St
Vincent & The Grenadines
by
Stuart Gray, August 2004
IMPORTANT
WARNING:
The contents of this report have been compiled
in good faith by Investorsoffshore.com to provide
assistance to investors, but do not constitute
investment advice or recommendations. Investors
should not rely upon the information given in
order to choose types or routes of investment
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before making choices. Investorsoffshore.com has
taken reasonable care in researching and presenting
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Whilst the Caribbean state
of St Vincent and the Grenadines is probably best
known as a tourist destination and hideaway for
the well-heeled (Princess Margaret had a holiday
home on Mustique for many years and Mick Jagger,
who still has a home there, is a regular visitor),
the former British colony is also emerging as
a well governed and regulated financial jurisdiction
to rival the more prominent offshore finance centres
in the region.
The
state of St. Vincent and the Grenadines (commonly
shortened to SVG) is located approximately 1,600
miles southeast of Miami and 100 miles west of
Barbados, forming part of the Windward Islands
at the southern end of the Lesser Antilles chain.
In a typically Caribbean setting, the country
itself consists of a group of 18 small islands.
The largest of these islands is St Vincent, a
lush volcanic island just 18 miles north to south
and 11 miles wide. Its capital, Kingstown, has
a natural deep-water harbour and the island is
dominated by the 3,000ft (950m) volcano, Soufriere
which last erupted in 1979.
The
tropical climate of the south-eastern Caribbean
ensures that the temperature in the area varies
little the year round. Rainfall however, is a
different matter. July is the wettest month when
there is measurable rainfall for an average of
26 days, while April, the driest month, averages
six days of rain. January to May tend to be the
driest and most popular months with tourists.
Generally, the Grenadines have a drier climate
than St Vincent.
From
1763 until independence, St. Vincent passed through
various stages of colonial status under the British.
Following a referendum in 1979, the territory
became the last of the Windward Islands to gain
independence and SVG is now a self-governing parliamentary
democracy, with a common law system based on the
British model. The currency is the Eastern Caribbean
Dollar (EC$) which is linked to the US$ at an
exchange rate of 2.7 EC$ to 1 US$, and is managed
by the Eastern Caribbean Central Bank, which has
its headquarters in St. Kitts. However, in addition
to the US dollar, the British pound and the Canadian
dollar are widely used in the islands although
major credit cards are not as widely accepted
in SVG as they are on other Caribbean islands.
Nevertheless, plastic can be used at most hotels,
car rental agencies and dive shops.
In
the past, the country's economy was based on income
from sugar and more latterly bananas, although
tourism has since superseded agriculture as SVG's
biggest earner. Economic growth has been restricted
somewhat by a combination of events such as climatic
problems, September 11 and the need to remodel
the financial services sector to appease the OECD
and FATF (Financial Action Task Force). Accordingly,
an ambitious programme of policy reforms designed
to strengthen the public finances, achieve higher
growth, lower unemployment and reduce poverty
is underway.
The
Offshore Finance Authority (later the International
Financial Services Authority (IFSA) was created
by Parliament to institute a new system to manage
and supervise the financial services industry.
After a certain amount of pruning in the financial
services sector in 2001, SVG was given a clean
bill of health by the FATF in June 2003, putting
its offshore economy on a more stable footing
and enabling steady growth in the industry.
Banking,
trusts, insurance and mutual funds form the cornerstone
of the finance industry although the registration
of International Business Companies has also become
a strong growth area for SVG.
In
the offshore banking sector, the regulator has
concentrated its efforts on ensuring that only
well managed and adequately staffed banks with
a physical presence are licensed in the jurisdiction,
and therefore, no shell banks will be found in
SVG. At present there are only a handful of banks
licensed to conduct international banking business,
all of which are subject to on-site examinations
by the authorities every 12-18 months.
