INTERNATIONAL BUSINESS COMPANIES
International Business Companies, also referred to as “Offshore Companies” or “IBCs” are the backbone of any international financial services jurisdiction.
For decades they meant ease of incorporation, no taxes and high levels of privacy as regards the identity of their shareholders, directors and officers and activities. The reasons for incorporating such an entity into one’s financial and business affairs were obvious. But is that still the case?
The EU and OECD have gone to great lengths to try to bring these sorts of companies to an end, claiming that their existence created an unlevel playing field for companies who operated in countries with more regulations, disclosure and taxes. (This was a nice pretense however in reality they were trying to stop the exodus of tax dollars from their high-tax jurisdictions.)
Whether this is true of course is a matter of much debate, but the two bodies have used their economic clout to force changes on small island state none the less. So what does an IBC look like today and is it still useful?
Lets review one by one......
Ease of Incorporation..... This is unchanged. We can incorporate your company for you on line in as little as 1 hour and your official company documents available to scan to you usually the next business day.
An interesting development with St. Lucian IBCs is that owing to the EUS own twisted logic about making the playing field level, St. Lucian IBCS can now engage in business onshore in St. Lucia. Whereas previously they could only engage in activities outside of the country, now they can operate within its borders just as any company incorporated under the old cumbersome domestic companies’ act may do. This has a considerable advantage in that it avoids being subject to the domestic company registry which is, if one is being charitable, difficult to navigate and deal with.
High Levels of Privacy..... Surprisingly, this really hasn’t changed. In the past the Registered Agent was required to maintain a register of Directors and a Register of Members (shareholders) for each IBC they represented. RAs nowadays are still required to maintain these two registers but now must also maintain an register of Ultimate Beneficial Owners. In 90% of the cases, this register is identical to the Register of Members. However, in cases where nominees shareholders or other intermediary companies or entities exist between the IBC and the UBO, this register makes clear who does ultimately own the IBC.
This information would of course always have been known to the RA but now we are required to maintain it in a particular prescribed register format. Its still private and known only to the RA, we are still subject to the strict confidentiality laws in our legislation and no public disclosure is required. In effect, really nothing has changed.
So what about taxation?.. This one is more interesting. Up until July 1, 2021, IBCs were exempt from St. Lucian income tax. The EU and OECD made a great deal about the inequity of this situation in that domestic St. Lucian companies were subject to income tax a rate of 30% and insisted that IBCs pay the same taxes as their domestic counterparts.
As it turns out domestic companies have quite a favourable tax regime and so adopting it for IBCs has proven to be no hardship at all in 95% of cases. Specifically.....
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Capital gains and dividends are not subject to income tax.
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Interest earned in St. Lucian banks is not subject to income tax.
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Income earned in Caricom member states is not taxed in St. Lucia due to the double taxation elimination provisions of the Caricom (Caribbean Common Market) Treaty.
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This leaves just income earned outside of Caricom that is not capital gains or dividends. However, St. Lucia does not tax domestic companies on foreign income!! This would seem to have been the great “get out of jail free” card however the EU and OECD insisted to truly be a level playing field, the IBCs must have something called “Economic Substance”. This has been a hard term to pin down exactly but it’s intended to impose a burden on IBCS to be “present” in St. Lucia, the same way domestic companies are. WE will expand on this and subsequent webpage however in effect, if an IBC can demonstrate they meet Economic Substance criteria, then their foreign source income is exempt from any income tax in St. Lucia.
So....in conclusion.....ease of incorporation, privacy and low/no taxes were the reasons IBCS flourished from the 1980s to about 2018. The question then is...are they still effective in todays more closely regulated world? It seems clear with some careful planning the IBC remains as relevant as ever.
Please contact us for details on how to proceed in forming an offshore company. Our staff will be pleased to provide a checklist of all the required information.