| Montserrat Investment Guide |
|
| Montserrat Investment Guide |
|
Tax system
Investor considerations
* International Business Companies are not subject to income tax laws
Principal taxes
The bulk of Montserrat’s revenue comes from direct taxation, comprises consumer tax, import duty, stamp tax, personal income tax and hotel and guest taxes. Direct taxes are levied on corporate income, business income resident and nonresident individuals' personal income.
Tax guarantees
Residents pay personal income tax. International Business Companies under the The International Business Companies Ordinance No. 19 of 1985 are exempt from Income Tax.
Individual companies falling under the Hotels Aid Ordinance, the Fiscal Incentives Act or specific concessions for other reasons would be granted tax concessions for a fixed period and these would be documented by the Executive Council.
Legislative framework
Statute law
Legislation governing taxation is passed by Executive Councilin the same way as any other legislation.
Case law
There is very little case law relating to taxation in Montaserrat. Reference is made to U.K. case law. More often, any anomalies or misunderstandings of the legislation are discussed between the taxpayer or his representative and the Comptroller of Inland Revenue, and an interpretation agreed upon; this forms a precedent. In some cases, the Commissioner may issue notes for the guidance of tax advisers and businesses.
Anti-avoidance
Transactions will be disallowed in respect of schemes that have no commercial justification other than tax avoidance. For example, if a nonresident carries on business with a resident and exercises substantial control over the resident and business is arranged so that the resident makes little or no profit, the nonresident may be taxed on the ordinary profits that might be expected to arise from that business.
Income tax
The system is basically a unitary one that provides for the aggregation of all income accruing in or derived from Montserrat or elsewhere.
Taxation laws cover corporations, nonresident individuals, branches of foreign corporations, and others. A partnership is not taxed as an entity, rather the income from the partnership is taxed in the hands of the individual partners.
Resident individuals are subject to income tax. Resident individuals are generally those physically present in Montserrat for at least 183 days continous, in a year or those whose permanent place of abode is in Montserrat and who are physically present therein for some period during the year.
Taxable income comprises gain or profits from any trade or business.
Capital gains are not subject to a separate capital gains tax, nor are they liable to tax as ordinary income.
A tax year is basically January to December and may be altered subject to the agreement of the Comptroller of Inland Revenue.
Tax-free zones
There are no tax-free zones in Montserat.
Tax holidays
Qualifying investors are eligible for tax holidays of up to 15 years, which under certain circumstances may be extended.
Capital taxation
There is no capital taxation in Montserrat.
International aspects
Foreign operations
Unless exempted, branches or subsidiaries of foreign corporations are taxed in Montserat on the total income of the branch or subsidiary. If this income includes income from overseas, a credit for overseas taxes may be applicable depending on the territory.
International financial center operations
Tax concessions encourage the establishment of offshore corporations, or international business corporations (IBCs), in Montserrat.
Tax administration
Investor considerations
o The Comptroller of Inland Revenue handles assessments and appeals.
o Withholding taxes are payable on certain payments overseas.
o The Inland Revenue may conduct a tax audit.
Administration of the tax system
The Comptroller of Inland Revenue is responsible for the administration of taxes.
Corporate taxpayers
Tax returns
March 31, or prescribed date, every person ( indiviual) must produce for the Inland Revenue its financial statements and a computation of taxable profit. All local companies registered in Montserrat or foreign companies registered to do business in Montserrat are required to file as requested by the Comptroller of Inland Revenue.International business corporations registered under the International Business Companies Act 1985 need not file accounts.
Assessments
Provisional assessments may be raised by the Inland Revenue in the absence of accounts. There is the right to appeal against these within 21 days. If the accounts are submitted on a timely basis, provisional assessments will not be raised, but assessments based on the accounts may be issued.
Appeals
Within 21 days of receiving an assessment a company may appeal, usually on the basis that the assessment is excessive. The appeal would be to the Comptroller of Inland Revenue and would be resolved between the Commissioner and the taxpayer or his representative.
Advance tax is payable in three installments based on the tax chargeable in the previous fiscal year. The standard amount of each installment is determined as one-third of the tax chargeable in the previous fiscal year. The balance of tax due, as notified in the assessment, is payable on or before June 30 of the year of assessment.
Certain payments made to nonresidents attract withholding taxes in Montserrat. These taxes become due at the time that payment is made or, if earlier, at the time that the payee's account is credited with the amount due.
