Com­panies or International Banks.