In common with many of its Caribbean neighbours, Antigua & Barbuda, the subject of this Investors Offshore jurisdiction focus, is probably a location more synonymous with the upmarket end of the tourist trade than as a place in which to invest. Whilst tourism is indeed an important part of the nation's economy, a notable offshore financial industry has in fact been developed by government over the last two decades, helped along by some generous business and personal tax incentives, the major aspects of which we will attempt to cover here.

As the name suggests, Antigua & Barbuda is two separate islands forming one country, located in the Eastern Caribbean. The larger of the islands, Antigua, covers approximately 108 square miles, whilst its smaller sister, Barbuda, (located about 30 miles north) is a mere 68 square miles in area. Both enjoy clement weather conditions, with average temperatures of around 75F (24C) in the winter and 85F in the summer. Visitors arriving outside of the traditional tourist season (January to June) however, should be wary of the hurricane season, which usually lasts from June to September.

The total resident population numbers around 86,700 (July 2010 est) and as a former British colony English is the predominant language. Although the country has been independent since 1981, Queen Elizabeth II remains the official head of state and strong British influences have survived; the legal system is based on English common law, and evidence of Britain's legacy can be seen in the islands' cultural and sporting life. As a popular destination for British tourists, the country is well served by direct air links to the UK: British Airways operates a five-day-per-week service whilst other major carriers from the UK, Europe and the US also fly direct into Antigua's V C Bird International Airport, which is located in the north east of the island.

The currency unit of Antigua & Barbuda is the Eastern Caribbean dollar (shared by several neighbouring islands) which is pegged to the US dollar at a fixed rate of 2.70 to 1; but US dollars are widely accepted within the islands, and other major currencies are readily exchanged.

Antigua was quite badly hit by the global downturn in 2009, with GDP dropping 7%, and government finances are under strain. The IMF is assisting with stand-by financing, and the jurisdiction is implementing wide-ranging fiscal reforms intended to return the government's budget to balance by 2012. The plan includes widening the scope of sales tax and a new 10% 'Recovery Charge' on all non-oil imports and domestic production.

Antigua belongs to the Organisation of Eastern Caribbean States, along with Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. The grouping has signed a treaty establishing an economic union in the Carribean and providing for the removal of trade barriers between member states.

International Business Companies

As previously mentioned, besides the important economic pillar of tourism, Antigua & Barbuda has sought to attract investment through the development of an offshore financial services industry, which it set about doing with the passing of the International Business Corporations Act in 1982 soon after gaining independence from the UK. The offshore industry is regulated by the International Financial Sector Regulatory Authority (IFSRA). Here are some of the major benefits provided to IBCs under the 1982 Act, (as amended):

• Full exemption from all direct taxes in respect of trading, investment or commercial activity;
• Exemption from withholding taxes and stamp duty;
• No minimum capital requirement;
• Permission to transfer the charter of an IBC to a foreign jurisdiction, or vice versa;
• Fast track applications procedure, (it is claimed that approval can be given within 24 hours).

The annual government fee for registration of an Antiguan IBC, which can be carried out by a locally registered trust company, an accountant or attorney, is US$300 (EC$810).

Additionally, an IBC with an international insurance licence is permitted to engage in any insurance business other than domestic insurance. Demonstrated capital of at least US$250,000 must be maintained at all times. The fee for an insurance IBC licence is US$10,000.

There are also significant tax advantages to be gained through the formation of a locally administered trust company. Antiguan trusts are not subject to any taxes on inheritance, profits, income, dividends, or on any capital assets or gains.

The government has also sought via legislation to facilitate the development of an offshore banking industry. Within 15 years of the IBC Act, some 70 offshore banking institutions had established in the jurisdiction. However, some sacrifices have had to be made in the wake of international pressure, forcing an emphasis on quality rather than quantity as new money laundering regulations were introduced between 1999 and 2001, and by 2008 the number of licensed international banks was steady at around 20. An IBC licence to carry on international banking attracts a fee of US$15,000 (EC$40,500).

Banks are supervized by the Eastern Caribbean Central Bank. The reputation of Antigua's banking sector was hit though in 2008 when the financial empire of Allen Stanford collapsed. He is to stand trial in the US over a USD8bn Ponzi scheme, while the head of the islands' financial regulator, Leroy King is being extradited to the US accused of accepting bribes from Stanford.

Following the arrests of Stanford and King in 2009, Verlyn Faustin, head of the International Financial Services Providers Association of Antigua and Barbuda, defended the jurisdiction as a reputable well-regulated jurisdiction:

“In light of the recent US indictments of Stanford International Bank’s Allen Stanford and Leroy King, former head of the Antigua and Barbuda Financial Services Regulatory Commission (FSRC), we must emphasize that the international financial services regulated in our country are operated with integrity and in accordance with the highest standards of fiduciary practice. The jurisdiction is comprised of many hard-working professionals who do not tolerate fraud, fiscal wrong doing and other financial crimes, and who continue to honor best practices with respect to international banking standards and prudent self-regulatory controls,” he stated.

In its own statement in July, Antigua and Barbuda's Financial Services Regulatory Commission (FSRC) announced that:

“The Commission takes this opportunity as the regulator of international banks and other international financial institutions in Antigua and Barbuda to reaffirm its unequivocal commitment to the protection of depositors and the public as well as the preservation of Antigua and Barbuda’s reputation as an offshore banking jurisdiction. We will continue to pursue excellence and to address issues in an ongoing effort to better serve the public.”

Tax Incentives

Besides this framework of offshore business structures, Antigua & Barbuda also provides a series of separate tax incentives for qualifying investors, as laid down in the Fiscal Incentives Act. Depending on the type of business involved, these give investors potentially long tax holidays. Typical investor concessions may include:

• Exemption from corporate tax on for an initial period of 15 years which may be eligible for renewal for a further 15 years;
• Waiver of all import duties or consumption tax on the importation of materials and equipment used in the operations of the company;
• Grant of an export allowance in the form of an extended tax holiday on the exportation of goods produced in Antigua & Barbuda;
• The right to repatriate all capital royalties, dividends and profits free of all taxes or any other charges on foreign exchange transactions.

Tax environment

Antigua reintroduced Personal Income Tax from 2005. There is an annual personal allowance of ECD36,000, and the first ECD60,000 of pension income is exempt. There is a graduated scale of tax rates from 10% to 25%. To become a resident of the jurisdiction for tax purposes, individuals must either have their permanent place of abode in the islands, or reside there for a minimum of 183 days in a year. Here are some other key tax rules applying to domestic businesses (but not, of course, to IBCs>:

• Incorporated companies pay tax at 40% of profits;
• Unincorporated companies pay a 2% tax on gross income (the first EC$4,166 of which is exempt);
• Directors' fees and proprietors' salaries are deductible;
• Capital gains are not subject to taxation.

Residence

To encourage a limited number of high net worth individuals to establish tax residency tax in Antigua and Barbuda, in June 1995, the government introduced a permanent residence scheme. To obtain a permanent residence certificate under this scheme, the applicant must: