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Expat Briefing Editorial Team, 29 March, 2016
With many small nations hit hard by the financial crisis, and struggling to come to terms with unfavorable currents in the global economy, some are considering all sorts of inventive ways to attract inward investment. An increasing number of countries are thinking once again about citizenship-by-investment programs, which offer permanent residency and sometimes favorable tax terms to investors in return for fairly substantial investments. As reported recently in the news section of Expat Briefing, the Caribbean territory of St. Lucia is the latest entrant to this somewhat exclusive club.
A "Difficult Decision"
Given that 2nd citizenship and residence-for-investment programs are often conflated by many people – perhaps unjustifiably – with tax havens, tax avoidance and generally shady monetary activities, Prime Minister, Dr. Kenny D. Anthony, said that launching St Lucia's scheme was "a difficult decision" for his Government to have to make, with reputation so important these days for "offshore" jurisdictions. However, a fact that is often overlooked by critics of such schemes, and of offshore territories in general, is that these small island-nations have very little to fall back on economically when tourist numbers fall, and the financial services sector goes into turmoil. And as Anthony himself hinted, St. Lucia hasn't had it easy over the last few years.
"While we have spent the last four years stabilizing and restoring our economic foundation, the Citizenship by Investment Program will provide impetus to our recovering economy to take off in the coming months," he said.
"A number of resorts will [soon] be constructed in Saint Lucia. These resorts will create much needed jobs in the construction sector, add more jobs in the hospitality sector, revive our real estate sector and restore a high level of growth to our economy," the Prime minister explained.
Anthony has previously described the current economic climate as "severe, debilitating and oppressive" and said that St Lucia has little choice but to consider initiatives that it once "frowned upon."
"This is a difficult environment perhaps calling for different responses," he said. "I think we cannot close our eyes because it's an option we may have to consider and in so doing we may have to look at the experiences of other countries."
Those who have yet to make their millions need not apply! For to stand a chance of being accepted onto St. Lucia's citizenship by investment scheme, an applicant must provide a sworn affidavit declaring financial resources of at least USD3m, as well as documents to support the claim.
To gain citizenship under this program, the applicant then must make a minimum investment in one of the following four schemes:
Single applicants intending to investment in the National Economic Fund must make a minimum investment of USD200,000. This rises to USD235,000 for applicants applying with a spouse, and to USD250,000 for applicants applying with a spouse and two dependents. An additional USD25,000 must be invested for each additional qualifying dependent.
A minimum of USD300,000 must be invested in an approved real estate project. Qualifying projects include high-end branded hotels and resorts and high-end boutique properties. Investment in an approved real estate project cannot be sold or transferred for a period of at least five years after the granting of citizenship.
For an approved enterprise project, a single applicant must invest a minimum of USD3.5m and create at least three permanent jobs. Joint investments can be made by more than one applicant, for which the minimum investment is USD6m, plus an additional USD1m investment from each applicant. Joint investments must create at least six permanent jobs. The following are considered as approved enterprise projects: specialty restaurants; cruise ports and marinas; agro-processing plants; pharmaceutical products; ports, bridges, roads and highways; research institutions and facilities; and offshore universities.
If the applicant chooses to go down the government bond route, the minimum investment is USD500,000 per single applicant. This rises to USD535,000 for applicants applying with a spouse, and to USD550,000 for spousal applications with two dependents. An additional USD25,000 is required for each additional qualifying dependent. A qualifying bond investment must be registered and remain in the name of the applicant for five years from the date of first issue. The bond also must not be interest-bearing.
Under the citizenship by investment regulations, the applicant must submit a police certificate from their country of birth and from any other country in which they have resided for a period of one year or more during the 10 years immediately prior to submission of the application. This rule also applies to qualifying dependents aged 16 or older. Qualifying dependents must also undergo due diligence checks.
Various fees are payable by authorized agents, promoters and marketers, as well as by the applicants themselves. For scheme applicants, USD7,500 is payable for due diligence and background checks, plus USD5,000 for each qualifying dependent over the age of 16. Applicants intending to invest in an approved real estate or enterprise project must pay a non-refundable administration fee of USD50,000, plus USD35,000 for each dependent over the age of 18, and USD25,000 for each dependent under 18. There is also a non-refundable processing fee of USD2,000, plus USD1,000 for each qualifying dependent, in the case of each application.
The regulations allow the Government to grant up to 500 applications for citizenship by investment annually, although this number can be reviewed by the relevant government minister.
About St Lucia
A byword for tropical beauty, St Lucia is a scenic and atmospheric Caribbean island located between the Caribbean Sea and the North Atlantic Ocean, to the north of Trinidad and Tobago.
The terrain of the 600 sq km island is volcanic and mountainous with some broad, fertile valleys. The highest point is Mount Gimie at 950m, in the western part of the island, although the two striking cone-shaped peaks south of the western coastal town of Soufriere, known as the twin Pitons, are one of the scenic natural highlights of the Caribbean.