The
IFSA collaborates with the Saint Kitts-based Eastern
Caribbean Central Bank in the licensing and supervision
of offshore banks, and SVG banking firms must
adhere to strict staffing requirements. Under
the International Banks Act, 1996 institutions
must have local employees and a minimum of two
OFA-approved directors, one of whom must be resident
in the jurisdiction. Whilst SVG in the past afforded
a high degree of confidentiality to account holders,
the Exchange of Information Act passed in 2002
in order to bring the jurisdiction in line with
international anti-money laundering standards
has of necessity compromised this to a certain
extent.
As
mentioned above, the SVG offshore sector also
caters to the mutual fund industry, which is governed
by the Mutual Funds Act 1997 (as amended in 1998).
The act provides for the licensing of both domestic
and offshore mutual funds and licenses can be
granted either for private and accredited funds
public funds. There are no capital adequacy requirements
or minimum subscription limits placed on public
funds although they must maintain accounting records
and financial statements as well as publish a
prospectus and file it with the OFA.
The
international insurance sector was also identified
by the government as an additional growth area
for SVG. The sector is currently governed by two
Acts passed in 1998 and 1999 which attempt to
create a high quality legal and regulatory framework
designed to attract market participation and offer
flexibility to insurers wishing to conduct international
insurance business.
In
a bid to secure future growth for the jurisdiction's
finance industry, the government created a new
international promotion agency, known as National
Investments Promotions Inc (NIPI). This new body
commenced operations in August 2004.
St.
Vincent and the Grenadines operates a favourable
taxation regime for international entities, which
are not subject to tax under the country's laws.
Furthermore, under the domestic tax regime there
is no capital gains tax, no inheritance tax, and
no tax on dividends. Corporate tax ranges from
10% to 35%. Income tax is levied on all persons
whose chargeable income is more than EC$12,000
per annum whilst National Insurance (social security)
Contributions are payable from salary up to EC$20,040
per annum at rates of 3% for the employer and
2.5% for the employee. Capital and profits may
be freely repatriated up to a limit of US$100,000
whilst amounts exceeding this sum require approval
before repatriation. Also there are no exchange
controls on current transactions under US$100,000.
All
visitors to SVG must have valid passports and
a return or ongoing ticket. However, nationals
of Canada, UK and the USA need only proof of citizenship
(a valid or expired passport, certified birth
certificate or Certificate of Naturalization and
photo identification) along with an onward/return
ticket and/or proof of sufficient funds.
The
acquisition of land by non-residents is governed
by the Aliens Holding Ordinance, and all foreign
nationals wishing to obtain land in the state
must apply to the government for a license. Applications
fall into two categories: those involving an acre
of land or less; and those involving more than
one acre of land. For an acre of land, the application
must contain an approved plan for development
and an execution of conveyance. However, for more
than one acre of land, the process is a lot more
involved and one is required to submit a development
plan for the entire area.
In
terms of communications within the jurisdiction,
UK telecommunications firm Cable and Wireless
provides most of the telephone services in the
country, with fax, cable and internet services
also in wide use. Cellular phone services are
provided by the Caribbean Cellular Company (formerly
known as Boatphone) although the opening up of
this market by the government has recently seen
new entrants.
Getting
to and from the country itself is not straightforward:
there are no direct long- haul flights to St Vincent's
E.T. Joshua Airport and visitors must first fly
to neighbouring islands such as Barbados or Trinidad
before taking a connecting flight with a regional
carrier such as LIAT, Mustique Airways or Air
Martinique. Nevertheless, the country is well
served by maritime links and Kingstown's harbour
can accommodate 2 ocean-going cruise ships. The
islands are also particularly suited to exploration
by yacht. Indeed many of SVG's beaches, scattered
around the many islands, are inaccessible by any
other means.
So, with its location somewhat off the beaten
track and its miles of unspoilt sandy beaches,
SVG may be an attractive proposition to those
wishing to buy or build a holiday home in the
Caribbean away from the tourist throng of more
popular destinations, or acquire a Robinson Crusoe
existence on one of the untouched islands. And
besides the excellent snorkelling and laid back
lifestyle, the country is also an interesting
and nowadays well-regulated base for the expatriate
or international investor.
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