ST VINCENT and the GRENADINES
Table of Contents
ECONOMIC OVERVIEW
Saint Vincent and the Grenadines, situated in the Caribbean Sea, is an island nation part of the Commonwealth and CARICOM. It lies north of Venezuela and Granada in the Lesser Antilles chain, covering 389 sq. km. Its population numbers around 103,000. Kingstown, located on St Vincent Island, serves as both the capital and the most populous city. English is the official language, and the Eastern Caribbean Dollar (XCD) is the official currency, pegged to the US Dollar (USD) at a ratio of 2.7:1 As a parliamentary democracy under the British Commonwealth, the country is led by a Prime Minister and Cabinet, with the British monarch as head of state represented by a Governor-General. Saint Vincent and the Grenadines actively participates in various regional organizations like CARICOM, OECS, ALBA, CELAC, and OAS. Its economy relies on agriculture exports (bananas, root crops, etc.), construction, tourism (especially yachting in the Grenadines), offshore financial services, and postage stamp issuance. The primary direct taxes imposed in St. Vincent and the Grenadines include corporation tax, income tax, and property tax. Each tax serves a distinct purpose in the country’s fiscal policy, contributing to its overall economic stability and development efforts.
Corporate Income Tax
In Saint Vincent and the Grenadines, corporate entities, whether local or foreign, are subject to a corporate income tax rate of 30% on their profits derived from commercial, industrial, or professional activities within the country. This tax is applied uniformly across all businesses operating within its jurisdiction. The tax year for corporations also runs from January 1st to December 31st, with a deadline for filing tax returns on April 30th of the following year. Companies are allowed deductions for business expenses and capital allowances.
Types of Business Taxes in Saint Vincent and the Grenadines
VAT
In 2007, Saint Vincent and the Grenadines implemented the Value Added Tax (VAT) system with a standard rate of 16% (effective May 1 2017). VAT was reduced 0%, and 11% for the hotel sector. However, certain goods and services may be subject to reduced rates or exemptions under this framework, adding nuance to the tax landscape. The administration of this tax is overseen by the Commissioner of Inland Revenue, with support from the Inland Revenue Department. The collection of VAT on imports is handled by the Customs and Excise Department, acting on behalf of the Commissioner.
Customs and Excise Duties
Customs duties are levied on imported goods entering St. Vincent and the Grenadines. The rates vary depending on the type of goods and are based on customs valuation. Sales tax is also levied on the sale of goods and services within the country at a rate of 15%. Certain goods and services are exempt from sales tax, such as basic food items and medical supplies.
Payroll Tax
Employers are mandated to pay payroll tax, referred to as National Insurance Contributions, on behalf of their employees. These contributions serve to finance social security benefits, including healthcare, pensions, and other welfare programs. The rates for payroll tax are determined by the employee’s salary and specific circumstances, thereby ensuring a fair and equitable distribution of the tax burden.
Property Tax
Property owners in Saint Vincent and the Grenadines are liable for an annual property tax. The assessment of this tax takes into account various factors such as the type, location, and value of the property. By levying property tax, the government generates revenue to support public services and infrastructure development while also encouraging responsible property ownership and maintenance. Companies are taxed annually at 5% of the market value of the property. Individuals are taxed at 0.008% of the value of their residential property.
Tax Period
The taxable activity period spans a duration of 12 months, with each period, as defined in the VAT Act, constituting one month. Taxable individuals must fulfill their obligations by filling out a VAT Tax Remittance Form and Return.
Penalties
Failure to comply with regulations can incur various penalties:
A fee of XCD250 per month for late filing.
A penalty of 10% of the owed tax if payment is not made by the deadline.
Interest of 1.25% monthly on the unpaid amount.
Additional penalties might also be imposed.
Personal Income Tax
Personal income tax in St. Vincent and the Grenadines is levied on individuals based on their income earned within the country. The tax rates are progressive, ranging from 10% to 30%, depending on the level of income. The tax year runs from January 1st to December 31st, and the deadline for filing tax returns is April 30th of the following year. Individuals are allowed certain exemptions, such as a basic personal allowance and deductions for contributions to approved pension schemes.
