St. Lucia, Offshore And More
   Anthony Bristol - Deputy Managing Director FCC

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s part of its development policy, St. Lucia is continuously adapting its laws and policies to attract business both “on” and for want of a better phrase “off” shore. In assessing any offshore centre or, for the more politically correct, international financial centre, much attention is often paid to the nuts and bolts of that particular industry; that is the legal framework and the quality of the service providers. St. Lucia has taken this a step further with, inter alia, a stated open work permit policy for persons wishing to work in the industry and a range of tax incentives for trust companies, and professional and related services that earn foreign exchange.

The past few years have shown that while there has been an increase in land prices this is not as a result of speculation or foreigners. As a result the government has removed the requirement for the 10% alien license tax and has set much lower fixed fees based on the size of the property. At the same time the approval which formerly was given by the Cabinet, is now given by a Minister unless the land being purchased is greater than a certain minimum size. The process therefore is not only less expensive, it is faster and easier for the potential investor or house buyer.

Under the 1999 Act there were restrictions on foreign companies holding mortgages on property in St. Lucia. A foreign company seeking to obtain a mortgage on a property required an alien license to do so. This meant a fee of 5% of the sum loaned was applicable and there was the application process to deal with as well. For hotel or other development projects or even house projects where the financing was to be foreign, there was a serious impediment in securing financing. With the 2002 Act there is no requirement for a license for an alien mortgagee. This has opened the local business community to foreign financiers, thus lowering the cost of financing from the higher cost of capital from local banks to considerably lower international rates.

The business sector is not only benefiting from lower costs of finance, but also of telecommunications. Traditionally telecommunications cost was a major disadvantage of doing business in Caribbean offshore centres. For most of the English speaking Caribbean region’s history, telecommunications has been dominated by Cable & Wireless with monopoly type arrangements in most territories. In May 2002, a landmark agreement was entered into with Cable & Wireless, which ended the monopoly and allowed for liberalisation of telecommunications.

While the agreement applied to other countries in the subregion, St. Lucia was the first to issue new licenses to Digicel out of Ireland and to AT&T Wireless from the USA. As anticipated the cost of international calls has dropped by as much as 75% in some cases and there is a significant improvement in the quality and range of data services available. Telecommunications costs which once were a disincentive to investment have come full circle and are now adding another dimension to our vacation paradise image. Business paradise! The on-going legal revision in the offshore industry has focused on providing flexibility to existing niche products and the introduction of new areas of opportunity in the sector.

St. Lucian International business companies can elect to pay taxes at 1% or to be exempt from tax. The election to pay tax confers a benefit under the Caricom (Caribbean Common Market) Double Taxation treaty. Under this treaty, a company is deemed to be resident in a member state if it is liable to tax therein. The treaty also provides that dividends from a company resident in a member state to a resident in another member state shall only be taxed in the first mentioned state. The income tax laws of St. Lucia exempt dividends from tax allowing this mechanism to work with an effective tax rate of 1% of the profits. As the member states include Barbados, Trinidad and Jamaica, many multinationals have structured their regional affairs with St. Lucia as the choice for the IBC that is the primary income earning vehicle.

The system worked smoothly for those companies that had elected to pay tax upon formation. However, what had not been contemplated by the drafters was that there would have been entities formed as exempt entities that would want to elect to pay tax at 1%. As a result an amendment is being tabled to allow a company that has elected not to pay tax to do so by notice to be filed with the Registrar of International Business Companies and Trusts. The converse does not apply, as once a company has elected to pay tax, it cannot change and become exempt.

Later this year there are expected to be three new pieces of legislation introduced. After much deliberation there will be introduced a Limited Liability Companies Act and a Protected Cell Companies Act as well as a Limited Partnership Act. The intention of the drafters is to table all three pieces of legislation at the same time, near year end, and to push through some reviews to existing laws such as the Mutual Funds Act which it is felt could be improved in light of demand and existing opportunities.

St. Lucia’s focus on being a paradise for work and play is paying off. The effort to respond to the needs of investors and persons wishing to reside in the country is ongoing, committed and genuine. As the offshore and tourism industries grow, the image of the country is being projected further and is sure to bring the sustainable benefits that the framers of policy and legislation seek: ‘A time to refine’.