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Saint Lucia Budget Lowers Taxes

by Phillip Morton, Investors

24 May 2013

The Government of Saint Lucia has announced a number of tax concessions in its 2013 Budget, to support the construction industry and boost the territory's attractiveness for doing business.

In the previous Budget, the government announced a number of reform measures to the property tax regime, including the introduction of a XCD100,000 (USD37,000) tax-exempt threshold. The Government has now announced that it will double this concession to XCD200,000, as the previous XCD100,000 threshold prompted a significant increase in non-compliance. The concession will exempt a further 3,196 taxpayers from the payment of property taxes, effective January 1, 2014, alongside improvements to tax administration to ensure compliance with the regime.

The Budget also aims to ease the tax burden on corporate amalgamations. Presently, mergers face a significant tax burden, including stamp duties on the transfer of property (vendor tax and registration), which can be as high as 12 percent when foreign investors are involved, or 7 percent in the case of domestic owners, as well as stamp duties on mortgages, leases and other financial documents.

It is proposed that concessions in Section 42 of the Income Tax Act, which provide relief to taxpayers in respect of the application of tax losses within a group of companies, will be expanded to allow an exemption from stamp duties for companies taking part in a group restructuring or reorganization approved by the Comptroller.

Historically, the application of Section 42 has been limited to local companies only, and only those companies experiencing financial difficulties. The Government has proposed to extend Section 42 to apply to both local and foreign-owned companies doing business in Saint Lucia, and not only to companies in financial distress.

Under the proposals, the relief and exemptions will include:

  • An exemption from the payment of Stamp Duty on the transfer of any property involved in the arrangements;
  • An exemption from the payment of Stamp Duty on the transfer or registration of mortgages, debentures, leases and other financial instruments necessary for the arrangements;
  • Full transfer and application of any available losses of companies that are party to the arrangements, by the surviving or other group companies involved in the arrangements, for the remaining period for which the losses are available; and,
  • The extension of the relief and exemptions to entities purchasing the assets of companies that are in receivership or liquidation, to allow for the faster and less costly transfer of assets and operations of companies in receivership.

Other proposals announced in the Budget include the regulation of small scale farming, and a tax exemption on farming income of up to XCD5,000 per annum.

New tax concessions will also be introduced to promote renewable energy, both in terms of energy generation and use. These concessions will include:

  • Income Tax deductions for installed renewable energy systems and energy efficiency measures;
  • Import duty exemptions for all imported components of renewable energy and energy efficiency components following approval of the specifications from Government;
  • A Property Tax deduction on new properties that are built using approved energy efficiency techniques and utilize energy efficient lighting and/or cooling equipment; and,
  • A Duty and Excise Tax exemption on the importation of all vehicles and vehicle conversion equipment that allow operation on sustainable fuels.

TAGS: environment | compliance | tax | investment | business | Saint Lucia | property tax | tax incentives | fiscal policy | energy | financial services | international financial centres (IFC) | corporation tax | environmental tax | offshore | tax rates | construction | regulation | services

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