St. Kitts and Nevis: Country and Foreign Investment Regime

St. Kitts and Nevis Geography

St Kitts and Nevis are islands in the Caribbean Sea, about one-third of the way from Puerto Rico to Trinidad and Tobago.

The two volcanic islands, which are renowned for their beautiful mountain scenery, total 261 sq km in area and are separated by a three-km-wide channel called The Narrows; on the southern tip of long, baseball bat-shaped Saint Kitts lies the Great Salt Pond; Nevis Peak sits in the center of its almost circular namesake island and its ball shape complements that of its sister island.

The climate is tropical, tempered by constant sea breezes and there is little seasonal temperature variation. The rainy season is from May to November. There can be hurricanes between July and October.

The capital is Basseterre, on St Kitts, and there are harbours at Basseterre and Charlestown (Nevis). Bradshaw International Airport, near Basseterre, can handle large jets, while Nevis’s Newcastle Airport is only capable of handling light aircraft.

Airline services to the Federation have been improving, and there are now direct flights from New York, Philadelphia, Miami, as well as links to other Caribbean islands.

Nevis is dominated by Nevis Peak, which rises to a height of 3,265 feet in the centre of the island. The majority of the population occupies the capital of Charlestown, which is situated on the western, or leeward side of the island. Although Nevis has a typical West Indies maritime tropical climate, high temperature are offset by northeasterly trade winds and humidity is relatively low.

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St. Kitts and Nevis Population, Language and Culture

In 1493, Christopher Columbus was so impressed by the central mountain of Nevis, circled in white mist resembling snow that he named the island “Nuestro Senora del las Nieves” (“Our Lady of the White Snows”). In the course of time this name became abbreviated to Nevis. The name St. Kitts is a shortened form of its official name, St. Christopher, also given by Christopher Columbus. The inhabitants call themselves Kittitians.

St. Kitts became Britain's first colony in the West Indies with the founding of a settlement in 1623. Nevis was settled by the British in 1628, after which there followed a period of intermittent warfare between the British, French and Spanish, with the French taking possession in 1706. The island was ceded to Britain by the treaty of Utrecht in 1713, but fighting continued until 1782, when it was once again captured by the French. Nevis was officially returned to Britain in 1783 under the terms of the Treaty of Versailles. Following this, St Kitts and Nevis was governed as part of the colony of the Leeward Islands and then of the West Indies Federation until 1967 when it became a governing state in association with Great Britain.

The Federation of St Kitts and Nevis finally attained full political independence in 1983 and, in order to relieve the anxiety of Nevisians, Nevis acquired autonomy within the Federation, together with its own Legislature and Cabinet. In 1998, a vote in Nevis on a referendum to separate from Saint Kitts fell short of the two-thirds majority needed.

Population of the Federation is approximately 50,000 (July 2011 est), mostly descended from African slaves brought to the islands to work sugar and tobacco crops and indentured servants and small farmers who stayed on after the world drop in sugar prices in the mid-1800s made plantation farming less than lucrative.

Nevis's desire for independence is not dead: On January 1st, 2004, Federation Prime Minister Dr. Denzil L. Douglas proposed Round Table talks with the Cabinets of the Federal Government and the Nevis Island Administration, major social partners and key operatives, to examine the options and ramifications of the posible secession of Nevis from the Federation. However, he said that his preference was for both islands to stay together.

Vance Amory, Former Prime Minister of Nevis, said in a televised statement in June 2006 that independence for his island was still a goal of his government. Amory was replaced as the Nevisian leader by Joseph Parry of the Nevis Reformation Party after an election in July 2006 and there have since been signs of rapprochement between the two islands.

Nevis has created separate 'offshore' legislation parallel to Federation legislation, and many Nevisians believe that its economic progress has been due to having greater control over its own affairs.

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St. Kitts and Nevis Government

Since gaining independence in 1983, St Kitts and Nevis has been an independent participant of the British Commonwealth. Unlike most other English speaking Caribbean jurisdictions, it is neither a dependency, nor a crown colony of Britain. The Federation has its own representation at the United Nations.

Saint Kitts and Nevis is a constitutional monarchy with a Westminster-style parliament. The Head of State is Queen Elizabeth II (since 6 February 1952), represented by Governor General Cuthbert Montraville Sebastian (since 1 January 1996). The governor general is appointed by the monarch; following legislative elections; the leader of the majority party or leader of a majority coalition is usually appointed prime minister by the governor general; the deputy prime minister is appointed by the governor general in cabinet: the cabinet is appointed by the governor general in consultation with the prime minister.

The head of government is Prime Minister Dr. Denzil Douglas since 6 July 1995 and the Deputy Prime Minister is Sam Condor.

The unicameral National Assembly has 14 seats, 3 appointed and 11 popularly elected from single-member constituencies. Members serve five-year terms. Elections were last held in January, 2010.

