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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 69,108 (July 2006 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.

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).

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, which to a large extent it has succeeded in doing. 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. An IBC licence to carry on international banking attracts a fee of US$15,000 (EC$40,500).

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.

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

From a personal taxation perspective, the great boon about Antigua and Barbuda is that residents are not subject to any income tax arising from employment. 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:

·        Maintain a permanent place of abode in Antigua and Barbuda;

·        Obtain an alien landholding licence costing 5% (in 2004) of the value of the property;

·        Pay a purchaser's stamp duty of 2.50% (2004);

·        Pay an annual levy of US$20,000 (EC$54,000)(2004);

·        Reside in Antigua and Barbuda for not less than 30 days a year.

There is also a residential property tax, which is based upon the current reconstruction cost of a property, in addition to a surcharge.

Internet Gaming

Another interesting facet of Antigua & Barbuda's offshore economy is its development as an internet gaming hub. However, just as the jurisdiction was becoming one of the world's most reputable offshore gaming centres, it had the rug pulled from under its feet somewhat when the US Congress passed the Leach Act 2001, criminalising offshore gambling by US citizens. This led US credit card providers and payment services to refuse to process betting transactions between US citizens and offshore casinos and gaming sites.

The loss of such a large market prompted the Antiguan government to challenge the US law. Led by Antigua's redoubtable foreign affairs representative Sir Ronald Saunders, Antigua took its complaint to the WTO, which eventually found in favour of the tiny Caribbean nation.

However, the passage in October 2006 of the Unlawful Internet Gambling Enforcement Act dealt yet another blow to Antigua's online gaming market.

Following the passage of the legislation in early October, Antigua and Barbuda's Minister of Finance, Dr Errol Cort, just back from a visit to the US to persuade officials to accept the WTO's anti-US ruling on Internet gambling, expressed shock and dismay.

Dr Cort observed that:

"It is remarkable that on the heels of our visit, during the course of which we highlighted the desire of Antigua to amicably work together with the United States Government in ensuring the safe delivery of these services to consumers in America, the Congress should choose to further protect their remote domestic industry at the cost of countries such as Antigua and Barbuda, where these services are highly regulated."

While expanding domestic opportunities for legal gaming, the US legislation effectively bans all international and inter-state online gaming, by making it illegal for banks and credit card firms to make payments to such internet operations. The provisions were tacked by Senate Majority Leader, Bill Frist (R-Tenn) onto an unrelated bill on port security.

Gaming licences

Internet gaming facilities are deemed to be financial institutions under the law. They are regulated by the financial regulator, IFSRA and are subject to the following rules:

• A 3% tax is payable by operators on their net win;
• Operators are entitled to deduct software licensing or software development costs from the above, capped at no more than 40% of the net win;
• Operators are entitled to deduct charge backs on credit cards for a period up to 18 months after the original charge was made;
• Operators are entitled to a maximum cap of US$50,000 per month on taxes
• Gaming Licence fees are US$75,000 (EC$202,500) per annum;
• Wagering Licence fees are US$50,000 (EC$135,000) per annum.

In view of the uncertainty clouding the internet gaming sector, a close eye must be kept on Antigua & Barbuda's future progress.

However, in summary, the county at present remains a favourable environment for the high-net-worth expat or investor with a light tax burden, a well-regulated offshore sector allowing the establishment of tax-efficient IBCs or trusts, a banking system that conforms to international standards, and relative political and economic stability.