Entrepreneurs often face problems when entering international markets. The geopolitical situation and economic sanctions can have a negative impact on the work of businessmen from countries whose governments are not popular in Europe.
Foreign entrepreneurs are reluctant to make business contacts. It is difficult to open an account in European banks. There are problems with paying for goods and services that a local business based in an “unpopular” country supplies internationally.
The foreign currency control system in such countries can also hinder business. For each foreign currency transaction, a local entrepreneur is often obliged to provide their bank with documentary justification. It takes time to check contracts and sometimes the bank requires documents to be reissued. As a result, the transfer of funds can be delayed, sometimes by a week. If this is a payment for the supply of goods essential for the business, the business cannot function until the transfer is made.
One solution is to transfer the jurisdiction of incorporation of the company to a country with a good reputation in international markets. Businesses can be registered quickly in the Caribbean, and the fiscal burden is minimal.
It is useful to assess the business reputation of jurisdiction using the black and grey lists of offshore companies issued by the European Council. Blacklisted companies do not exchange tax information with the EU. Companies on the grey list cooperate with the EU and gradually change their tax legislation according to the recommendations of the European Union. As of February 2021, only one Caribbean country with a citizenship program was on the blacklist: Dominica.
The Caribbean countries have formed the Caribbean Community, CARICOM. They have a single central bank, the Eastern Caribbean Central Bank, similar legislation in the field of taxation, and the same forms of business registration. On March 31, 2021, the Eastern Caribbean Bank launched DCash, a digital equivalent of the Eastern Caribbean dollar. Testing is underway in Antigua and Barbuda, Grenada, St Kitts and Nevis, and St Lucia.
Form of a company for doing business in the Caribbean
IBC. In the Caribbean countries, an International Business Company (IBC) is the most common type of company. This form of company is suitable for those who work closely with businesses in other countries.
The recommended minimum authorized capital for an IBC is $50,000 and brand registration costs another $1,000.
An IBC may have one or more shareholders. It can issue registered and bearer shares, with or without par value. Shareholder meetings can be held anywhere in the world.
Legal requirements for IBC staff:
- The company must have at least one director, one shareholder, one manager and a secretary.
- The directors are chosen by the shareholders.
- The director, shareholder and manager may be the same individual.
- Everyone except the secretary can be a foreigner.
It is sufficient for the company to have a legal address, which will be indicated in the registration documents. The company does not need a full-fledged office. For example, the legal address may be the address of the company's legal advisor or the address of the company secretary.
The name of the company must contain a well-known abbreviation such as Ltd. or Inc. The company must also have a registered agent. This role can be performed by a specialized law firm.
Other forms of companies that can be registered in the Caribbean:
- Holding companies.
- Import and export companies.
- Shipping companies.
- Finance companies.
Our client receives income from two sources. His main income is derived from dividends from company shares and additional income from payments for consulting on business development.
Our client moved his company to Dominica and became a tax resident there. As a result, our client was no longer obliged to pay tax on dividends in his country of origin.
The investor’s company in Dominica is registered in the form of an IBC.
How to register a company in the Caribbean?
To register a company in one of the Caribbean countries, you do not need to travel there. It can be registered through the state portal. The founder fills out the registration form, uploads the required scanned documents, pays the registration tax, and waits for the certificate of registration.
Documents that need to be uploaded on the state portal for registering a company:
- company charter (Articles of Association/Incorporation);
- the memorandum of association of the company (Memorandum);
- copies of passports of all shareholders;
- confirmation of the registered address of shareholders;
- confirmation of the presence of authorized capital.
The average cost of registering a company in the Caribbean is $1,200. Foreign companies are usually registered with an authorized capital of $50,000 and shares with a par value of $1, even though the law does not specify the minimum authorized capital.
The applicant receives a certificate of registration and the charter of the company, also in electronic form, within 10 working days. Information about the beneficial owner of the company is not entered in the public register.
Basic package of company documents:
- certificate of registration;
- memorandum of association;
- the company charter;
- share certificate;
- appointment of a director;
- consent of the director;
- the first resolution of the director.
The company documents must be translated into English and certified with an apostille.
After registration, the company opens an account at a local bank, which takes one to two weeks. The bank account can be opened remotely.