Tax audits
The Comptroller of Inland Revenue has the right to have officers of his department visit a company's premises and examine the books and documents relating to any particular year of assessment.
Penalties and interest
Late payments of tax accrue penalties of 5 percent plus 1 percent interest per month. Persons making false statements are subject to a fine of up to EC$5,000, or imprisonment for a term not exceeding eight months.
Statute of limitations
Assessments are not final until seven years after the end of the income year, within which period revised assessments can be made at any time.
Individual taxpayers
Resident individuals, generally those physically present in Montserrat for at least 183 days in a year or those whose permanent place of abode is in Montserrat and who are physically present therein for some period during the year, are subject to income tax.
Temporary residents in Montserrat and nonresidents deriving income from Montserrat are subject to individual rates of tax. The procedures relating to tax administration are the same as for corporations.
Temporary residents are not subject to tax on income arising outside Montserrat.
Foreign personnel
There are no special rules for foreign personnel.
Exit permits
The formalities for tax clearance is that a certificate of clearance must be obtained from the Comptroller of Inland revenue.
Unincorporated businesses
The procedures for administering business tax on all businesses that are not corporations are the same as for corporations.
Trusts, partnerships, joint ventures
The income derived from a trust, partnership or joint venture is taxed in the hands of the recipients, the rate of tax depending on the status of the recipient
Taxation of corporations
Corporate tax system
Corporations and shareholders
Corporate income is assessable in the hands of the corporation.
Taxable entities
Corporation tax payable by resident corporations also applies to the branch operations in Montserrat of foreign corporations in respect of income arising in Montserrat. A company is deemed to be resident only in the country in which the central management and control of its business is situated.
Taxation
Gross income
Accounting period
A newly incorporated company will select a year-end for accounting purposes, usually a year after commencement of the business. The Comptroller of Inland Revenue has to approve any subsequent change of year-end. Such approval is usually given if good reasons for a change exist.
Accounting methods
Accounts are normally prepared on an accrual basis; any other basis would have to be agreed on with the Comptroller of Inland Revenue.
Intercompany transactions
There are no specific limitations on prices for goods bought from or sold to foreign affiliates, but the Inland Revenue will disregard or adjust transactions they consider to be artificial.
Inventory valuation
Inventories are generally stated at the lower of cost or net realizable value. FIFO and average-cost methods of valuation are generally used for book and tax purposes. However, the Comptroller of Inland Revenue will normally accept a method of valuation that conforms with standard account practice in that trade. LIFO is not permitted for tax purposes. General provisions for obsolescence are not deductible for tax purposes.
Capital gains are not subject to a separate tax or taxed as ordinary income.
Interest
Interest is taxable and forms part of the taxable income assessable to tax in the same way as any other taxable income.
Dividends and intercompany dividends
Dividends received by a company resident in Montserat from another company resident in Montserrat are taxed at the rate of 40 percent. However, the recipient company is allowed a tax credit equal to the tax on the profits out of which the dividends were paid.
An Montserrat corporation is taxed on foreign branch income as earned, and on foreign dividends as received. Double taxation is avoided by means of foreign tax credits where active tax treaties exist.
Stock dividends
A Montserat corporation can distribute a tax-free stock dividend proportionately to all shareholders.
Royalties
Royalties are assessed for corporation tax in the same way as interest.
Service fees
Service fees are also assessed for corporation tax in the same way as interest.
Exchange gains and losses
Foreign exchange gains and losses would be taken into account in computing taxable income generally when resulting from trading and when realized.
Nontaxable income
Income arising from the business of fishing, farming, market gardening and livestock raising carried on by a resident is exempt from taxation..
Deductions
Business expenses
For the purpose of ascertaining the taxable income of a corporation, all outgoings and expenses are to be deducted that are wholly and exclusively incurred in the production of the income. There are no territorial limits and no prohibitions against payments to affiliates, provided they conform to the principle of being incurred for the production of the income. Certain payments to overseas companies are subject to withholding taxes.
Depreciation
Depreciation allowed for tax purposes is computed on the diminishing-balance method at prescribed rates. Initial allowances are granted on industrial and commercial buildings, built between April 1998 and March 31,2003, and in respect of capital expenditure incurred on plant and machinery by a person carrying on a trade or undertaking as defined. Conformity between book and tax depreciation is not required. Gain on sale of depreciated assets is taxable as ordinary income up to the amount of tax depreciation recaptured.
