ST. LUCIA
Table of Contents
ECONOMIC OVERVIEW
Saint Lucia, situated in the Caribbean Sea, comprises 11 quarters or parishes, with Castries serving as its capital and largest city. English is the official language, and the East Caribbean dollar (XCD) is the currency. Throughout the 17th and early 18th centuries, Saint Lucia, with its advantageous natural harbor at Castries, was a frequent point of contention between England and France, changing hands 14 times before finally being ceded to the United Kingdom in 1814. Even after the abolition of slavery in 1834, Saint Lucia remained primarily focused on agriculture, cultivating tropical crops for export..
Self-government was granted in 1967, leading to independence in 1979. The nation has successfully attracted foreign investment, particularly in offshore banking and tourism, with a notable increase in foreign direct investment in 2006 due to various tourism projects. While traditional crops like bananas, mangoes, and avocados are still cultivated for export, tourism is the primary driver of Saint Lucia’s economy, serving as its largest source of income and employment. The island’s manufacturing sector is the most diverse in the Eastern Caribbean, and efforts are underway to revitalize the banana industry.
Personal Income
Saint Lucia imposes income tax on the following: Income earned by an individual who is a resident or ordinarily resident in Saint Lucia, whether it originates from within or outside Saint Lucia. Income earned by a resident individual who is not ordinarily resident in Saint Lucia, derived from all sources within Saint Lucia and income from sources outside Saint Lucia to the extent that it is brought into Saint Lucia. Income generated within Saint Lucia to a non-resident individual, and income from sources outside Saint Lucia received within Saint Lucia by a non-resident, to the extent that it is received in Saint Lucia.
Other taxes
Social security contributions
Social security contributions in Saint Lucia entail individuals contributing 5% of their gross salary to the National Insurance Corporation (NIC), capped at XCD 250 per month. Employers match this contribution and file monthly returns.
Value-added tax (VAT)
The standard VAT rate in Saint Lucia stands at 12.5%, with certain goods and services subject to a 0% rate. Notably, the hotel sector and related services are taxed at 10%, with a reduced rate of 7% applicable for tourism accommodation services starting from December 1, 2020. Businesses with annual sales turnover below 400,000 East Caribbean dollars (XCD) are not required to register for VAT. This threshold is based on the taxpayer’s annual sales turnover. Certain supplies are subject to a VAT rate of 0%, including goods for export, duty-free shop sales, fuel, water, and electricity. Additionally, specific goods and services are exempt from VAT, such as domestic residential rental, educational, financial, insurance, and medical services, as well as local transportation services and certain food items. Import duty on medical supplies was waived from May 1, 2012, to April 30, 2016, with no official end date announced. Prescription drugs are currently exempt from VAT. To expedite VAT refunds, the government has established a dedicated VAT Refund Account as per the Financial Administration Act.
Net wealth or worth taxes
There are no net wealth or worth taxes, inheritance taxes, estate taxes, or gift taxes in Saint Lucia.
Residential property tax
Residential property tax is levied at a rate of 0.25% of the open market value of the property.
Excise taxes
Excise taxes apply to fuel, liquor, beer, and cigarettes, primarily at specific rates. Fuel excise tax is imposed on imports by wholesalers and included in the fuel price at the pump, calculated based on the supplier’s current price and regulated pump price. As of July 1, 2023, Saint Lucia has raised excise tax on tobacco products by 50%.
Customs duties
Customs duties are levied on a wide array of imported goods in Saint Lucia, with exemptions granted for raw materials, plant, and machinery used in manufacturing, as well as certain items imported by hotels undergoing construction, extension, or refurbishment projects.
Stamp tax
Stamp tax is applicable to documents indicating legal or contractual relationships between parties. Various commercial and legal documents must be stamped to indicate tax payment, with rates either fixed or ad valorem based on property value or transaction amount.
Foreign tax relief and tax treaties
In Saint Lucia, residents can receive a tax credit for foreign taxes paid on income earned abroad, regardless of whether there is a double taxation agreement (DTA) with the foreign country. If there is a DTA in place, the tax credit is applied according to the terms of the agreement. In the absence of such an agreement, the tax credit is the lower of the tax payable in the foreign country or the tax charged in Saint Lucia. Saint Lucia does not have tax treaties with most countries, except for certain members of the Caribbean Community (CARICOM). However, there is an agreement within CARICOM member states aimed at preventing double taxation.
