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In common with many of its Caribbean neighbours, Antigua & Barbuda, the subject
of this Investors Offshore jurisdiction focus, is a location more
synonymous with the upmarket end of the tourist trade than as a place
in which to invest. Whilst tourism is indeed an important part of
the nation's economy, a notable offshore financial industry has in
fact been developed by government over the last two decades, helped
along by some generous business and personal tax incentives, the major
aspects of which we will attempt to cover here.
As the name suggests, Antigua & Barbuda is two separate islands
forming one country, located in the Eastern Caribbean. The larger
of the islands, Antigua, covers approximately 108 square miles, whilst
its smaller sister, Barbuda, (located about 30 miles north) is a mere
68 square miles in area. Both enjoy clement weather conditions, with
average temperatures of around 75F (24C) in the winter and 85F in
the summer. Visitors arriving outside of the traditional tourist season
(January to June) however, should be wary of the hurricane season,
which usually lasts from June to September.
The total resident population numbers around 105,000 (July 2010 est)
and as a former British colony English is the predominant language.
Although the country has been independent since 1981, Queen Elizabeth
II remains the official head of state and strong British influences
have survived; the legal system is based on English common law, and
evidence of Britain's legacy can be seen in the islands' cultural
and sporting life. As a popular destination for British tourists,
the country is well served by direct air links to the UK: British
Airways operates a five-day-per-week service whilst other major carriers
from the UK, Europe and the US also fly direct into Antigua's V C
Bird International Airport, which is located in the north east of
the island.
The currency unit of Antigua & Barbuda is the Eastern Caribbean
dollar (shared by several neighbouring islands) which is pegged to
the US dollar at a fixed rate of 2.70 to 1; but US dollars are widely
accepted within the islands, and other major currencies are readily
exchanged.
Antigua was quite badly hit by the global downturn in 2009, with
GDP dropping 7%, and government finances are under strain. The IMF
is assisting with stand-by financing, and the jurisdiction is implementing
wide-ranging fiscal reforms intended to return the government's budget
to balance by 2012. The plan includes widening the scope of sales
tax and a new 10% 'Recovery Charge' on all non-oil imports and domestic
production.
In March 2011, following the second and third reviews of the local
economy by the IMF under the 36-month stand-by arrangement, John Lipsky,
IMF First Deputy Managing Director said that there were signs of a
recovery. However, despite the government having made good progress
in achieving structural reforms, levels of investment are still below
pre-crisis levels.
"Recent indicators point to moderate positive growth in 2011
based on some improvement in the tourism sector," Lipsky said.
"However, private and foreign direct investment, remittance flows,
and construction spending are still below pre-crisis level. All end-December
quantitative targets under the Fund-supported program were met, despite
the continued weak economic performance in 2010 and revenue shortfalls
relative to initial program projections. The overall fiscal balance
improved significantly as result of expenditure restraint, interest
savings from debt restructuring and, to some extent, enhanced revenue
efforts. Continued vigilance is necessary as risks remain high, including
those related to increasing global food and fuel prices and the domestic
banking sector."
Antigua belongs to the Organisation of Eastern Caribbean States (OECS),
along with Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint
Lucia, and Saint Vincent and the Grenadines. The grouping has signed
a treaty establishing an economic union in the Caribbean and providing
for the removal of trade barriers between member states.
On December 30, 2010, Antigua and Barbuda became the first signatory
to ratify the Revised OECS Treaty of Basseterre, a first step toward
establishing the OECS Economic Union. An agreement signed by OECS
governments in January 2011 committed them to the free movement of
nationals within the sub-region by August 1, 2011. The establishment
of an European-styled regional parliament has also been agreed. The
regional parliament, part of the new OECS governance structure, is
likely to be headquartered in Antigua and would include representations
from Prime Ministers and opposition leaders in member countries. The
assembly will have legislative authority in eight areas ranging from
finance and trade to immigration.