The legal system is largely based on English Common Law, and appeal is to the East Caribbean Supreme Court in St Lucia.

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St. Kitts and Nevis Economy and Currency

Sugar was the traditional mainstay of the Saint Kitts economy until the 1970s when activities such as tourism, export-oriented manufacturing, and offshore banking began to assume larger roles in the economy. As tourism revenues are now the chief source of the islands' foreign exchange, a decline in stopover tourist arrivals following the September 11, 2001 terrorist attacks eroded government finances. In 2009 and 2010, following the global financial crisis, tourism declined significantly and with it tourism-related construction and foreign direct investment.

Despite the closure of the sugar industry, economic growth accelerated in 2006, fiscal imbalances improved significantly and monetary aggregates continued to grow in line with economic growth, according to the IMF.

In June 2009, the IMF said that after several years of robust growth, the economy of St. Kitts and Nevis had weakened markedly. Still, the IMF believes that, while the global downturn and heavy debt burden are likely to weigh heavily on near-term growth, the economy is well placed to achieve strong growth over the medium term provided that appropriate policies and reforms are implemented. The IMF said that after growing by 3.2% in 2008, St. Kitts and Nevis’s real output was projected to contract by 1.2% in 2009. In the event, GDP slumped to -9.6%. Higher food and fuel prices led to a pick-up in inflation in the first ten months of 2008, peaking in October 2008 at 8.3% before moderating to 7.6% at the end of 2008. Inflation eased further in 2009 on the back of lower oil prices, a rise to 2.5% was recorded for 2010 and 2011 is estimated to see inflation rise to 3.5%.

GDP per capita at purchasing power parity is USD13,700 (2010 est), on the low side for the region. Agriculture represents just 2.6% of the economy, with industry contributing 25.3% and services 72.1%. Tourism revenues are now the chief source of the islands' foreign exchange. Each islands boasts a championship golf course and additional tourist facilities, including a second cruise ship pier, hotels are under construction.

The current account deficit widened to 9.4% compared to 3.8% in 2009 due to a reduction in tourism and FDI-related construction. Oil imports from Venezuela contributed to arrears faced by the jurisdiction.

With a debt ratio of almost 200% of GDP by end-2010, the government announced in June, 2011 that it plans to restructure its debt with the help of its creditors.

The Federation's currency is the East Caribbean dollar, pegged at 2.7 to the US dollar. The currency is controlled by the Central Caribbean Reserve Bank, situated in St Kitts. However, the US Dollar is generally considered to be a second currency and is freely accepted and interchangeable throughout the Island.

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St. Kitts and Nevis Entry and Residence

Work permits are granted on application by employers, provided that no local worker is available, and involve the production of a number of documents, including health certificates.

Tourist visas are granted readily, but visas for longer stays involve demonstration of adequate financial resources.

It is possible to acquire citizenship by making an investment into the Federation under sub-section (5) of Section 3 of the Citizenship Act 1984. This stipulates that a person is entitled, upon making application to the Minister, to be registered as a citizen of the Federation without voting rights, if the Cabinet is satisfied that the person has invested substantially in the Federation.

The minimum investment requirement may be satisfied with a substantial investment of at least USD350,000 or its equivalent in East Caribbean currency in an “approved investment project”

The registration fees currently in force are USD35,000 for head of household (male or female), USD15,000 for spouse, and USD35,000 for each adult family member or other adult.

Each citizenship certificate of registration is USD47 and the cost for each passport is USD13.

Every citizenship application must be made on the prescribed form which must be submitted together with various documents relating to the applicant's identity, civil status, criminal record, financial resources, and health. All documents must be in English or translated into English, and all photocopies of any document submitted must be notarized and properly certified.

A passport is valid for ten years, unless otherwise stated. It remains the property of the Government of the Federation and may be withdrawn at any time.

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St. Kitts and Nevis Business Enviroment

Cable & Wireless (St. Kitts-Nevis) Ltd is a joint venture between Cable & Wireless and the St. Kitts-Nevis Government, providing all domestic and international telecommunications services to the islands, with digitalization using fiber optic cables. Services offered include Direct Dialing, Leased Circuits, Internet, CLASS Services and Voice Mail. ISDN is available on request. Cable and Wireless Caribbean Cellular (St. Kitts) Ltd. provides cellular phone service.

Inter island links to Antigua and Barbuda and Saint Martin (Guadeloupe and Netherlands Antilles) are handled by VHF/UHF/SHF radiotelephone international: international calls are carried by radiotelephone to Antigua and Barbuda and switched there to submarine cable or to Intelsat; or carried to Saint Martin (Guadeloupe and Netherlands Antilles) by radiotelephone and switched to Intelsat.