Foreign tax relief and tax treaties
In Saint Lucia, residents can receive a tax credit for foreign taxes paid on income earned abroad, regardless of whether there is a double taxation agreement (DTA) with the foreign country. If there is a DTA in place, the tax credit is applied according to the terms of the agreement. In the absence of such an agreement, the tax credit is the lower of the tax payable in the foreign country or the tax charged in Saint Lucia. Saint Lucia does not have tax treaties with most countries, except for certain members of the Caribbean Community (CARICOM). However, there is an agreement within CARICOM member states aimed at preventing double taxation.
Taxable period
In Saint Lucia, the tax year follows the calendar year.
Tax returns
Individuals earning taxable income exceeding XCD 18,000 (XCD 25,000 for the 2023 income year) in any calendar year must file a personal income tax (PIT) return by March 31 of the following year. Married individuals with a spouse earning taxable income must file separate PIT returns.
Payment of tax
Individuals earning taxable income exceeding XCD 18,000 (XCD 25,000 for the 2023 income year) in any calendar year must file a personal income tax (PIT) return by March 31 of the following year. Married individuals with a spouse earning taxable income must file separate PIT returns.
Penalties and interest in Saint Lucia are applied as follows:
– Late filing or failure to file incurs a penalty of 5% of the tax amount at the filing date.
– Late payment results in a penalty of 10% of the unpaid tax at the due date.
– Unpaid tax and penalties accrue monthly interest at a rate of 1.04%.
– Knowingly evading or attempting to evade tax incurs a penalty equal to 100% of the tax amount.
Appeals
Taxpayers in Saint Lucia have a 30-day window after receiving a notice of assessment or reassessment to lodge a written objection with the Revenue Department regarding any issues therein. If the Revenue Department upholds its assessment, the taxpayer has the option to escalate the matter by appealing to the Appeal Commission, consisting of seven individuals appointed by the Minister of Finance. Should the Appeal Commission’s decision not be satisfactory, the taxpayer can further appeal to the Saint Lucia High Court within 30 days. Subsequently, appeals against orders from the High Court can be made to the Court of Appeal.
Statute of limitations
The statute of limitations allows for assessments to be made regarding an individual’s tax affairs within six years after the end of the relevant income year.
Corporate income
Resident companies in Saint Lucia face a flat tax rate of 30% on all profits, regardless of their source, as long as they meet specific criteria. Companies with tax arrears and non-compliance are subject to a higher tax rate of 33.33%. The implementation of a new territorial tax system since 2018 exempts resident companies from taxes on certain types of income earned abroad. For non-resident companies, Saint Lucia-source income is taxed with a 25% withholding tax (WHT) rate, while interest is subject to a 15% WHT rate. Associations of underwriters are taxed at a rate of 30% on 10% of the gross premium arising in Saint Lucia. Similarly, life insurance companies are taxed at a rate of 30% on 10% of the gross investment income arising in Saint Lucia.
Commercial property tax
Commercial property tax is assessed annually at 0.4% of the property’s open market value. Owners need to obtain a commercial valuation to determine this value. Newly completed commercial properties after April 1, 2001, can benefit from a three-year exemption from commercial property tax.
Residential Property Tax
For residential properties, the tax rate is set at 0.25% of the property’s open market value.
Social security contributions
Employees contribute 5% of their gross salary to the National Insurance Corporation (NIC) for retirement, sickness, and disability benefits, up to a maximum of XCD 250 per month (equivalent to a monthly salary of XCD 5,000). Employers match this contribution and submit monthly returns.
Tourism levies
As of December 15, 2020, guests staying at registered accommodation providers are charged either 3 USD per person per night for room rates below USD 120 or 6 USD per person per night for room rates above USD 120. A reduced rate of 50% applies to guests aged 12 to 17.
Health and Citizen Security Levy
Saint Lucia introduced a 2.5% Health and Citizen Security Levy on the importation of goods and certain services provided by VAT-registered taxpayers in Saint Lucia or by non-residents to VAT- registered taxpayers in Saint Lucia, effective August 2, 2023. This levy is calculated ad valorem on the cost, insurance, and freight value of goods and applies to invoices generated for goods and services from October 2, 2023.
