An Overview of Accounting, Audit, and Tax Compliance in St. Kitts and Nevis
St. Kitts and Nevis has no mandate on accounting and audit. The accounting records must only be maintained to judge the company’s performance and financial position. Also, offshore companies that don’t conduct business in Nevis are exempt from taxes. No corporate, income, or property tax or stamp duty is levied on them. Nor is there a requirement to file any tax returns. Only an Annual Registration Fee is paid in place of taxes. However, for resident companies, filing an income tax return is mandatory even if the corporation does not make any business transaction during the reporting period. Other than this, a non-resident corporation or other person having a permanent business establishment in St. Kitts and Nevis must also file an annual income tax return. A branch office of an offshore corporation is considered registered in St. Kitts and Nevis and a separate legal entity for tax purposes.
Accounting Requirement in St. Kitts and Nevis
St. Kitts and Nevis follows the International Financial Reporting Standard. Companies have to maintain all the source necessary papers and accounting records. These necessary papers and records are to be kept for a period of at least 6 years from the date when the initial tax return was required to be filed. Based on these necessary papers and records, all the financial statements are prepared. The financial statements to be prepared include:
- Balance Sheet
- Profit and Loss Statement
- Cash Flow Statement
- Statement of retained earnings
- Notes to accounts
The time limit for filing the financial statement is 3.5 months from the end of the enterprise's financial year. If the financial statements are not filed within the deadline, then a penalty of 100 East Caribbean Dollars per month, a late payment penalty of 10% of the amount, and a late payment fee of 1.25% per month. No offshore company is required to prepare a consolidated report. Only resident companies must file a consolidated report per the International Financial Reporting Standards (IFRS).
Auditing Requirement in St. Kitts and Nevis
When it comes to auditing, offshore companies are not required to conduct audits. However, all resident companies, corporations, and other persons having permanent business establishments in St. Kitts and Nevis must audit their financial statements. On controlled foreign companies, preparation of financial statements as per IFRS and a positive auditor’s opinion of an independent auditor is required.
Tax Compliance in St. Kitts and Nevis
Different Types of Taxes in St. Kitts and Nevis
- Personal Tax: In St. Kitts and Nevis, global income, inheritance, wealth, and gifts are not taxable. But earnings are subject to housing and social development levies over and above the social security contributions. The rate at which the tax is imposed varies depending upon the annual earnings:
Income of Employees
Income from XCD 1000 to XCD 6500
Income from XCD 6500 to XCD 8000
Income over XCD 8000 per year
Any income arising from business such as trade, professional services or any kind of entrepreneurship but other than from employment is taxed at the rate of 4% on income less than XCD 12,500 for trading business, and if the income is less than XCD 2000 for business providing services.
- Corporate Income Tax: Resident companies pay tax on their global income, whereas non-residents pay tax on income sourced within the country at the rate of 33%. Earlier, companies not doing business within the country or only doing business with foreign counterparts were exempt from tax. However, recently the law was amended, and now these companies are taxed. Capital gains from the sale of assets held for a period of less than a year were taxed at half the tax rate but not more than 20% in any case.
- Withholding Tax: A withholding tax is levied at the rate of 15%. It is levied on dividends, interest, royalties, and other income types.
- Value-Added Tax: Value-Added Tax or VAT is levied on the sale of goods or supply of services and on the import of goods and services. The rate of VAT levied on the tourist and hotel sector is 17% and drops down to 10%, but the interest rate on certain goods and services can be zero. If the total value of the supply of professional services exceeds the threshold of XCD 96000 and XCD 150,00- for other commercial activities, then registration is mandatorily required. However, voluntary registration is also possible, but only with the consent of the Inland Revenue Department. VAT Reporting should be done no later than the 15th day of the month succeeding the reporting month. A penalty of XCD 100 per month shall be levied in case the deadline is violated. Late payment of fine is done at the rate of 10% of the amount + interest fine of 1.25% per month.
- Property Tax: Property Tax is determined based on the property's market value. Depending upon the intended use and location of the property, the range of property tax range from 0.2% to 0.3%. The profits arising from a leased property are not taxed. Further, there is no capital gains tax on the sale of real estate. Stamp Duty is levied on the transfer of real estate property which ranges from 2% to 18.5%. The seller pays the stamp duty, and the non-residents' buyers should obtain a license for owning land in St. Kitts and Nevis.
- Social Security Contributions: Social Security Contributions are made by employers as well as employees at the rate of 5%. The maximum monthly earning for the calculation of social security contributions is XCD 6,500. Other contributions, such as a Severance Payments Fund, are calculated at 1% for the employer, and Employment Injury Coverage is also taxed at 1%.
- Stamp Duty: A stamp Duty is paid at variable rates on real estate transactions. It is also charged on certain other transactions. The seller of the property pays stamp duty. The rates at which stamp duty is paid falls within 6-10% of the sale price. The percentage depends upon the location of the property. Buyers of the property should have a license to buy the property and have to pay 10% of the value of the property. However, the rule to have a license does not apply to the buyers participating in St. Kitts and Nevis citizenship program.
Tax Return Filing
There is no income tax in St. Kitts and Nevis, so there is no requirement to file an income tax return. However, the companies are required to report their profits at the rate of 3.5 months from the end of the financial year. The corporate income tax must be filed as per the forms prescribed by the Comptroller. Any non-resident entity with a permanent business establishment in St. Kitts and Nevis has to file an annual Income Tax Return.