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Every country has their own tax code by which individuals and corporations must abide. The tax policy of individual countries is one of the main determining factors for whether a business relocating to a given country is a viable option. Let’s take a look at taxation in the Caribbean in three main categories: Personal Taxes, Corporate Taxes, and VAT.
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Business, tax and benefits
Here’s everything you need to know about personal taxes in the Caribbean:
Challenges of business
In many Caribbean nations, residents and non-residents alike are subject to personal taxes. In most cases, people are treated as residents of the island if they spend a minimum of six months in a country in any tax year.
What is the Tax Rate?
The personal tax rates for Caribbean nations vary. Almost all have a progressive tax rate, meaning that the tax rate increases as income increases. On average, the income tax rate in the region is about 24%.
By comparison, the average individual tax rate for countries in Latin America was 31.89% in 2021. With a lower average income tax rate than neighboring regions, the Caribbean may be attractive to many businesses.
National vs International Income
In almost all of the Caribbean island nations and territories—such as Trinidad & Tobago, Antilles, Puerto Rico, and Jamaica—residents are taxed on all the income they generate, whether it’s from within the country or overseas.
In most cases, non-residents are only taxed on the income they generate within the particular country. For non-residents, foreign income is exempt from Caribbean individual taxes in most cases.
Capital Gains, Exemptions & Other Considerations
Most Caribbean countries apply a capital gains tax between 1% and 2%. Some don’t have any at all, and most allow for standard deductions from income to reduce tax liability.
Caribbean Corporate Taxes
Here’s everything you need to know about corporate taxes in the Caribbean:
Who is Taxed?
Businesses that have their main physical location within a country are typically considered to be resident corporations for tax purposes. Still, corporations are taxed in most Caribbean countries regardless of residency status.
What is the Tax Rate?
Corporate tax rates can be different from one country to the next. For the most part, the Caribbean islands have corporate tax rates that are on par or slightly below the regional average.
What is Taxable Income?
In most cases, net profits are subject to corporate tax in Caribbean countries. This allows businesses to deduct ordinary expenses from their gross income to reduce their overall tax liability.
Tax Incentives & Deductions
Some Caribbean nations offer tax incentives to encourage companies to either locate in their nation or launch a particular type of business in the region. Many Caribbean nations have what are called Free Trade Zones, where taxes are either much less or non-existent as long as the business is in a specific location.
Caribbean VAT
Value-added taxes, better known as VAT, are a common form of consumption tax. The value-added portion is the difference between a business’ sales and its cost of purchasing services or goods from another business. Here’s what you need to know about VAT in the Caribbean:
Who is Taxed?
Most Caribbean nations tax services and products that are imported from another country as well as some that occur within the country. Many of the islands also offer reduced VAT rates for particular activities or business sectors. Almost all exports are exempt from VAT completely.
What is the Tax Rate?
Caribbean VAT rates vary from one nation to the next, but they average around 15%. Reduced rates are often available for various types of services and goods, depending on what the nation wants to incentivize.
Is the Caribbean Right for Your Business?
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