Antigua and Barbuda
by
Stuart Gray, October 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.
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.
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