The Government of Saint Lucia announced that its House of Assembly has agreed to the Income Tax Amendment (2) Act. This ensures that an international business company (IBC) would not give any benefit to companies that might violate OECD standards. In other words, the amendment ensures who should benefit from the exemption on foreign source income.
A so-called grandfather clause is an exemption that allows persons or entities to continue with activities or operations that were approved before the implementation of (i) new rules, (ii) regulations or (iii) laws. According to the Prime Minister, these companies would now be liable to pay taxes on their local income and benefit from other taxations in place for international revenue.
Referring to the amended tax act, an international business company that was incorporated prior to 1 January 2019 and elected to pay 1% income tax will continue to be liable to pay income tax on its worldwide income, and will not benefit from the new territorial system that provides exemption for foreign income (grandfathered company). In other words, 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.
In relation to the opt-out, the Government has also announced the passage of the International Business Companies Amendment No. 2 Bill, which includes an amendment to allow IBCs that have been grandfathered until 30 June 2021 to opt-out of being grandfathered and move into the new regime.
Prime Minister Allen Chastanet notes that the amendment seeks to comply with the Organisation for Economic Co-operation and Development (OECD). IBCs, as the Prime Minister refers, 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.
Source: Saint Lucia Government