21 August 2020
All Nevis companies that are deemed to be resident in Nevis are generally subject to 33% corporate income tax on their worldwide profit as well as 15% withholding tax on any payments to non-residents (e.g. dividends, interest, royalties, fees for technical services). In brief, a company is deemed to be resident if it is incorporated in St. Kitts & Nevis and/or managed by local directors.
Companies which do not carry on business in Nevis, and which were established on or before 31 December 2018, are exempt from this taxation until 30 June 2021.
There are alternatives for companies which wish to continue their existence outside Nevis; with one being the redomiciliation of the Nevis company to another jurisdiction.
The redomiciliation involves the moving of the corporate seat of a company from one jurisdiction to another, and this to be combined with the shifting of its tax residency to that other jurisdiction. This enables the company to continue its legal existence and operations in another jurisdiction without any interruptions.
The next question would be whether to move to another ‘offshore’ or to an ‘onshore’ jurisdiction.
BVI is a fully compliant prime offshore jurisdiction which allows the redomiciling-in of foreign companies. Its legislation is highly attractive as it is based on the British legal system and English Common Law. In the BVI, there is no corporate income tax nor any withholding tax on outgoing payments.
Certain activities may constitute a BVI company to fall within the new Economic Substance requirements (similar ones implemented in almost all other offshore jurisdictions), thereby creating the obligation to establish relevant and adequate economic substance in the BVI.
With all the related international developments and trends, it may be the time to instead consider moving to an onshore jurisdiction.
Cyprus would be one of the ideal choices. Being a fully compliant EU member state and an established international business centre, Cyprus offers most attractive legal and tax regimes. Further, it is a practical and comparatively cost efficient place to properly set up and manage the international business.
In brief, Cyprus has a good and wide double tax treaty network, access to all relevant EU Directives, no withholding tax on outbound payments and a flat corporate income tax rate of 12.5%. The effective tax rate though, will, in most cases, be much lower as there is an array of full or partial tax exemptions and other favourable tax provisions – thus making it one of the lowest and most attractive tax regimes within the EU. Noting that pure holding company activities are completely tax exempt.
Even though there is no legal requirement for the establishment of local substance, Cyprus can easily accommodate any desired level of substance in an effective manner and with a comparative cost advantage from other prime EU jurisdictions.