Small Business Enterprise

GENERAL

In Section 2 of the Income Tax Act No. 1 of 1989 as amended - A small Scale Business Enterprise means an enterprise incorporated during the year of income and:

(a) is wholly owned by citizens of St.Lucia who have not been
owners of previously incorporated businesses in St.Lucia;

(b) employs not more than fifty persons;
(c) has a gross income which does not exceed one million dollars;
(d) engages in an activity on the listing of preferred business activity as approved by the Minister of Commerce in accordance with the provisions of any law in respect of micro or small scale business;
(e) satisfies the provisions of any law in force in respect of micro or small scale business;

Filing of Returns

Any individual who is resident in St.Lucia is subject to income Tax on worldwide income. An individual is considered to be resident if he or she spends more than 183 days in the island.

Individuals required to file returns:

self –employed
Employee with business income ( including pensioners)
Partners (showing share of partnership profits)
Trusts

Tax Year

The normal financial year for individuals is the Calendar year. However a company or any incorporated business or partnership can adopt a fiscal year end other than December.

Three (3) months following the Income year a small business enterprise is required to;

File an income Tax Return for the previous income year and to pay all outstanding taxes due

A partnership is not liable to pay taxes, but each individual partner is effectively treated as trading in their own right and must file a tax return.

Tax Payments

The previous year’s tax liabilities should be paid by March 31 and estimated tax paid quarterly by March 25, June 25, and September 25.

Computing Taxable Trading Income

Income Sources

Income includes profits or gains from business, July 31, 2008 investment, vocation, share of profits.

Examples of sources of income:

• Sale of goods ( grocer)
• Operators
• Rents
• Contracts/Sub-contracts
• Auto mechanics


Examples of Professionals:

• Lawyers
• Doctors
• Accountants

The Accounting Profit/loss of any person for any year of income is the starting point for a series of adjustments to move from accounting profit to taxable profit. The adjustments needing to be made are as follows;

Expenditure that has been allowable for accounting purposes but which tax law does not recognize as an allowable deduction. Eg. Depreciation.

Income which is Taxable under Section 33 that has not been included in the Accounts;

Expenditure that is deductible for tax purposes but not charged in the profit and loss account. Eg. Wear and Tear Allowance which replaces depreciation at statutory prescribed rates.

Deductible and Non – Deductible Expenditure


Deductible Expenditure

Deductible expenditure is allowable for tax purposes and includes the following examples;

• Rent paid on business premises
• Interest paid towards bank loans/overdrafts used for business purposes
• Repairs on business assets
• Wages and salaries for staff
• Insurance - Vehicle, Fire, Stock, Public liability
• Any other expenses incurred in the production of business income
  

Non Deductible Expenditure

Non – deductible expenditure is by far the most common form of adjustments to accounting profit. A determination would have to be made by the Comptroller on whether or not the Expenditure was incurred wholly and exclusively for the purposJuly 31, 2008 income. Some examples of Non-deductible Expenditure are

• Donations
• Capital Expenditure
• Domestic Expenses

Capital Allowances

Capital Allowances replaces depreciation at statutorily prescribed rates as outlined in the Second Schedule of the Income Tax Act No. 1 of 1989. An initial allowance of 20% is also allowed as a deduction.

Investment Allowance

In the initial year of income there shall be granted to any person carrying on a small scale business enterprise, an investment allowance of 10% on the capital expenditure incurred on the provision of plant and machinery acquired and brought into use for the purpose of producing assessable income.

For this purpose capital expenditure relates to plant and machinery imported into St.Lucia for the first time and is funded from non-local sources.

Business Losses

Losses from a business except agricultural losses, can be set off against other profits of any description arising in the same tax period. Any overall loss may be carried forward against profit in the next six (6) years. However only 50% of taxable profit in any year can be offset by losses brought forward. Losses cannot be carried back.


Calculation of Tax Liability


The rates below applies only to Small Business Enterprises which meets all of the conditions in the definition of a Small Scale Business Enterprise, where the conditions are not met than the rate of 33 1/3 will be applicable;

New Small Business Enterprises

* for the first income year 15%
* for the second income year 20%
* for the third income year 25%
* for the fourth income year 30%
* for the fifth and subsequent income years 33 1/3%

Rights and Responsibility Of An Individual Carrying Out A Business Or Engaged In Private Practice


Responsibility

Keep complete records of all:

Sales
Purchases
Bank Statements
Drawings (cash/goods for personal use)
Stock
Wage books
Deposit books
Other expenditure relating to the business

Retain receipts, bills, invoices, bank statements, cancelled cheques and cheque stubs. It is recommended that records be retained in English on the island of St.Lucia for a minimum of six (6) years.


Rights

If you disagree with the amount of tax assessed, you can object in writing within thirty (30) days from the date of issue of the Notice of Assessment to the Comptroller.

Any person who is aggrieved by a decision of the Comptroller may in writing appeal to the Appeals Commissions, then the Courts within thirty (30) days of any decision.


Powers of the Comptroller

The Comptroller is empowered by the Income Tax Act to make assessments in the absence of proper records, documents and information.

To verify tax status, returns may be randomly selected for audit.

The comptroller may carry out an examination of the Income affairs of the business of any person liable to pay tax.