No allowance is given for amortization of goodwill or other intangible assets, such as patents, trademarks and copyrights.
Interest is an allowable deduction provided the interest is paid on capital employed in acquiring assessable income.
Interest payments to nonresident persons are subject to withholding tax.
Royalties and service fees are tax deductible if incurred to produce assessable income. Payments to nonresidents are subject to withholding tax.
Deductions may be claimed on payments to employees provided they are properly employed within the business. The fact that they are foreigners or shareholders has no relevance except that the salaries must be reasonable having regard to the services performed. Where a principal shareholder receives a salary from the company, there is a restriction for tax-deductibility purposes on the amount of that salary to a reasonable commercial level of remuneration.
Insurance premiums are allowable but, in the case of captives, must be at a level that bears a reasonable resemblance to the arm's-length cost of insuring the risk.
Bad debts
Specific provisions for bad debts are allowed.
Foreign taxes
Relief is given for tax paid on Commonwealth income and taxes paid in territories with which a double taxation agreement exists.
Pension funds
Contributions to pension funds approved by the Governor in Council are allowed and is 3 per cent of the individuals salary.
Nondeductible items
No deduction is allowed in respect of domestic or private expenses; expenses not who/ly and exclusively incurred jn the productjon of income capital withdrawn; any sum recoverable under an insurance policy or contract of indemnity; legal fees for purchase of an asset or lease; or amortization of goodwill, patents, trademarks, and copyrights.
Tax computation
Net income
Net taxable income is determined by taking the reported profit from the profit and loss account (income statement) and adding back book depreciation and nonallowable expenditure and then deducting tax depreciation allowances and nontaxable income, such as gains on sales of fixed assets, in the amount of accumulated allowances granted earlier.
The adjusted profit may then be reduced by up to 50 percent if there are sufficient agreed tax losses brought forward from previous years (see Losses above)
Tax rates
Corporate tax is imposed at the following rates.
1. Nonresident companies lending money for "approved development" in
Montserrat-20 percent.
2. Resident companies-20 percent.
Tax credits
There are provisions in the tax laws for a foreign tax credit by way of unilateral relief where no double taxation treaty exists. Credit is given under the double tax treaties and there are also bilateral arrangements with certain Commonwealth countries.
Consolidation
There are no provisions for group tax relief where losses of one company may be offset against profits of another.
Other taxes
There are no other taxes on the income of a corporation resident in Montserrat.
Branch versus subsidiary
Generally, it is preferable to incorporate a local company in Montserrat rather than operate as a branch of a foreign company. The advantages derived are as follows.
1. Identity and image:
It is better to present a local image.
2. Possible future admission of local shareholders.
3. Possible tax advantages in foreign parent's country of residence:
For example, if the subsidiary had a tax holiday, the parent could be free of tax on
Antiguan earnings until distributions were made.
4. Saving of substantial stamp taxes if the Antigua operation, including fixed assets, were
subsequently sold, e.g., stamp tax on share transfers is 2.5 percent, whereas stamp tax
on property transfers is a total of 7.5 percent.
Branch losses cannot be carried forward on incorporation.
Special industries
Insurance
In the case of an insurance company (other than a life insurance company) where the gains or profits accrue in part outside Montserrat, the gains or profits on which tax is payable shall be ascertained by taking the gross premiums and interest and other income received or receivable in Montserrat less reinsurances, claims expenses and a reserve for unexpired risks.
Life insurance companies are taxable on investment income and commission, less management expenses.
All insurance companies are subject to a premium tax of 3 percent on the premium income, excluding motor business, net of agents' commissions, whether resident or not.
Income arising from the business of shipping carried on by a nonresident is exempt from tax provided an equivalent exemption is granted by the country in which such person is resident to persons resident in Montserrat. The expression "business of shipping" means the business carried on by an owner of ships, and the expression "owner" includes charterer.
Subject to the above provisions, an owner or charterer of ships whose principal place of business is outside Montserrat, but in a part of the Commonwealth, is taxable on the proportion of profits applicable to shipping in Montserrat.
Under the Hotel Aid ordinance, investors in the hotel industry may benefit from a tax holiday of up to five years. For five of the following eight years, the investor may offset up to one-fifth of the incurred capital expenditure against future income. Losses incurred during the tax holidays may not carried forward against future profit.