The Government runs a 39-channel cable television service that broadcasts daily news programs from North America and England via satellite. Three local newspapers are published: the weekly "Democrat" and "Observer" and the twice-weekly "Labor Spokesman". Tap water is rated as being of high quality and is considered safe to drink. St. Kitts can also provide excellent and luxurious conference facilities at the Fort Thomas Hotel, Horizon Villa Resort, and Ocean Terrace Inn, all offering modern electronic equipment for meetings.

The Eastern Caribbean Central Bank and The Eastern Home Mortgage Bank are headquartered in St. Kitts. There are several accounting firms and law firms of international standing. A full range of legal, accounting, management and trust company services are available.

There are no exchange controls in Nevis and the invoicing of foreign trade transactions may be made in any currency. Importers are not required to make prior deposits in local funds and export proceeds do not have to be surrendered to Government authorities or to authorised banks. There are no controls on transfers of funds. The Government of Nevis guarantees the free transfers of profits and repatriation of capital.

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St. Kitts and Nevis Investment Incentive Schemes

Under the Fiscal Incentives Act, four types of enterprise qualify for tax holidays. The length of the tax holiday for the first three depends on the amount of value added in St. Kitts & Nevis. The fourth type, known as enclave industry, must produce goods exclusively for export outside the CARICOM region.

Group I enterprises, which add 50% or more in value in St Kitts and Nevis are entitled to tax holidays of up to 15 years.

Group II enterprises add 25% to 50% in value in St Kitts and are netitled to a maximum tax holiday of 12 years.

Group III enterprises, which add 15% to 25% in value in the jurisdiction are entitled to a maximum tax holiday of 10 years.

Finally, Enclave business are entitled to a maximum tax holiday of 15 years.

St. Kitts provides companies with a further tax concession effective at the end of the tax holiday period, which, in effect, is a rebate of a portion of the income tax paid based on export profits as a percentage of total profits.

The Hotel Aids Ordinance provides duty-free concessions (relief from customs duties and pier dues) on items for use in the construction, extension and equipping of a hotel of not less than 30 bedrooms. The Income Tax Ordinance provides special tax relief benefits for hotel proprietors granted licenses under the Hotel Aids Ordinance: the gains or profits of a hotel of more than 30 bedrooms are exempt from income tax for a period of 10 years, for hotels with less than 30 bedrooms, the gains and profits are exempt from income tax for a period of 5 years.

Companies which qualify for tax holidays are allowed to import into St. Kitts and Nevis duty-free all equipment, machinery, spare parts and raw materials used in production.

Under the Caribbean Basin Initiative, besides participating in the financial contribution allocated by Washington to the member countries, St. Kitts also qualifies for duty-free entry into the United States of more than 95% of its products, not including sugar. Under the Generalized System of Preferences (GSP), manufactured and semi-manufactured goods are also eligible for duty-free access to United States markets. Virtually all of St. Kitts-produced items and raw materials are eligible for GSP treatment under the list of some 2,800 products eligible for duty-free importation. However, to qualify, the product must have had 35% of its appraised value added in the beneficiary country. Again, this enhances St. Kitts' status as a site for conversion of merchandise because of its skillful and well-trained labor force.

The St. Kitts Investment Promotion Agency (SKIPA) officially launched its long anticipated website on February 2, 2009. SKIPA, created in December 2007, proactively promotes St Kitts as an international finance centre and arranges local and foreign investment projects.

“This new website will be an important tool in promoting St. Kitts as a preferred investment destination by offering a wealth of information to potential investors worldwide,” said a SKIPA statement.

“The website features investment related news, information about SKIPA and St. Kitts and an Investor’s Guide that draws information from the various institutions that play a role in the establishment of sound businesses. The website also highlights the Priority Sectors that are crucial for the continued development of the nation, as well as investment opportunities that exist on the island,” said SKIPS’s Market Research Officer, Darien Belle.

He explained that visitors to the website will be provided with a unique opportunity to interact with the agency and other visitors through an interactive discussion forum.

“We are particularly excited about this medium of communication which is intended to foster discussions geared towards improving the business conditions in St. Kitts for existing firms and potential investors,” he said.

Shawna Lake, CEO, SKIPA, underlined the agency's role in St Kitts.

“SKIPA is not only charged with the responsibility of promoting investment opportunities available in St. Kitts but one of our most important functions is to facilitate inward investment by working with persons who have made the decision to establish a business in St. Kitts. We assist these investors by providing them with general information on application requirements and procedures and we also facilitate the submission of their applications to the various government departments for review and approval.”

“Another important service offered by SKIPA is aftercare. This service has evolved from our belief that businesses in St. Kitts should have access to a capable support system. As part of our aftercare services, we follow up with investors who have already established their businesses in St. Kitts in an effort to understand the issues facing their business or industry and to assist them in developing viable solutions. SKIPA also provides support to businesses that are interested in expansion," concluded the statement.

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