The Income Tax Amendment (2) Act seeks to amend the Income Tax Act Cap 15.02 which ensures that a business company which was incorporated prior to January 1 2019 and elected to pay one percent income tax continues to be liable to pay the income tax under the Income Tax Act Cap 15.02 with respect to its worldwide income. The amendment ensures who should benefit from the exemption on foreign source income.

    The provision states that a grandfathered company, a company incorporated prior to 2019 does not benefit from exemptions of tax on foreign

 income. During the period of a grandfathering, a grandfathered company has to be subject to the legislation which governed it prior to the creation of a new legislation for newly incorporated companies. Some of these grandfathered companies based on the IBC amendment may opt out of the grandfathered and become a 2019 company.

    Prime Minister of Saint Lucia, Allen Chastanet, notes the amendment seeks to comply with the Organisation for Economic Co-operation and Development (OECD). With the help of governments, policy makers and citizens around the world, the OECD works on establishing international norms and finding evidence-based solutions to a range of social, economic and environmental challenges. The organization’s duties include improving economic performance and creating jobs, fostering strong education and fighting international tax evasion.

 “Members of the House would remember that while we were trying to satisfy the requirements of the OECD with regard to harmful taxation that what had agreed to do was amend and abolish our IBCs,” The Prime Minister says. “The manner in which we are doing that is by eventually merging our IBCs with our local companies. What we have introduced is a territorial tax structure. Under that structure which is in essence the source of taxation is defined by the CARICOM agreement that we have, does not charge taxes on foreign earned income by those companies. What we are doing is putting a provision in, so that the companies who were under the old IBC Act for the two-year period of the grandfathering can continue to benefit from the one percent tax,” adds Chastanet.

    IBCs as the Prime Minister refers are International Business Companies. These are offshore business companies formed under the laws of some jurisdictions as a tax neutral company which is usually limited in terms of the activities it may conduct in, but not necessarily from, the jurisdiction in which it is incorporated.