Manufacturers
The Fiscal Incentives Act 1975 provides that manufacturers of an "approved product" are exempt from local taxation for varying periods, five to ten years, although longer periods of up to fifteen year maximum may be negotiated depending on the nature of the investment.
Companies qualifying for fiscal incentives are entitled to Capital Expenditure Allowances after the expiration of the tax holiday. This allowance may not exceed 20% of the total expenditure on plant, machinery and equipment made during the holiday. There are no restrictions on the Repatriation of Profits, dividends or registered capital.
International business corporations
The International Business Companies Ordinance 1985 provides that an international business corporation is exempt from local taxation.
Holding companies
There is no special tax legislation relating to holding companies, nor is there any provision in the tax legislation to permit the assessment to tax on a group basis. Each company within the group is assessed separately and there is no setoff of losses between related companies.
Corporate tax planning strategies
Tax rates for companies are the same as for other entities 30 percent.
A subsidiary Montserrat company is preferable to a branch of a foreign corporation
Special industry companies
Incentives are available for a wide range of companies, including in tourism, manufacturing and agriculture.
In considering asset or share acquisition, the tax consequences depend on the circumstances. Stamp taxes on the sale of real estate are high. However, capital allowances can be claimed on the full cost of buildings, as well as plant and machinery. The special concessions relating to hotels may apply, in which case an asset acquisition would be preferable.
International tax center
The International Business Companies Ordinance 1985 gives tax exemption to international companies.
Active tax treaties are presently in existence with the United Kingdom, and the Organisation of Eastern Caribbean States (O.E.C.S).
Taxation of foreign corporations
Investor considerations
Tax concepts
If the management and control of a foreign corporation is outside Montserrat, the corporation is nonresident for tax purposes. However, the corporation is subject to tax on income arising in Montserrat if the corporation earns income through a factor, agent, branch, or manager.
Income from rents, mortgage or debenture interest, annuities, or other annual payments that the payer is entitled to deduct for tax purposes from chargeable income are subject to withholding tax.
Imports
A foreign corporation engaged in exporting goods to Montserat is not taxable in Montserrat on the profits arising from the transactions unless it maintains a business establishment in Montserat. For this purpose, a business establishment includes such things as a branch office or an employed manager or agent who is resident in MOntserrat, but does not include a wholesaler, distributor or commission agent.
Branch operations
Branch operations in Montserrat of a foreign corporation are taxable in the same way as resident corporations. In tax planning for branch operations, it is important to ensure that the Montserrat branch is fairly charged for its proper share of overseas expenses incurred in earning the income. For example, there may be group advertising costs and head office administration charges, a proportion of which would be allowable in computing taxable profits in Montserrat.
Transfer of branch profits
Once the profits of the branch have been taxed in the normal way, transfer taxes are applicable.
Tax rates
The tax rate for branches is the same as for corporations-30 percent.
Income from subsidiaries
Dividends
Dividends may be paid to parent corporations without deduction of any tax other than any tax on income of the subsidiary.
Interest
Unless exempted by special concession, interest is subject to withholding tax.
Royalties
Royalty income arising in Montserrat is regarded as taxable in the hands of the recipient and withholding taxes are deductible from payments.
Capital gains
There is no tax on capital gains.
Rentals
Withholding taxes are applicable.
Taxation
Portfolio investments
An investor in Montserrat corporations is not subject to any tax on dividends or capital gains tax or income tax on dividends over and above the tax payable by the corporation.
Shareholders
Investor considerations
Domestic shareholders
Dividends are paid out of taxed profits, unless exemption from tax has been granted. In either event, there is no further taxation of the dividend in the hands of the recipient.
As far as foreign-source dividend income is concerned, when the foreign country is in the British Commonwealth, relief is allowed for either part or all of the foreign tax paid, depending on the rate, provided the country allows a similar relief for Montserrat tax. Also, where a double tax treaty exists with a foreign country in which the taxes are payable, there are usually provisions for partial or total relief against Montserrat tax for any foreign taxes paid.
Capital gains
There is no taxation of capital gains.
Foreign shareholders
Dividends
The same rules apply as for domestic shareholders. There are no further taxes or withholding taxes on dividends.
Capital gains
No taxation is applicable to capital gains.