Company documents required to open a corporate bank account:
- director's resolution to open a bank account and appoint an account manager;
- memorandum of association of the company;
- the company charter;
- an agreement with a bank and an application for opening an account;
- certificate of company registration;
- a description of the scope of the company's activities on the corporate letterhead, certified by the director of the company.
Documents provided to the bank by shareholders, director, and account manager:
- registered address;
- certificate confirming that they have an account in another bank.
All documents can be provided as scans of notarized copies.
Taxes paid by Caribbean companies
There is no value-added tax or tax on capital gains in the Caribbean. The lowest base tax rate on net income, 25%, is in Antigua and Barbuda, and the highest one, 33%, is in St Kitts and Nevis.
International companies can reduce their income tax to 1% or pay a flat annual license fee. The amount of the fee depends on the size of the authorized capital. If a company pays a license fee, it may not file financial statements.
For reference, international companies with an authorized capital of $50,000, which are tax residents of a Caribbean country, pay about $5,000 in taxes per annum.
Basic tax rates for legal entities
|Type of tax||Tax rate for a company registered in the Caribbean (tax resident)||Tax rate for a foreign company that receives income in the Caribbean (non-resident)|
|Value added tax||None||None|
|Capital gains tax||None||None|
|Net income tax||25—33% on worldwide income||25—33% on net income earned/received in the Caribbean|
|Tax on dividends, interest, royalties||None||15—25% on dividends sourced/received in the Caribbean|
|Tax on interest, royalties||0—15%||15—25% on interest and royalties sourced/received in the Caribbean|
|Annual government tax||$300||None|
|Social contributions||4—7% of salary||4—7% of salary earned in the Caribbean|
What are the benefits of Caribbean citizenship for a business
The owners of a company with a Caribbean passport can visit more than 140 countries visa-free and establish business relationships around the world. As Caribbean citizens, they can spend more than 183 days a year in the Caribbean. They can become a tax resident in the country and reduce their tax payments as an individual.
Our client wanted to transfer his business to the Caribbean, open bank accounts in the Caribbean and in the United States, and develop a partnership with Singapore. His primary goal was to expand his business and enter the international market.
Our client received a St Lucian passport under the citizenship by investment program in 3.5 months.
A month later, he registered a company in St Lucia. Our client opened personal and business bank accounts in St Lucia, the United States, and Singapore. The investor and his company are not taxed on dividends. The corporate income tax rate is 1%.
How to become a citizen in a Caribbean country
Five Caribbean countries have government-sponsored programs for investors: St Lucia, Antigua and Barbuda, Grenada, Dominica, St Kitts and Nevis. Citizenship by investment can be obtained in 3 to 6 months.
It is easy for an investor to obtain second citizenship in a Caribbean country at a reasonable cost.
Investment options in the Caribbean citizenship program:
- (a) a non-refundable contribution to the national fund: the amount ranges from $100,000 to $200,000. This is a one-time payment;
- (b) government-approved real estate projects for participation in the citizenship program, usually hotels and resort complexes. Investors can buy a share in a project, apartment, or villa. The minimum investment is $200,000, which can be recovered by the investor after five years when they sell the property. However, their second citizenship is for life.
In return for the investment, the investor receives second citizenship. As a citizen of a Caribbean country, the investor can visit the UK, the Schengen area and more than 140 countries without a visa. They can also easily apply for a 10-year US visa.
The main applicant can include their relatives in their citizenship application: spouse, financially dependent children under 30, parents over 55, grandparents and even siblings. The investor is not obliged to live in the Caribbean.
Business in the Caribbean
Registering a company in a Caribbean country can solve a number of problems at once. It also helps the investor integrate into the global business community: companies registered in the Caribbean are accepted and trusted internationally. It is easier for them to open corporate accounts in foreign banks.
The owner of a company registered in the Caribbean, who obtains second citizenship in a Caribbean country, can travel around the world visa-free. They can fly to the Schengen zone, the UK, Hong Kong, and Singapore without a visa at any time. They can also easily get a 10-year U.S. visa. In contrast, citizens of most countries do not enjoy these benefits.
An entrepreneur who becomes a tax resident in a Caribbean country can significantly reduce their personal income tax obligations.
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