¶ 2601
Overview
Scope of the chapter. This chapter explains how the Federation of Saint Christopher and Nevis taxes the trusts, limited liability companies, corporations and foundations formed under the Nevis Ordinances, and what remains of the tax exemptions that those Ordinances grant. It covers the division of taxing power between the federal Parliament and the Nevis Island Legislature, the federal Income Tax Act, the residence and source rules that decide whether an entity is within the charge, the exemption provisions of each Ordinance, the international reviews that ended the exemption for companies, and the taxes that reach land, documents and local activity. Exchange of tax information is treated in chapter 27, anti-money-laundering and beneficial-ownership rules in chapter 28, and the United States taxation of Nevis structures in chapter 29 (see infra chs. 27–29).
The position in summary. The Federation does not tax individuals on income. Since May 1, 1980 the charge to income tax has not applied to income accruing to any person other than a company. Income Tax Act, Cap. 20.22, § 3(3) (rev. ed. 2017) ("ITA"). Companies are taxed on worldwide income if they are resident in the Federation and on Federation-source income if they are not. Residence turns on where central management and control is exercised. The place of formation does not decide it. The Nevis Ordinances grant exemptions on top of that federal law. For corporations and LLCs those exemptions ended no later than June 30, 2021. For international trusts and multiform foundations the statutory exemptions remain in the revised texts and were not part of the reforms that ended the corporate exemptions.
Two questions for every structure. Every Nevis structure raises two separate questions. The first is whether the entity is within the federal charge at all: whether a company is resident, or carries on a business in the Federation, or receives Federation-source income. The second is whether a Nevis Ordinance exempts it from a charge that the Act imposes. For most structures administered by a registered agent and managed from abroad, the answer to the first question is no, and the second question does not arise. The exemptions matter for entities that have some activity or income in the Federation, and for the stamp-duty and succession-tax provisions that apply regardless of residence.
What changed in 2018–2021. In March 2018 the Federation was placed on the European Union's list of non-cooperative jurisdictions for tax purposes, and the OECD Forum on Harmful Tax Practices had identified preferential regimes in its company legislation. St. Christopher & Nevis Inland Revenue Dep't, CIT-101 Return Guidelines 3, 5 (rev. Nov. 1, 2020). The Federation responded by closing the corporate exemptions to new entrants from January 1, 2019 and ending them for existing entities by June 30, 2021. The details are set out at ¶ 2650. The change did not create a corporate tax on Nevis companies managed abroad; it removed an exemption that had become largely unnecessary for them once the Inland Revenue Department confirmed that incorporation alone does not make a company resident (see infra ¶ 2630).
Method and sources. The chapter relies on the consolidated text of the Income Tax Act published by the Inland Revenue Department, which shows the law as at December 31, 2017, and on the Department's published guidance. The Department describes its consolidation as prepared for internal use and advises users to obtain an official copy. Later amending Acts were not all located; where the chapter states a rule that may have changed after 2017, it says so. Rates are stated only where an official source was found. The consolidation renumbers several sections without updating its own arrangement of sections; this chapter cites the section numbers printed in the text. No reported decision of the Eastern Caribbean courts construing the tax provisions of the Nevis Ordinances was located.