Taxation
Reorganizations
Incorporation
A business can be acquired by a corporation, but any stamp taxes on real estate and assignments would be applicable. Any brought-forward tax losses would not be available to the company.
Merger, amalgamation or reorganization
There are no tax consequences to the shareholders or to the corporations concerned with respect to a merger, amalgamation or reorganization by way of share exchange.
In the case of a transfer of tax-depreciable assets, the Inland Revenue normally permits the transferee corporation to use the tax written-down values of the transferor corporation, but application should be made for approval if it is proposed to do this. Generally, any profit on transfer of tax-depreciable assets is taxable in the hands of the transferor, but the profit is restricted to a maximum of the tax allowances granted on these assets. There are provisions in the tax laws with regard to related transactions in the case of certain trades, where the Inland Revenue may use open-market value prices and may also apportion the proceeds of sale of assets in certain circumstances. The Inland Revenue may disregard transactions considered artificial or fictitious.
It should be noted that it is not possible to carry forward branch losses on incorporation.
Liquidation
Taxable income continues to be liable to corporate tax after a corporation begins liquidation proceedings. The shareholders are not taxable on any distribution of the assets of the company, whether in cash or otherwise, including the repayment of share capital.
Acquisitions
Asset acquisition
Gains on the sale of assets are taxable to the extent of tax depreciation previously claimed. Generally, the buyer may claim tax depreciation on the cost of the asset to him where the transaction is on an arm's-length basis. Interest on money borrowed to acquire the assets is allowed as a tax deduction, provided it can be shown that the assets are used in the
production of the taxable income. The purchase of goodwill is not tax deductible.
Share acquisition
When a corporation is acquired through the acquisition of its shares, there is no method whereby the tax basis of the assets may be increased to reflect the purchase price. When a domestic corporation borrows money to acquire the shares of another domestic corporation, the interest is disallowed for tax purposes, since the dividend income resulting from the purchase of the shares is not subject to corporate tax. Any unutilized tax losses in the acquired company are not affected.
Buyer and seller
The Inland Revenue does have the power to allocate reasonable values to various assets in certain cases; professional advice should be sought before negotiation for the purchase or sale of assets of any business.
Taxation of foreign operations
Investor considerations
Taxation of foreign income
Branch income
A corporation that is resident in Montserrat and that has branches in other territories is taxable on its total profit, regardless of whether the income is received in Montserrat. Losses of a branch may be set off against total income.
Allowance may be granted for foreign taxes paid.
Foreign subsidiary income
Income of a foreign subsidiary of a domestic corporation is subject to Montserrat tax only to the extent of dividends received by the parent company. Again, allowance may be granted for foreign taxes paid.
Liquidation proceeds
The liquidation proceeds of a foreign subsidiary are normally treated as capital and are therefore not subject to corporation tax.
Capital gains
Gains on the sale of shares in foreign subsidiaries are not subject to tax.
Taxation
Dividends
Dividends received from a foreign subsidiary are liable to corporation tax in the accounting period in which they are received, subject to any foreign tax credit that may be available.
Interest
Interest is subject to corporation tax in the hands of the parent company in the year in which it is earned.
Royalties
Royalty income is treated for tax purposes in the same way as interest.
Foreign exchange gains and losses
In general, foreign exchange gains and losses are included in determining taxable income if realized and if relating to items of income or expense.
Double tax relief
Relief from double taxation of income earned by foreign branches and subsidiaries is available through the following means.
1. Tax treaty provisions.
2. Credit for foreign taxes paid (Commonwealth double taxation relief).
3. Deduction for foreign taxes paid.
Tax treaties with Caricom will be in effect by 2001
Tax treaties
The provisions of the relevant tax treaty will specify the extent to which Montserrat will grant relief on income already taxed in a foreign jurisdiction which is also taxable in Montserrat. Treaty relief generally applies to income taxes on foreign branch income and to withholding taxes on other types of income, e.g., dividends, interest, royalties.
Where the foreign taxes paid exceed the credit granted by Montserat, the excess foreign taxes are deductible for Montserrat tax purposes.
Commonwealth relief
Where there is no tax treaty but the foreign income is subject to income tax in a British Commonwealth country that gives similar relief, a partial credit for such foreign country taxes paid can be claimed in Montserat . Essentially, the Montserrat relief is restricted to 50 percent of the lower of the Montserrat or foreign country income tax paid on the same income.