Capital gains
Capital gains are not taxed in Saint Lucia unless they are considered part of the income-earning activities of a business, in which case the corporate tax rate applies.
Dividend income
Dividend income is exempt from taxation in Saint Lucia, including inter-company dividends.
Interest income
Interest income is subject to the corporate tax rate, except for income earned on specific securities issued by member governments of the Eastern Caribbean Central Bank or income from trading in securities under the Securities Act, which are tax exempt.
Royalty and rental income
Royalty and rental income are subject to the corporate tax rate, except for certain exemptions on rental income from residential accommodations meeting defined regulations.
Foreign exchange gains or losses
Foreign exchange gains or losses arising from trading items are taxable or deductible if settled within normal credit terms. Unrealized exchange gains or losses are not taxable or deductible.
Bribes, kickbacks, and illegal payments
Bribes, kickbacks, and illegal payments received by a company are considered taxable income.
Foreign Income
Saint Lucia does not tax resident companies on income earned outside its jurisdiction. Reciprocal agreements exist with some countries for double taxation avoidance, with foreign tax allowed as a credit against tax in Saint Lucia. There are no tax treaties with countries outside CARICOM, but agreements for double taxation avoidance exist within CARICOM member states. Tax deferral is not permitted in Saint Lucia.
Depreciation
In Saint Lucia, businesses can claim capital allowances for various assets: An initial allowance of 20% is available for the acquisition of industrial, agricultural, and commercial buildings (excluding hotels and rental properties), as well as for plant and machinery, including motor vehicles and furniture, and fixtures and equipment. Following the initial allowance, annual wear and tear allowances are granted on a reducing- balance basis, ranging from 10% to 33.33%. However, industrial and agricultural buildings receive a 5% annual allowance, and commercial buildings (excluding hotels and rental properties) receive a 2.5% annual allowance. The Comptroller of the Inland Revenue Department (IRD) may approve higher annual allowance rates for assets with significant wear and tear upon application. Gains on asset disposal are treated as ordinary income up to the amount of depreciation recovered. Any proceeds exceeding the asset’s cost are considered a capital gain, which is not taxable. If the disposal proceeds are less than the tax written-down value of the asset, a balancing allowance is granted to cover the shortfall.
Group taxation
In Saint Lucia, group tax filing is not permitted. However, group tax relief is accessible in specific situations. This relief allows trading losses, excluding the current loss, of one resident company within a group to offset the profits of another resident company within the same group. To claim group relief, approval from the Comptroller of the Inland Revenue Department (IRD) is necessary, and it is exclusively available to resident companies.
Transfer Pricing
Regarding transfer pricing, transactions between related parties are accepted if they are conducted on an arm’s-length basis. The IRD is empowered under the Income Tax Act to make adjustments deemed necessary to ensure such transactions adhere to arm’s-length principles.
Withholding taxes
Resident corporations and individuals in Saint Lucia are obligated to withhold taxes on specific income payments made to both residents and non-residents. The only Double Taxation Agreement (DTA) Saint Lucia has is with other Caribbean territories, recognized as the CARICOM Double Taxation Agreement. This agreement includes states such as Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, St. Vincent and the Grenadines, and Trinidad and Tobago.
Significant developments
Following the Budget announcement by the Prime Minister and Minister of Finance on April 26, 2022, adjustments to personal allowances and income tax rates and brackets will take effect starting January 1, 2023. For resident individuals, the personal allowance deduction has risen from 18,000 to 25,000 East Caribbean dollars (XCD). Additionally, the income tax rates and brackets have been modified, effective January 1, 2023. Saint Lucia has decided to extend its tax amnesty program for taxpayers with outstanding arrears in various taxes, including corporation tax, personal income tax (PIT), value-added tax (VAT), pay-as-you-earn (PAYE), withholding tax (WHT), and property tax. This extension will remain in effect until May 1, 2024, with all penalties and interest waived for periods up to and including the income year 2021. Additionally, a new Health and Citizen Security Levy of 2.5% has been introduced, effective August 2, 2023, applicable to specific goods and services provided to residents. This levy will be calculated ad valorem based on the cost, insurance, and freight value of goods and will be included in invoices generated for goods and services starting from October 2, 2023. Furthermore, as of July 1, 2023, Saint Lucia has raised the excise tax on tobacco products by 50%.