First Rock co-founder defends decision to incorporate businesses overseasFriday, September 24, 2021
Co-founder of First Rock Capital Holdings Ryan Reid has defended his decision to register entities overseas, noting that the process still presents more pros than cons. This despite revisions to the International Business Company (IBC) Acts in countries like St Lucia and Barbados.
First Rock was one of several companies he oversaw being incorporated in St Lucia, during the time when the law afforded companies several tax efficiencies through the Caribbean Community (Caricom) double taxation treaty.
Prior to the revision of the Acts, First Rock, like several other publicly listed IBCs on the Jamaica Stock Exchange, had the option of selecting either a zero per cent or one per cent charge on their net income as an IBC. Now they're being charged 30 per cent on St Lucian source income and zero per cent on income earned outside of the country.
Reid said management had decided to incorporate overseas as they wanted to structure some of their companies in a most efficient way from an operation and tax standpoint. He said from where he sits, there's not been a sentiment to suggest that it was done to hide something.
Despite the recent legislative changes, he said he's yet to see a downside risk to the process. However, that's possibly because most of the business activity from the entities incorporated under his belt remains outside of St Lucia.
Under a new law being passed in St Lucia, companies incorporated there will have to prove economic substance, meaning they must show that some level of economic activity has been/will take place in that country. For instance, this could be highlighted through an office or an employee being in the country.
“The only thing is that once you've structured your company in a certain way like a board of directors and so forth then obviously board meetings and your annual general meetings, etc, need to take place there so there are cost implications where that's concerned,” he said.
According to Reid, incorporating overseas has proven to be relatively inexpensive when compared to the earnings coming from overall business activities. He's urging others looking to do the same to first analyse the activities that will be undertaken in the country of incorporation to determine if the process will be a wise business decision.
“If you intend to take a pan-Caribbean approach towards your business then it makes absolute sense but for St Lucia, if you expect or anticipate that your business activities will be largely in St Lucia then it might not make sense,” he said.
Reid disclosed that it costed roughly $US2500 to incorporate their companies in St Lucia three years ago, and said the process was similar to what they would have needed to do if they were registering in Jamaica.
Contrary to popular belief, he said the process also started with critical stakeholders in Jamaica and not overseas.
“We engaged attorneys, accountants to find out what was the best way to structure and that would be my first recommendation to any company looking to incorporate a business,” he said, before adding that “they indicated to us that St Lucia at the time proved to be a very attractive destination in which to register some of our companies and as such we moved to engage an attorney in St Lucia and that attorney would have essentially incorporated the business and automatically became our company secretary.”
Reid said with most lawyers in Jamaica having relations with counterparts in St Lucia, the process should be seamless and direct as they will make all the contacts and see to the process being completed.
At the same time, he's urging persons to ensure they weigh their options to ensure they receive their intended benefits should they decide to register overseas.
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