Sandy beaches abound, which has helped the island become a popular upmarket tourist destination. As one would expect, St. Lucia's climate is tropical, but temperatures, which range between 23 and 29 Celsius, are moderated by northeast trade winds. There is a dry season from January to April, and a rainy season from May to August.
The island, with its fine natural harbour at Castries, the capital city, was contested between England and France throughout the 17th and early 18th centuries (changing possession 14 times); it was finally ceded to the UK in 1814. Even after the abolition of slavery on its plantations in 1834, Saint Lucia remained an agricultural island, dedicated to producing tropical commodity crops. Self-government was granted in 1967 and independence in 1979.
The majority of the island's population of approximately 164,000 are of black African descent. The official language is English, but a French patois is also spoken.
The currency is the Eastern Caribbean Dollar (XCD), which is pegged to the USD dollar at a rate of XCD2.7 = USD1.
St Lucia has been able to attract foreign business and investment, especially in its offshore banking and tourism industries. Tourism is the main source of jobs and income – accounting for 65 percent of GDP – and the main source of foreign exchange earnings. Tax incentives are available to investors in tourism projects, such as hotel construction, conference venues; eco-tourism facilities, entertainment venues and water sports and yachting.
However, the manufacturing sector is the most diverse in the Eastern Caribbean area. Opportunities for investors exist in the following areas: processed foods; pharmaceutical products; processing of household and industrial waste; manufacture of light industrial tools and household products; manufacture of packaging materials; assembly of electronic components; fish processing; and processing of fruits, vegetables and animal feed. Tax incentives include tax holidays of up to 15 years and waiver of import duties on plant, machinery, and raw and packaging material. The repatriation of profits and capital is also unrestricted.
The Government is also keen to increase investment in the ICT sector, particularly in the areas of computer-aided design, data entry and transfer, electronic publishing services, image processing, software development and call centre operations. Incentives include duty free import of equipment, but the Government also grants other tax incentives on an ad-hoc basis.
Crops such as bananas, mangos, and avocados continue to be grown for export, but St. Lucia's once solid banana industry has been devastated by strong competition.
Income And Other Taxes
Compared to some no- and low-tax Caribbean islands, income tax in St. Lucia is relatively high. Personal income tax is progressive with a top rate of 30 percent.
There are also property taxes, and a value-added tax was introduced in 2012 at a standard rate of 15 percent.
Ordinarily, companies resident in St Lucia are liable for corporate income tax on profits at a rate of 33 percent. This includes profits accruing directly or indirectly to a non-resident carrying on a business through a permanent establishment. Payments made to a non-resident outside of the CARICOM economic area are subject to a 25 percent withholding tax. Withholding tax of 15 percent is due on payments to CARICOM residents.
Every employer and employee must be registered with the National Insurance Corporation (NIC) office. Contributions to the NIC total ten percent (10 percent) of wages, five percent to be paid by the employee and five percent by the employer.
St Lucia is a member of the CARICOM free trade area and the World Trade Organization. Through CARICOM, St Lucia also participates in other free trade agreements, including with the European Union and certain South American countries.
Registering a Company
The incorporation and registration of a company must be done through an attorney registered and operating in St. Lucia. Companies must also register with the Inland Revenue Department and Social Security Institute before they begin trading. Registration fees are ECD850 for a for-profit company and ECD3,125 for a foreign company. There is also an ECD125 fee for registering a business name.
Additionally, all foreign individuals and companies intending to conduct business in St Lucia, and who own more than 49 percent of the company's shares, are required to have a Trade License, for which there is a fee of ECD1,000. However, where the license is to be held by a person or company involved in selling goods where average stock does not exceed ECD10,000, the fee is ECD500. Only when a trade licence has been granted can an investor apply for fiscal incentives.
Companies whose taxable supplies have exceeded, or are expected to exceed, ECD180,000 a year must also register for VAT.
Getting There And Back Again
Air links are fairly good. St Lucia is served by Hewanorra International Airport near Vieux Fort Quarter on the southern tip of the island, which has the capability to handle the Boeing 747 and other similar long-range aircraft; destinations in North America and Europe are served. The smaller George F. L. Charles Airport, located near Castries, handles mainly regional air traffic.
There are three major seaports in St Lucia, at Castries, Cul-de-Sac and Vieux-Fort.
Telecommunications infrastructure is sound, with the East Caribbean Fiber Optic System and Southern Caribbean fiber optic system submarine cables, along with Intelsat from Martinique, carrying international calls. Fixed-line density is around 25 per 100 persons, and mobile-cellular density is 130 per 100 persons.
Other Citizenship By Investment Schemes
Although several countries have incentives in place to attract foreign investment, only a handful have fully-fledged citizenship by investment programs. These include Antigua and Barbuda, Dominica, Grenada and St Kitts & Nevis. In Europe, Malta has a number of schemes designed to attract skilled and well-heeled expats, including one which can be loosely described as a residence-for-investment program.