Determined to buy a second citizenship of Antigua and Barbuda for investment, wealthy Americans, Britons, Italians, Canadians and Russians are to no small degree guided by the possibility of a significant reduction of their tax burden compared to the historical homeland. After all, legislation of the Caribbean jurisdiction says nothing about any income tax for individuals receiving their income from foreign sources, as well as there is no capital gain tax. The local fiscal system does not involve charging fees for inheritance or gifts. In addition to minimum taxes for individuals, the jurisdiction offers its guests and citizens very attractive fiscal incentives in terms of establishing offshore companies.
As for the Americans, their tax savings are so substantial that many of them even renounce citizenship of the country of birth in favor of the Antiguan one. And soon the prospect of buying a second passport and citizenship by investment of Antigua and Barbuda should become even more interesting for numerous foreigners seeking to minimize their tax burden. The reason is the impending abolition of the personal income tax in all its forms.
Why Did the Antiguan Government Abolish the Income Tax?
The Prime Minister of Antigua and Barbuda Gaston Browne announced the imminent entry into force of the decision to abolish the personal income tax in full. The Head of the Antiguan Government made the relevant statement during his speech on the country’s budget for the upcoming year. The levy of this fiscal fee in the jurisdiction was completely discontinued from April 2016. The politician reminded that the complete abolition of income tax was his promise to the people of Antigua and Barbuda, voiced during the election campaign.
“This was one of the main promises of our election campaign. My Government is keeping its word and is ready to deliver on this promise made to the people. The abolition of the personal income tax can be called an important reform. This will not only result in an increase in the amount of money in the pockets of our citizens, but will also allow them to save or spend more for the benefit of the country’s economy as a whole. This will help to restore our country’s position as one of the most competitive jurisdictions in the Caribbean,” the politician said.
Referring to the calculations made by officials, the Head of the Antigua Government noted that the complete abolition of the personal income tax would result in getting more than 30 million Eastern Caribbean dollars (one U.S. dollar and 37 Eastern Caribbean cents) back into the people’s pockets.
“The relatively high costs associated with the income tax collection process, the complexity of this procedure, and the unfairness of this fiscal levy (most self-employed do not meet their obligations to pay this tax or do not fully comply with them) make the decision to abolish the income tax quite reasonable,” said Browne, who also holds the post of Finance Minister of the Caribbean State.
This step is expected to make the Caribbean jurisdiction even more interesting, among other things, for foreigners who have decided to obtain a second citizenship by investment of Antigua and Barbuda, for employers seeking to provide their employees with the most beneficial employment conditions, as well as for retirees from all over the world who want to find the best place to live after they retire.
“Antigua and Barbuda will become an even more competitive location in terms of placing head quarters of various companies that will contribute to creating new jobs. Our country will also become even more attractive for professionals who are looking for a nice place to move. At the same time, retirees will be more active in choosing Antigua and Barbuda as a place to live during their well-deserved vacation. In addition, the income tax abolition will make our Citizenship by Investment Program (CIP) more attractive to foreign investors who will choose a second citizenship and passport of Antigua and Barbuda and invest in our economy rather than in the economies of our competitors in the global second passport market,” the Prime Minister said, stressing that income taxation is an obstacle to investment, savings and consumption, and hinders the development of entrepreneurship.
How is the Government of the Caribbean Jurisdiction Going to compensate for the Lost Budget Revenues?
As for the 30 million that have been lost as tax revenues in connection with this decision to abolish the income tax, these losses will be partially covered by an increase in the rate of another fiscal levy. This is the so-called Revenue Recovery Charge which is reflected in the full cost of most imported and locally produced goods. Its rate was increased from 10 to 13 percent. It is expected to additionally increase the budget revenues by 20 million of the Eastern Caribbean dollars. It was specifically emphasized that all foodstuffs of the consumer goods basket will be exempt from this tax increase.
In addition, in order to compensate for the losses associated with the refusal to collect personal income tax, the authorities of the jurisdiction are going to improve the efficiency of the collection of other taxes and adopt a law on the Individual Entrepreneurship Tax. The last measure aims at counteracting the smuggling of alcohol and tobacco products, that deprives the local budget of income, into the country.
In his speech, the Antiguan Prime Minister said that the reduction in budget revenues due to the personal tax abolition is a step in the right direction in all respects. This decision will increase individual disposable income that will be spent not only for the consumption of goods and services, but also for investment. This is one of the key steps needed to increase citizens’ welfare and redistribute national income.
What Other Second Passport Can One Acquire by Investment to Forget About the Income Tax?
It should be noted that Antigua and Barbuda is by no means the only Caribbean jurisdiction that has launched its own economic citizenship program and is pro-actively attracting foreign investors via the liberalization of its fiscal system. For example, if you decide to get a second citizenship by investment of St. Kitts and Nevis, you can also forget about the income tax since in this jurisdiction the personal income tax had not been charged for quite a long time.
But the local authorities do not stop there, offering potential economic citizens increasingly attractive fiscal benefits. In particular, in 2015, the authorities of the Federation of St. Kitts and Nevis excluded absolutely all food and medicines from the VAT list.
At the same time, since 2011, the country has been regularly organizing the so-called Discounted VAT-Rate Day. Every year, residents and visitors of the Caribbean jurisdiction are able to buy goods and services at a reduced price which is achieved by reducing the VAT rate to pay.
In 2015, this event aimed at stimulating sales and business development was on December 18 and became a record in history. A total of eighty-three enterprises took part in the event. Twenty-three companies in Nevis were able to earn USD 11 million, while 60 companies from St. Kitts earned USD 30 million. A very impressive result for a compact island jurisdiction with a population of only 55,000.
Between 2012 and 2015, during the event, the VAT rate was reduced to 5 per cent, down from 7 per cent in 2011. Sales on the day of discounted VAT are growing year by year: in 2011 it amounted to 10 million U.S. dollars, in 2012 is was 13 million U.S. dollars, in 2013 is amounted to 26 million U.S. dollars, in 2014 is was even more, 40 million U.S. dollars, and in 2015 it became 41 million U.S. dollars. At the same time, the most active islanders buy cars. In 2015, the number of cars sold at a discount reached 230 pieces, while in 2014 the number of cars sold was 155.
But, as they say, every day is not Sunday. All foreigners who are considering obtaining a second passport and citizenship by investment of St. Kitts and Nevis should remember that this Caribbean jurisdiction has committed itself to implementing an international standard concerning the automatic exchange of information (AEOI).
The issue was discussed at the end of January at the AEOI Implementation Seminar event held in the capital of the Federation St. Kitts and Nevis. Representatives of most governments in the region met in Basseterre to discuss ways to prevent tax evasion via the new standard.
Speaking to the audience, Prime Minister Timothy Harris recalled that six Caribbean countries had committed themselves to implementing the standard for automatic exchange of tax information by 2017, while nine more jurisdictions, which are part of the region, were going to take this step by 2018.
Harris also recalled that many countries in the region were positioned as large financial centers, so that jurisdictions and the entire Caribbean were under the scrutiny of the international community. According to the politician, the governments of the Caribbean region must do everything in their power to meet their commitments and bring financial systems in line with the international standards.
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