Nevis

Nevis Taking Steps to Maintain its Competitive Edge


By Maurisha A. Robinson, Partner, Morton Robinson, L.P. (19/09/2017)

As the world becomes more globalized, Nevis has sought to maintain its international presence by improving its legislation so as to continue offering clients unique products while at the same time collaboratively combatting money laundering and terrorist financing.

The tiny island, located in the Eastern Caribbean, has consistently been at the forefront of the international financial industry and is set to repeal and replace the following ordinances:

1.      The Nevis Limited Liability Company Ordinance (NLLCO)

2.      The Nevis Business Corporation Ordinance (NBCO)

3.      The Nevis International Exempt Trust Ordinance (NIETO)

All three pieces of legislation had their respective and successful readings at the House of Assembly in July 2017 and are set to be implemented shortly.

This move is being made to keep pace with the most progressive legislation and  to showcase the island’s serious intent to cooperate on a global level in combatting money laundering and terrorist financing. Moreover, it is intended that there be a harmonization of the legislation.

In enacting the new legislation, the government has had the assistance of both local and overseas experts. Of note is its engagement of David Neufeld and Jonathan Gopman, both of whom are well regarded in their respective fields. Neufeld is world renown for his work in international law and regarded as a pioneer for his work with offshore limited liability company law. Gopman is well accomplished in his practice, which focuses on sophisticated wealth accumulation and preservation planning strategies for entrepreneurs.

One of the most significant changes to the NLLCO and NBCO is the ‘tax’ part. Under the former ordinances, a corporation is exempt from paying any taxes as long as it does no business in the jurisdiction. Under the new NLLCO and NBCO, they have introduced a provision whereby a company can elect to be a tax resident by applying to the relevant minister for a ‘Tax Resident Certificate’ and elect to pay a corporate residency tax to be eligible to be considered a tax resident of Nevis. So, where the corporation makes an application for a tax resident certificate, that corporation must submit its financial statements and pay a corporate residency tax to the Inland Revenue in Nevis, within 30 days after the end of the corporation’s financial period. The corporate residency tax payable by a corporation is then assessed based on the gross revenue of the corporation and is charged at a rate equivalent to the current tax rate charged for unincorporated business tax on Nevis. Upon the issue of a Tax Resident Certificate to a corporation under this section, the provisions of section 136(2) shall apply, except with respect to any of the prescribed taxes payable, and the corporation shall be tax resident in Nevis for all intents and purposes.

With the introduction of this proviso, Nevis intends to set itself apart by maintaining its attractiveness as a tax free jurisdiction while at the same time giving a corporation the option to establish itself soundly as a tax resident (thereby putting any issues or challenges to rest as to whether the corporation is domiciled/resident in Nevis).

The NIETO will also introduce some significant changes, one of which includes the elimination of the rule against perpetuities, thereby allowing a trust unlimited duration provided the trustee has unrestricted power to sell all the trust assets, or if one or more  persons has the unlimited power to terminate the trust. Clarification of the creditors’ rights and an increased bond of US$270,000 is required to be paid by a creditor before bringing any court action against any person or trust property governed by NIETO. This increase in the bond is intended to discourage any frivolous claims being brought against a person or trust property under the trust.

It is usually said that jurisdictions such as Nevis are safe havens for money launderers, tax avoiders etc., but Nevis is dedicated to setting itself apart by maintaining its status as a transparent jurisdiction, cooperating on a global level in facilitating the exchange of information for tax purposes. To improve international tax compliance and to facilitate the automatic exchange of information, the Federation signed a Model 1B FATCA Inter-governmental Agreement (IGA), as well as adopting the Common Reporting Standard in December of 2016 to allow for the automatic exchange of information. It is without little doubt that Nevis, ‘the gentle giant’ is successfully maintaining a competitive edge by striking a delicate balance.