Saint Kitts and Nevis: St. Kitts: An International Financial Centre

Article by Shawna Brisbane, Director, Marketing & Development Department

St. Christopher ("St. Kitts") forms a part of the twin-island Federation known as "St. Kitts & Nevis". The Federation has a history of political and economic stability. The economy is well diversified and since the 1980’s the Federation has experienced excellent growth rates averaging 5% and reaching 7% in 1997.

St. Kitts focuses on foreign investments that will generate employment opportunities by upgrading and expanding the island’s infrastructure. St. Kitts therefore places emphasis on both industrial development and financial services.

In April 1997, St. Kitts launched itself as an International Financial Centre with the enactment of three pieces of legislation viz.

• The Companies Act, 1996
• The Trusts Act 1996 and
• The Limited Partnerships Act 1996

The 1996 Companies Act effectively repealed the Companies Act, Chapter 335 (domestic) and the International Business Companies Act 1992 (offshore). In doing so, St. Kitts distinguished itself in the region, by introducing the concept of an ordinary company, which qualifies for tax-exempt status provided that it conducts business only with persons not resident in the Federation. These companies are referred to as exempt companies. An exempt company does not lose its tax exempt status because of activities within the Federation which are incidental to the carrying on of its business such as, signing contracts, employing residents, purchasing goods and services, holding managers’ and directors’ meetings or serving as adviser to residents who enjoy exempt status, among other things.

St. Kitts therefore has one regime, which captures both onshore and offshore entities under one piece of legislation, which makes all entities effectively answerable to the same standards of supervision. For this reason, the amendments to this Act to meet the standards recommended by the recent wave of initiatives to hit offshore centres, have been minor.

Incorporation costs are priced competitively at US$200 and names can be reserved for up to three months without costs. Approvals for names can be granted within minutes. The incorporation process is usually completed within 24 hours.

Companies may be limited by either shares or guarantee or by both (hybrid companies). All companies must maintain a registered office in this jurisdiction, must maintain corporate records at the registered office and must file annual returns. However, exempt companies may not disclose the names of directors or shareholders in the annual return. This Act provides for the registration of companies that are incorporated in another jurisdiction but wish to carry on business in this jurisdiction, as well as for the registration of companies which have been incorporated elsewhere but wish to migrate to this jurisdiction. A feature of the Act is that ordinary companies will not pay income tax on dividends, interest and royalties received from a qualifying participating interest in another body corporate.

This legislation governs the registration and administration of trusts in the jurisdiction. Trusts are exempt from income, withholding, capital gains and stamp taxes as long as all transactions are confined to non-residents. Beneficiaries of trusts do not lose their exemption if trustees are active in the Federation owning or leasing property for an office or residence for beneficiaries, conducting banking business, holding meetings, employing residents, etc. The law states that "a body corporate may be a settlor or a trustee or a beneficiary of a trust and the settlor or a trustee of a trust may be a beneficiary at the same time of the same trust".

The law also incorporates attractive asset protection provisions dealing with the settlor’s rights and responsibilities and shields the settlor against forced heirship, compulsory division of matrimonial property, and creditors’ suits. Trusts do not have to be audited unless required under the terms of the trust deed, however trustees must keep accounting records disclosing with "reasonable accuracy" the trust’s financial position. The registration fee is US$200.

At least one general partner and one limited partner are needed to form a limited partnership. A limited partnership qualifies for tax exemption if it refrains from doing business with the Federation’s residents. Partners of an "exempt limited partnership" are not subject to income, capital gains or withholding taxes. However, the tax on ordinary partnerships is only 4% so this is also a viable option if the partnership is desirous of doing business locally. The law is flexible and allows a corporation to be a general or limited partner and one person to be simultaneously a general as well as a limited partner. An office must be maintained in the Federation, where the register of limited partners has to be kept. Accurate accounts reflecting the partnership’s financial position must be kept but auditing is not required. The registration process is relatively simple requiring a declaration of information signed by a general partner and a fee of US$200.

Together with the three pieces of legislation mentioned above St. Kitts also passed the Financial Services (Regulations) Order, 1997 to regulate and supervise individuals and corporate entities engaged in the provision of finance business.

The Order provides for:

• The establishment of a Financial Services Department to monitor and supervise the financial services sectors. The Director General, a Registrar of Companies, Trusts and Limited Partnerships and Superintendents of Deposit Taking Investment and Insurance businesses staff this Department.
• The criteria to be satisfied for the granting of authorisation to carry on finance business in or from within the jurisdiction.
• The power to request information and inspect documents and records.
• The standards by which finance businesses are to be regulated and supervised.

Finance Business is comprised of deposit taking, investment, insurance, trust and corporate business. The licensing criterion meets international standards and in addition to the information, which is specifically required under the provisions of the Order, there is discretion to request additional information or disclosures. This is augmented by advisories on policies issued by the Financial Services Department.

St. Kitts is regarded as a well regulated jurisdiction. The emphasis has not been on company incorporations, but on more sustainable types of business.

St. Kitts, along with its sister island Nevis, was removed from the FATF list of non-cooperative countries and territories in June of 2002 after improvements were made to the regulatory regime. A new Proceeds of Crime Act (2000) No. 16 of 2000 was passed to repeal and replace the 1993 Proceeds of Crime Act, which dealt mainly with the laundering or the proceeds of drug trafficking. This new Act criminalizes the laundering of the proceeds of all serious crimes.

In addition, a Financial Services Commission was established by the Financial Services Commission Act (2000) No. 17 of 2000 and a Financial Intelligence Unit was established by the Financial Intelligence Unit Act (2000) No. 15 of 2000. At the FATF Plenary held in Berlin in June 2003, it was agreed that the monitoring of the progress being made by St. Kitts and Nevis in implementing their new regulatory regime would be passed on to the CFATF (Caribbean Financial Action Task Force). The CFATF normally monitors the progress being made in all its member countries.

St. Kitts is also a member of the ITIO (International Trade and Investment Organization) which is an organization of small and developing countries working together to address the particular challenges in the international arena with respect to trade in services. This organization successfully brought recognition of the level playing field concept by the OECD and has been instrumental in ensuring that its members are not unnecessarily compromised by more developed countries in the OECD, by being forced to introduce standards which are not truly international.

St. Kitts is on the verge of introducing Private Foundation legislation which will be passed during the latter part of July 2003. This new legislation has been continuously reviewed to ensure it meets customer requirements and regulatory standards.

The Authorities in St. Kitts are focussing very heavily on further developing the international financial services sectors. New legislation to facilitate e-commerce for example and the opening up of the telecommunications sector has allowed for multiple information technology service providers to enter the market and thus guarantee more competitive rates for customers.

St. Kitts possesses all of the attributes that are required to succeed as an international financial centre.