New Tax Residence Laws in Nevis; Tax Filing now Underway in Cook Islands
BY MATTHEW SMITH – GENERAL COUNSEL
As many Southpac clients will be aware, laws surrounding the tax treatment of international companies (‘ICs’) and limited liability companies (‘LLCs’) in Nevis and the Cook Islands have undergone significant changes in recent years. More recently, there has been a particular focus on the legislative situation in Nevis, following the tabling of an amendment to St Kitts and Nevis income tax legislation in November 2020. Although confirmation of the amendment passing into law has been eagerly awaited by the Nevis Financial Services Industry, the amending Bill was enacted with no fanfare or government announcement at all on 26 March 2021 in the form of the Income Tax (Amendment) Act, 2021 (‘the Act’).
The Act provides, so far as relevant, that:
1. Companies (including ICs and LLCs) which are resident in St Kitts and Nevis are assessable to tax on all worldwide income;
2. Companies which are non-resident in St Kitts and Nevis but which carry on trade or business there through a permanent establishment (ie a fixed place of business) are assessable to tax on all worldwide income;
3. A company is resident in St Kitts and Nevis, whether or not it is registered there, if it is managed or controlled from within St Kitts and Nevis; and
4. A company is managed and controlled from the place where the central mind, management and control of the company is ordinarily situated.
The upshot of the above is that the vast majority of Nevis-registered ICs and LLCs will not be taxable there. This is because they have no physical presence in the jurisdiction or because they are managed and controlled from outside St Kitts and Nevis, either directly by the manager/director, or indirectly via a nominee or corporate management agreement.
The St Kitts and Nevis Inland Revenue Department has recently confirmed that a simplified tax return for the 2020 tax year will need to be filed by 31 August 2021 by or on behalf of all ICs and LLCs which were registered in Nevis during 2020. This exercise will be similar to the one that was undertaken for the 2019 tax year and will entail all ICs and LLCs making a declaration that they are not tax resident in Nevis. Further information on filing will be provided to individual Southpac clients when it becomes available.
Previously, certain Nevis ICs and LLCs have been exempt from taxation regardless of their situs of tax residence. This exemption expired on 30 June 2021. As a result, all ICs registered under the Nevis Business Corporation Ordinance 2017, and all LLCs registered under the Nevis Limited Liability Company Ordinance 2017, are now taxable in Nevis, and liable to pay 33% tax on worldwide income, if they are tax resident there.
Over in the Cook Islands, ICs registered on or after 18 December 2019 are now taxable (at a rate of 20%) on worldwide income and are required to file an annual tax return with the Cook Islands Revenue Management Division. Southpac and other registered agents in the Cook Islands have been co-ordinating this process and have also been required by the RMD to obtain tax numbers for all currently registered Cook Islands ICs. The tax exemption which remains for ICs registered before 18 December 2019 is to expire on 31 December 2021. All Cook Islands ICs will be taxable on all worldwide income after that date.
Cook Islands LLCs remain tax exempt and are not required to report.
The table below provides an at-a-glance guide to the current company taxation situation in each jurisdiction.
|Jurisdiction||Company type||Registration date||Tax status|
|Nevis||IC||Any||Taxable at 33% on worldwide income if tax-resident under the Act. Must file annual simplified tax return. Must file full tax return if tax resident.|
|Nevis||LLC||Any||Taxable at 33% on worldwide income if tax-resident under the Act. Must file annual simplified tax return. Must file full tax return if tax resident.|
|Cook Islands||IC||On/after 18 Dec 2019||Taxable at 20% on worldwide income. Must have RMD number and file full tax return each year.|
|Cook Islands||IC||Before 18 Dec 2019||Not currently taxable but must obtain RMD number. Will be taxable as from 1 January 2022 and required to file full tax return each year thereafter.|
|Cook Islands||LLC||Any||Not taxable.|
Cook Islands taxation laws are currently under review. Southpac is closely monitoring developments and will notify these to clients when further information is available.
For more information about this article or to enquire about asset protection please contact us.
Disclaimer: The above contains a statement of the current laws of Nevis and the Cook Islands and is for information purposes only. It is not intended to constitute tax or legal advice. Seek a duly licensed professional for tax or legal advice.