As Benjamin Franklin famously wrote in 1789, “in this world nothing can be said to be certain, except death and taxes.” Try as we might, there is nothing we can do to avoid the former. In the case of the latter however, there are a variety of legal ways to minimize your obligations to the taxman. Becoming resident in a jurisdiction which demands less in taxes is just one such approach.
While better known as popular tourism destinations offering world-class beaches and an unhurried pace of life, several islands and territories in the Caribbean also offer the opportunity to reduce your tax liability. Some locations are considered to be pure tax havens while others have reduced the tax burden to the bare minimum. Here we take a look at some of the most attractive low tax jurisdictions in the Caribbean and how you could enjoy the benefits.
Low tax jurisdictions in the Caribbean
Anguilla
The tiny British Overseas Territory of Anguilla is a “zero-tax jurisdiction.” As the description would suggest, there is no capital gains tax, income tax, inheritance or estate tax and no other forms of direct taxation on the island for residents.
Access to this attractive environment is set to be enhanced with the launch of a new “Residency by Investment” program which is currently in the works. The program will allow foreign nationals to acquire permanent residency status via a financial contribution such as investment in real estate in Anguilla and thereby acquire the ability to enjoy the island’s low tax environment.
Individuals are however not completely free of the requirement to pay taxes. For example, property owners must pay an annual property tax, which is a tax on improvements only. The 2015 Property Tax Act Regulations set out the rates according to the following classifications: Residential 0.300%, Hotel 0.300%, Short term 0.325% and Commercial 0.350%.
In January 2017, the Government of Anguilla implemented a temporary amendment to the Stamp Act and to fees associated with obtaining an Aliens Land Holding Licence (ALHL) with the aim of stimulating Anguilla’s real estate market and encouraging investment in property. Transfer tax for Belongers was reduced to 2.5%, while the tax on the ALHL required by Non-Belongers to obtain the right to own property on Anguilla has been reduced to 5% for Improvements (such as villas and houses) and 6.25% on land purchases, with a requirement for construction to be completed within 30 months of acquiring the land. The program will run until 31st December 2019. At the end of the period, rates are set to revert to previous rates of 5% for Belongers and 12.5% for Non-Belongers on freehold purchases.
Antigua & Barbuda
With 365 beaches – one for every day of the year – Antigua & Barbuda is a popular tourism and sailing destination, but there are far more appealing aspects to the twin island nation for investors than its beautiful coastline.
There is no capital gains tax or inheritance / estate tax in Antigua & Barbuda. In addition, in 2016 the Government abolished personal income tax to enhance the country’s appeal to investors, businesses, professionals and retirees considering relocating.
Property owners must pay an annual property tax which is based on the assessed market value of the property and its use (either residential or commercial). Property tax on residential land is set at 0.20% while tax on residential buildings is 0.30%.
Transfers of real property are subject to stamp tax which is paid by bother the buyer and the seller. The stamp tax for sellers is 7.5%, while for buyers it is 2.5%. Non-citizen buyers are also required to pay 5% of the value of the property to obtain an Alien Land Holding License.
Since 2013, Antigua & Barbuda has operated a Citizenship by Investment Program offering qualified applicants the opportunity to acquire full citizenship via either a minimum financial contribution of US $100,000 (plus fees and charges) or an investment in an approved real estate project with a minimum value of US $400,000 (plus fees and charges).
The Bahamas
Renowned for its crystal clear oceans and powder soft white sand beaches, the island of The Bahamas offer some of the most alluring landscapes in the region. Equally alluring is the tax regime. There is no capital gains tax, no income tax, no inheritance / estate tax in the archipelago.
There are however various other forms of taxation, such as 12% VAT which is levied on goods and services and National Insurance which is paid by all employees and employers. Other taxes in The Bahamas include import duties, stamp duty and real property tax.
Stamp duty is levied on transfers of real or personal property at variable rates. All property transactions valued at $100,000 or more incur 10% stamp duty.
An annual real property tax on owner occupied residential property is paid by property owners at variable rates according to the market value of the property, as follows: The first $250,000 of market value – exempt; From $250,000 to $500,000 of market value – 0.625%; From $500,000 to $5,000,000 of market value – 1% with a cap of $50,000.
It is possible for financially independent non-Bahamian nationals to apply for residency through an investment in real estate in The Bahamas which can offer significant tax advantages. While the outcome of any application cannot be guaranteed, an investment of at least $500,000 in a residence is more than likely to lead to the granting of permanent residency status. The cost of permanent residence is $10,000. All non-Bahamian residence owners can acquire a homeowner’s card which entitles the bearer, spouse and dependent children to enter and remain in The Bahamas for the duration of the validity of the card.