Foreign operations
Where relief cannot be claimed under either a tax treaty or Commonwealth double taxation provisions, the taxpayer may claim a deduction for foreign taxes paid on the income subject to Montserat tax.
Businesses, partnerships and joint ventures
Businesses
Entity or conduit
Every industry, manufacture, trade, business, and engagement in commercial activity of any kind, whether conducted by an individual or a partnership, is classified as a business and is subject to business tax at 20 percent.
Not included in the above definition are corporations, which are taxed at 30 percent. Also not included in the above definition are the businesses of farming and fishing.
Taxable income
The taxable income of a business is computed in precisely the same manner as the taxable income of a corporation. Reasonable proprietorship salaries are allowed as a tax deduction.
Partnerships
Entity or conduit
A partnership is treated as a conduit for tax purposes. Individual partners are taxed on their share of profit.
Taxable income
The partnership income is adjusted for tax purposes by adding back depreciation and disallowed expenses and deducting capital allowances and reasonable partner salaries. The net taxable income is then apportioned between the partners in accordance with their profitsharing ratios and added to their other taxable income. The rates of tax applicable are the same as for an indiviual.
Taxation of foreign partners
Foreign nationals who are resident in Montserrat are subject to personal income tax.
Joint ventures
Entity or conduit
Whether a joint venture is treated as an entity or conduit depends on the circumstances and the duration of the venture. If the venture carried on business under a special name, it would be required to be registered under the Business Registration Act and would be taxed as a business. In other circumstances, particularly if a corporation were involved, the Joint venture would be regarded as a conduit and the joint venturer would add the joint venture profit to other taxable profits.
Taxable income
The taxable income is determined in the same way as for corporation tax. In no circumstances could a corporation enjoy the reduced rate of tax available to a business. An unincorporated body of persons or an individual would pay business tax on their share of profits.
Taxation of individuals
Tax planning for expatriates
Tax consequences of resident/nonresident status
Territoriality and residence
An individual who is resident in Montserrat is subject to tax in Montserrat on income from employment.
"Resident in Montserrat" in relation to a year of assessment in the case of an individual means the following.
1. The permanent place of abode is in Montserrat, and the individual is physically present therein for some period of time in the year unless the Commissioner is satisfied that the individual's absence throughout the whole of the year was for the purposes of education, medical treatment or the performance of duties on behalf of the government.
2. The individual is physically present in Montserat for not less than 183 days in the yeaar.
3. The individual is physically present in Montserrat for some period of time in the year
immediately preceding or succeeding a year when qualified as resident.
Taxation of residents
Residents of Montserrat are subject to tax on their employment income. Further, resident individuals, including trusts, pay tax on such items as net dividends, interest or rents. As noted resident individuals engaged in a business pay business tax on business profits.
Taxation of nonresidents
Gross income
In the case of persons who do not qualify as residents, inasmuch as they do not meet the requirements of the definition above, but who are temporarily present in Montserat during the basis period of a year of assessment, tax is payable on income from employment in Montserrat.There is no tax on income arising outside Montserrat
Employee services
Included in taxable income are gains from employment and the estimated annual value of residence or other allowance granted in respect of employment.
Business and partnership income
A foreign national who is a partner in an Montserat partnership and is resident in Montserrat is subject to personal income tax. If such a partner is nonresident, that partner would pay withholding tax on salary and on the business profits after deduction of salary.
Dividends
Tax paid on company profits, out of which dividends are paid to individuals, cannot be recovered.
Taxation
Capital gains
Capital gains are not taxable.
Other income
Foreign-source income is taxable.
Rules exist for the taxation at personal rates of undistributed profits of a company controlled by not more than five persons. This would only affect nonresidents.
Deductions Personal allowances
No personal allowances are available for nonresidents.
Double tax relief
Double tax relief is not applicable to residents and generally would not be applicable to nonresidents unless the income is received in Montserrat.
Tax computation for nonresidents
Taxable income
Taxable income is gross income from employee services.
Tax rates
Tax rates are on a sliding scale up to a maximum of 30 percent on annual taxable income over EC$15,000,.
Other taxes
There are no wealth, gift or inheritance taxes.
Taxation of trusts and estates
Trusts and estates
Trusts are generally governed by United Kingdom common law principles.
Taxation of trusts and estates
A trust established in Montserrat qualifies as a resident of Montserrat and has the same tax status as an individual. Taxes would, therefore, be payable on such items as net dividends, interest and rents, and would be required to submit annual returns.
