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 but should make their own independent
enquiries before making choices. Investorsoffshore.com
has taken reasonable care in researching and presenting
the information herein but makes no representations
as to its accuracy and accepts no liability for actions
taken or not taken as a result.
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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