BVI
As a self-described “centre of excellence for global business and finance”, the British Virgin Islands offers a range of tax benefits to lure both individuals and businesses, including freedom from capital gains tax, gift tax, inheritance / estate tax, net wealth / worth tax and sales tax / VAT.
Technically, residents of this beautiful British Overseas Territory are required to pay income tax but the rate has been set at zero.
However, there are several other forms of taxation in the BVI, including a payroll tax on all incomes paid by both employers and employees, social security contributions and customs duties. Stamp duty is levied on all real estate transactions at a rate of 12% (or 4% in the case of Belongers). In addition, property owners are required to pay a nominal property tax which combines land and house taxes and rarely exceeds US $1,000. Property tax amounts to US $50 for up to half an acre, US $150 for half to 1 acre and US $50 for each additional acre or part of an acre. Fees for land owned by BVIslands or BVI Companies are lower.
Cayman Islands
The Cayman Islands has established itself as one of the most successful offshore financial centres in the Caribbean and a vibrant luxury real estate market. While endless white sand beaches, turquoise seas and an idyllic lifestyle certainly add to the allure, the attractive tax environment contributes significantly to the islands’ appeal.
Described as a “tax-neutral jurisdiction”, the Cayman Islands enjoys freedom from direct taxation for all full and part time residents and investors. Like other jurisdictions mentioned in this article, there is no capital gains tax, inheritance / estate tax, sales tax or personal income tax in the Cayman Islands and businesses based in this British Overseas Territory are exempt from corporation tax. Unlike many other jurisdictions in the region, there is also no annual property tax.
With no direct taxation, government derives most of its revenue from indirect sources. These include annual business licenses levied on all companies and stamp duty on real property transfers. Stamp duty amounts to 7.5% of the purchase price or market value of the property and is payable by the buyer as a one-time fee unless otherwise stipulated in the contract.
If this sounds appealing, there are various options in place to enable qualified applicants to become resident. For example, individuals with an annual income of at least CI $120,000 who invest in the Cayman Islands can apply for a Certificate of Residence for Persons of Independent Means. On Grand Cayman the minimum investment level is CI $1 million of which at least CI $500,000 must be in developed real estate. The minimum investment levels are lower in Little Cayman and Cayman Brac. Certificates are valid for a period of 25 years and can be renewed. A minimum investment of CI $2 million in developed real estate offers eligibility to apply for a Certificate of Permanent Residence which, as the name suggests, offers the right to reside in the Cayman Islands indefinitely and can be a gateway to full naturalization.
St Kitts & Nevis
St Kitts & Nevis is well known for its dramatic mountainous landscape, beautiful beaches and colonial plantations, many of which have been converted into atmospheric hotels. The dual-island Federation is perhaps less well known for the tax benefits it offers. Like several of the other Caribbean nations referred to above, there is no capital gains tax, inheritance / estate tax or personal income tax on the islands.
There are however various other taxes that must be paid. Property owners, for example, must pay an annual property tax. On St Kitts, property tax is typically levied at the rate of 0.2% of the market value of residential properties. On Nevis, property tax is calculated slightly differently. The rates for property tax on residential properties are based on the assessed market value of the building and the land, levied at 0.156% and 0.075% respectively.
Stamp duty is levied on real property transfers and is paid in its entirety by the seller. Rates range from 2% to 10% depending on the type of transfer.
Wondering how you could benefit from St Kitts & Nevis’s tax environment? One option would be to apply to become a citizen of the Federation. The country operates a citizenship by investment program which offers qualified applicants the opportunity to apply for full citizenship in exchange for a minimum financial contribution of US $150,000 (plus fees and charges) or an investment in an approved real estate project starting at US $200,000 (plus fees and charges).
Turks & Caicos
As a tax neutral jurisdiction, there is no income tax or capital gains tax in the Turks & Caicos Islands. There is also no annual property tax for home owners.
The only forms of direct taxation imposed on individuals are customs excise duty on the importation of goods and stamp duty on real estate transactions.
A one-time stamp duty is paid by property buyers. The amount varies according to the price and location of the property. On the islands of Providenciales, Parrot Cay, Dellis Cay, Ambergris Cay, Water Cay, East Caicos and West Caicos, stamp duty is set at 6.5% for properties between $25,000 and $100,000, 8% for properties between $250,000 and $500,000 and 10% for properties over $500,000. On Grand Turk, North Caicos, South Caicos and Middle Caicos, stamp duty is 5% for properties between $25,000 and $100,000 and 6.5% for properties over $100,000.
Disclaimer
This article should not be regarded as offering a complete explanation of the taxation matters in any the territories and countries referred to. No person, entity or corporation should rely on this article in whole or in part and readers are advised to obtain comprehensive advice in relation to their personal circumstances from a qualified professional person or firm of advisors prior to taking any action.
This article was originally published in Issue 8 of The Caribbean Property Investor magazine. To read the full issue, click here.