Taxation of beneficiaries
Resident and Nonresident beneficiaries are subject to tax. Nonresident beneficiaries are subject to personal tax on income arising in Montserrat from a trust or estate, but are not taxable on distributions made by a trust corporation established under the International Business Companies Act 1985.
A trust is liable to tax in Montserrat. Rate two or more beneficiaries 20 percent.
Indirect taxes
Investor considerations
Customs and excise duties
Customs duties are charged on a wide range of imported goods. Exemptions can be granted for raw materials and plant and machinery used in manufacturing and for other approved enterprises as well as for certain items imported by hotels in construction, extension or refurbishing projects.
Consumption tax
Consumption tax is levied on goods manufactured and sold in Montserrat and also on a range of imported goods. Consumption tax ranges from 0-50 per cent, average rate is 15 per cent.
For manufactured goods, the tax is charged on their ex-factory value; for imported articles, it is charged as a percentage of the CIF value plus customs duty.
taxation
Imports of raw materials and plant and machinery for use in manufacturing and for refurbishing and upgrading hotels can be granted exemption from consumption tax.
Customs service tax
Customs service tax is applied at the rate of 8 percent of the CIF value of all goods imported.
Property tax
Property tax is levied on the annual market value and site value of the land (as determined by the Property Tax Ordinance No. 3 of the Valuation Officer) of the property, as defined, at the following rates.
1.Charged according to the classification:
Land Building
Agricultural 1.0%
Residential 1.65% .30%
Business 2.0% .80%
Industrial 1.0% .75%
Noncitizens undeveloped land tax
Noncitizens failing in their responsibility to appropriately develop land that they own are required to pay a surcharge of 1.65% on the value of the land.
Guest tax
A guest tax of 7 percent is charged in respect of every item on the hotel bill.
Travel tax
This is no tax on airline tickets purchased in Montserrat.
Vehicle licenses
These are payable annually at rates varying according to the size of the vehicle.
Telecommunications
All overseas telephone calls are subject to a levy of 5 percent.
Foreign currency levy
A tax of 1.75 percent is charged on the purchase of foreign exchange.
Appendix Vl
Financial statements
B Company-A wholly owned subsidiary of A Company (a non-U.S.company).
Sample 1-Balance sheet
Consolidated balance sheet
(In EC$ thousands)
December 31
Assets 19X1 19XO
Current assets: ~C
Cash and short-term deposits XX XX
Accounts receivable (Note) XX XX
Inventories (Note) XX ~
XX XX
Investments (Note) XX XX
Fixed assets (Note) XX XX
Goodwill XX XX
XX XX
Liabilities and shareholders' equity
Current liabilities
Bank overdraft (Note) XX XX
Accounts payable and accrued liabilities XX XX
Taxation payable XX XX
Proposed dividend XX XX
Current portion of long-term debt (Note) XX XX
XX XX
Long-term debt (Note) XX XX
Deferred taxation XX
Shareholders'equity:
Share capital-Xshares XX XX
Appraisal excess (Note) XX XX
Retained earnings XX XX
XX XX
XX XX
Financial statements
Sample 3-Statement of changes in financial position
Consolidated statement of changes in financial position
(In EC$ thousands)
Year ended
December 31
19X1 19XO
_
Cash provided by (used in)
operating activities:
Net income for the year XX XX
Depreciation XX XX
Deferred corporation tax XX XX .
Gain (loss) on disposal of
fixed assets (XX) XX
XX XX
Changes in noncash working
capital balances:
Accounts receivable XX XX
Inventories
Accounts payable and accrued
liabilities XX XX
Taxation payable XX XX
XX XX
Cash provided by (used in)
investment activities:
Proceeds from sale of fixed
assets XX XX
Purchase of fixed assets (XX) (XX)
Purchase of investments (XX) (XX)
_ X
Cash provided by (used in)
financing activities:
Long-term debt XX XX
Repayment of long-term debt (XX) (XX)
Dividend paid (XX) (XX)
Issueof shares XX XX
_ XX XX
Cash increase(decrease) XX XX
For the year ( )
Cash position, beginning of year (XX) XX
Cash position, end of year XX XX
Represented by:
Cash and short-term deposits XX XX
Bank overdraft (XX) (XX)
XX XX