Residents are subject to taxation on their global income but are only taxed on income received within St. Vincent & the Grenadines if they are not considered ordinarily resident there. This taxable income encompasses earnings generated within the country and income from activities conducted there. It includes income from employment and business activities after deducting allowable deductions and allowances. Tax rates are as follows:
Taxable Income | Rate |
|---|---|
XCD 5,000 | 10% |
XCD 5,001-10,000 | 20% |
Over XCD 10,000 | 30% |
Social Security
According to the NIS Act, every employed individual in St. Vincent and the Grenadines must contribute to the National Insurance Services. Presently, the overall contribution rate stands at 8% of insurable earnings. At this rate, employees are obligated to pay 3.5%, while employers match this with 4.5%. For self-employed individuals, the contribution rate is 7.5%, and for voluntary contributors, it is 6.84%.
Withholding Tax
Withholding tax is levied on certain types of payments made to non-residents, such as dividends, interest, royalties, and technical service fees. The withholding tax rates vary depending on the type of payment, ranging from 10% to 15%. The tax is withheld by the payer and remitted to the tax authorities.
Interest
Interest withholding tax is imposed on interest payments to nonresident entities and individuals. The rate is 15% for interest paid to residents of CARICOM countries and 20% for others. However, no withholding tax is levied on interest payments to resident companies or individuals.
Royalties
Royalties paid to nonresident entities or individuals are subject to withholding tax. The tax rate is 15% for royalties paid to residents of CARICOM countries, and 20% for those paid to residents of other countries. However, no withholding tax is levied on royalties paid to resident companies or individuals.
Capital Gains
Capital Gains are not subject to tax in St Vincent and the Grenadines
Bilateral Investment Agreements and Taxation Treaties
St. Vincent and the Grenadines has not established a bilateral investment treaty with the United States, but it has entered into bilateral tax treaties with several countries, including the United States, Canada, the United Kingdom, Denmark, Norway, Sweden, and Switzerland. In addition, there is an investment treaty with Germany signed in 1989 to foster favorable investment conditions between the two nations.
Caribbean Community
The country is also actively involved in regional economic communities and organizations. It is a member of CARICOM, established by the Treaty of Chaguaramas in 1973, aiming to enhance economic integration among its 15 Member States. St. Vincent and the Grenadines benefit from preferential access to the entire CARICOM market, and the Revised Treaty of Chaguaramas further facilitates the free movement of goods, capital, and labor within CARICOM through the CARICOM Single Market and Economy (CSME).
Organization of Eastern Caribbean States
Moreover, St. Vincent and the Grenadines is part of the Organization of Eastern Caribbean States (OECS), formed by the Revised Treaty of Basseterre. This treaty promotes harmonization among its members in areas like foreign policy, defense, security, and economic affairs. The OECS Economic Union, established in 2011, aims to create a single financial and economic space facilitating the unhindered movement of goods, services, and people.
Economic Partnership Agreement
The country is also engaged in the Economic Partnership Agreement (EPA) between CARIFORUM and the European Community, signed in 2008. The EPA aims to alleviate poverty, promote regional integration, enhance trade capacity, and create an investment-friendly environment within CARIFORUM states.
Caribbean Basin Initiative
Lastly, St. Vincent and the Grenadines participates in the Caribbean Basin Initiative (CBI), which seeks to stimulate economic development in Central America and the Caribbean islands. The initiative allows duty-free entry of products manufactured or assembled in St. Vincent and the Grenadines into U.S. markets, aiming to diversify economies and boost exports in the region.
Other Developments
In response to the notice issued by the Department on December 23, 2022, it is to be noted that effective January 1, 2023, there was a reduction in the maximum tax rate for both Corporate Income Tax (CIT) and Personal Income Tax (PIT) from 30% to 28%. Additionally, the Standard Deduction rate saw an increase from $20,000 to $22,000. Consequently, the tax tables underwent revision to accurately reflect these amendments. The updated tax tables were issued on December 30, 2022, superseding the previous version circulated on December 23, 2022.