No special treatment for former IBC corporate bodies as of 1 January

by Linda Straker

• International Business Companies Act law no longer in place
• Inland Revenue Department will be taxing IBCs on revenues earned in Grenada
• Corporate Income Tax in Grenada is 30% of company’s profit

Finance Minister Gregory Bowen has disclosed that Companies affected by Government’s decision to repeal the International Business Companies Act (IBC) will now have to pay taxation wherever it earns an income and still comply with local corporate legislation.

“We do not have any IBCs on our books; that must go as you rightly indicated the IBCs law no longer in place, what they are following is our local law with which the double taxation treaty kicks in and so they are recognised now instead of dealing with us instead of anybody. They will have to deal with the parent company and countries of residence where they were incorporated and to deal with us in Grenada,” Bowen said during the weekly post-cabinet briefing on Tuesday, 25 January 2022.

“So, we are following the law, the Inland Revenue Department will be taxing them on revenues earned in Grenada. At the same time, we are not sitting idly by as we are working to find a way to encourage them to pay some of the monies earned to pay some in Grenada.” Bowen explained that if a company pays its corporate tax in Grenada, it won’t be exempted from paying in its homeland.

“That is where the double taxation-treaty comes in place,” he added. Corporate Income Tax in Grenada is 30% of the company’s profit.

Bowen, who became Finance Minister in 2020, said that Government did not give the 50 companies which were in good standing and who are now registered with the Corporate Affairs and Intellectual Property Office (CAIPO) any special treatment to continue operating on the island. A few of them are call centres that employ hundreds of young people.

“We did not give them any special treatment; it was there in law already. If you earn your income in Canouan that belongs to St Vincent, then the requirement for taxation is quite different than if you earned it Carriacou,” he referred to as an example.

“These call centres earn their revenue from abroad, Europe, the US, and so the requirements for paying the taxes in much different to a company that lives and operates here, so when you look at what has happened maybe it’s something we should have done already,” he said.

In terms of concessions, Bowen said what they got was already enshrined in law. “As a matter of fact, if we have given them anything that could have taken away from our revenues, then the international communities will simply come to us and say you can’t be giving them on one hand and coming to us with an open hand in the other. So, they looked at it and we had to explain that to the companies,” he said.

The European Union in 2017 described the International Companies legislation, the International Insurance Legislation, the International Trusts legislation, and Offshore Banking as “harmful tax practices.”

Grenada was then among 90 countries screened against tax transparency; harmful tax practices and based erosion profit shifting and placed on a blacklist. The government had to repeal those laws for the country to be removed from the Blacklist.

“It has become necessary to re-examine, to amend or even abolish existing tax measures, legislation or regimes that constitute harmful tax competition and also to reframe countries from introducing new measures that constitute harmful tax competition,” said Legal Affairs Minister Kindra Maturine-Stewart when she presented the 4 pieces legislation in the House for Members approval in December 2018.