International Business Companies
As previously mentioned, besides the important economic pillar of
tourism, Antigua & Barbuda has sought to attract investment through
the development of an offshore financial services industry, which
it set about doing with the passing of the International Business
Corporations Act in 1982 soon after gaining independence from the
UK. The offshore industry is regulated by the International Financial
Sector Regulatory Authority (IFSRA). Here are some of the major benefits
provided to IBCs under the 1982 Act, (as amended):
- Full exemption from all direct taxes in respect of trading, investment
or commercial activity;
- Exemption from withholding taxes and stamp duty;
- No minimum capital requirement;
- Permission to transfer the charter of an IBC to a foreign jurisdiction,
or vice versa;
- Fast track applications procedure, (it is claimed that approval
can be given within 24 hours).
The annual government fee for registration of an Antiguan IBC, which
can be carried out by a locally registered trust company, an accountant
or attorney, is US$300 (EC$810).
Additionally, an IBC with an international insurance licence is permitted
to engage in any insurance business other than domestic insurance.
Demonstrated capital of at least US$250,000 must be maintained at
all times. The fee for an insurance IBC licence is US$10,000.
There are also significant tax advantages to be gained through the
formation of a locally administered trust company. Antiguan trusts
are not subject to any taxes on inheritance, profits, income, dividends,
or on any capital assets or gains.
The government has also sought via legislation to facilitate the
development of an offshore banking industry. Within 15 years of the
IBC Act, some 70 offshore banking institutions had established in
the jurisdiction. However, some sacrifices have had to be made in
the wake of international pressure, forcing an emphasis on quality
rather than quantity as new money laundering regulations were introduced
between 1999 and 2001, and by 2008 the number of licensed international
banks was steady at around 20. An IBC licence to carry on international
banking attracts a fee of US$15,000 (EC$40,500).
Banks are supervized by the Eastern Caribbean Central Bank. The
reputation of Antigua's banking sector was hit though in 2008 when
the financial empire of Allen Stanford collapsed. He is to stand trial
in the US in September 2011 over a USD8bn Ponzi scheme, while the
head of the islands' financial regulator, Leroy King is being extradited
to the US accused of accepting bribes from Stanford.
Following the arrests of Stanford and King in 2009, Verlyn Faustin,
head of the International Financial Services Providers Association
of Antigua and Barbuda, defended the jurisdiction as a reputable well-regulated
jurisdiction:
“In light of the recent US indictments of Stanford International
Bank’s Allen Stanford and Leroy King, former head of the Antigua
and Barbuda Financial Services Regulatory Commission (FSRC), we must
emphasize that the international financial services regulated in our
country are operated with integrity and in accordance with the highest
standards of fiduciary practice. The jurisdiction is comprised of
many hard-working professionals who do not tolerate fraud, fiscal
wrong doing and other financial crimes, and who continue to honor
best practices with respect to international banking standards and
prudent self-regulatory controls,” he stated.
In its own statement in July, Antigua and Barbuda's Financial Services
Regulatory Commission (FSRC) announced that:
“The Commission takes this opportunity as the regulator of
international banks and other international financial institutions
in Antigua and Barbuda to reaffirm its unequivocal commitment to the
protection of depositors and the public as well as the preservation
of Antigua and Barbuda’s reputation as an offshore banking jurisdiction.
We will continue to pursue excellence and to address issues in an
ongoing effort to better serve the public.”
Tax Incentives
Besides this framework of offshore business structures, Antigua &
Barbuda also provides a series of separate tax incentives for qualifying
investors, as laid down in the Fiscal Incentives Act. Depending on
the type of business involved, these give investors potentially long
tax holidays. Typical investor concessions may include:
- Exemption from corporate tax for an initial period of 15 years
which may be eligible for renewal for a further 15 years;
- Waiver of all import duties or consumption tax on the importation
of materials and equipment used in the operations of the company;
- Grant of an export allowance in the form of an extended tax holiday
on the exportation of goods produced in Antigua & Barbuda;
- The right to repatriate all capital royalties, dividends and profits
free of all taxes or any other charges on foreign exchange transactions.
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