Foreign tax credit
Where income has accrued to a resident and has been taxed in a foreign country with which there is no double tax agreement (DTA) or is income to which a DTA, if there is one, does not relate, credit for tax on such income is allowed for the lesser of the tax payable in the foreign country or the tax charged under Saint Lucia tax law.
Tax holidays are available for manufacturing companies. The incentives are aimed at increasing the manufacturing base of Saint Lucia, the level of exports, and the use of local materials and labour in production. An approved manufacturing enterprise will be granted a tax holiday, up to a maximum of 15 years. In determining the length of the tax holiday, the extent of the local value added to approved products is taken into account.
Income tax incentives and other fiscal concessions are provided under the Fiscal Incentives Act, the Tourism Incentives Act, the Special Development Areas Act, and other concessions granted by the Cabinet of Ministers. The extent of the incentives and concessions granted are specific to the legislation or Cabinet conclusions and depend on the impact that the investment would have on local employment, exports, and the generation of foreign exchange earnings. The incentives granted include the following:
- Duty-free importation of raw materials, machinery, components, and spare parts and other inputs used in manufacturing, and the duty-free importation of construction materials, equipment, and other inputs used in the construction and operation of hotels and other hospitality products.
- Income tax waivers of up to 100% of the taxable income of companies engaged in manufacturing, tourism, and agriculture and other employment-generating activities, for periods of up to 15 years.
- Whole or partial waivers of property tax, stamp duties, Alien Landholding Licence fees, WHT, and VAT with respect to investments in specific areas, or in specific industries and activities.
- Guaranteed repatriation of capital and dividends. Remittance of profits and dividends are tax-free, as they are not subject to WHT.
- Export allowances for goods manufactured in Saint Lucia and exported. Companies that engage in such activity are given tax exemption on the export of such goods, up to a maximum of ten to 15 years.
Employment incentives are available in the Income Tax Act for the following:
- Hiring university graduates. An additional deduction of 25% of salaries is provided for a maximum period of three years.
- Hiring persons in the offshore financial services industry with skills not available in Saint Lucia. A special tax concession is given to such persons that allows a prescribed percentage of an employee’s or contractor’s salary or fees to be exempt from income tax.
International Business Companies (IBCs) Act
IBCs incorporated prior to 1 January 2019 that were exempted from income tax or liable to income tax at a rate of 1% may be liable to pay income tax as a resident.
IBCs incorporated prior to 1 December 2018 are prohibited from conducting business in Saint Lucia and may elect to be exempted from income tax until 30 June 2021, unless they elect to adopt the new territorial system before the end of the grandfathering period. Alternatively, IBCs incorporated prior to 1 December 2018 may elect to be liable to income tax on their profits and gains at a rate of 1%. Freedom from exchange controls is granted to IBCs, as well as from stamp duty on the transfers of any property, assets, shares, debt obligation, or other securities. No WHT is levied on remittances of dividends and distributions, royalties, interest, management fees, or fees or other income paid by IBCs to persons outside Saint Lucia. Supplies to an IBC are also deemed to be an export, and VAT is applied at the rate of 0%.
In common with many other territories, Saint Lucia has also adopted economic substance legislation, the guidelines for which are currently being finalised.
Complete or partial waivers of income tax are available on the taxable profits of companies engaged in providing services to the offshore financial services industry.
Special tax concessions are also available for capital construction in the hotel industry. Capital expenditures on the construction of a hotel may offset profits for up to 15 years.