Foreign entrepreneurs who set up in Grenada, whether a guesthouse in St David's, a marine services firm in Prickly Bay or a consultancy serving regional clients, quickly learn that corporate tax is only part of the picture. A Grenadian company typically meets corporation tax on profits, Annual Stamp Tax on turnover, VAT once it crosses the threshold, payroll deductions for staff, and withholding tax when it pays dividends or fees to people abroad.
This overview explains each from the point of view of a foreign owner. Company formation, licensing and incentives are covered in other sections of this site. Rates here reflect published summaries at the time of writing and are often adjusted in the annual budget, so confirm them with the Inland Revenue Division (IRD) and a licensed accountant before you rely on them.
Corporation tax and company residence
Companies resident in Grenada pay corporate income tax on their chargeable profits at a flat rate, reported in recent published summaries as 28 per cent, the same as the top personal rate. Profits are computed from the accounts, adjusted for items the Income Tax Act treats differently, such as capital allowances in place of depreciation and disallowed expenses like most entertainment.
Whether a company is resident matters as much as where it is incorporated. In systems built on the British model, residence traditionally follows central management and control: where the board actually makes strategic decisions. A Grenadian company whose directors all live and meet in Toronto may raise questions in Canada about whether it is Canadian resident, and the reverse is true for a foreign company managed from St George's. Board meetings, minutes and the location of directors deserve attention from the start.
A foreign company that does business in Grenada through a branch registers as an external company with the Corporate Affairs and Intellectual Property Office (CAIPO) and is taxed on the profits attributable to its Grenadian operations.
Withholding tax on payments abroad
What it covers. Grenada applies withholding tax to certain payments made to non-residents, which can include dividends, interest, royalties, management fees and some fees for services. The payer deducts the tax and remits it to the IRD.
The rate. The domestic rate is commonly reported at 15 per cent, but rates and the list of covered payments should be confirmed for each type of payment.
Why foreign owners notice it. A foreign shareholder taking profits out as dividends, or charging the Grenadian company a management fee from abroad, will often see withholding applied. Without a treaty, there may be no reduced rate available.
Treaty relief within CARICOM. For payments to residents of participating CARICOM states, the regional double taxation agreement may change the outcome. Documentation, including proof of the recipient's residence, is needed to claim it.
Credit at home. Whether the owner's home country gives credit for Grenadian withholding depends on its domestic rules. Check before deciding between salary, dividends or fees as the way to extract profit.
Other taxes a Grenadian company meets
Corporate tax is calculated once a year. These others arrive more often and are where most compliance problems begin.
- Annual Stamp Tax is levied on business turnover, at rates that have been set lower for smaller businesses and with some receipts exempt. It is due even in a loss-making year.
- VAT at the standard 15 per cent rate applies once taxable turnover exceeds the registration threshold. Registered businesses charge VAT, reclaim input VAT and file regular returns.
- PAYE and NIS must be deducted from employees' pay and remitted monthly, with the employer's own NIS contribution on top.
- Property tax applies to business premises owned by the company, and companies with foreign shareholders may need an Alien Landholding Licence to hold land.
- Customs duty applies to imported equipment and stock unless a concession has been granted under an incentive regime.
- Sector levies and licences apply in tourism, financial services, telecommunications and other regulated industries.
Incentives and older regimes: read the fine print
Grenada offers fiscal incentives for approved investments, administered through the Grenada Investment Development Corporation (GIDC) under investment legislation. These can include relief from import duty on equipment and building materials and, for qualifying projects, tax holidays or reduced rates for a period. Incentives are negotiated and granted project by project, with conditions on employment, investment levels and timelines, and they can be withdrawn if conditions are not met.
Grenada, like several Caribbean jurisdictions, previously operated offshore-style regimes for international companies. Under pressure from the OECD and the European Union over harmful tax practices, such regimes across the region have been closed to new entrants or reformed, with grandfathering periods for existing companies. Any structure marketed today as exempt from Grenadian tax should be examined carefully by an independent adviser.
Incentives also have international limits. A tax holiday in Grenada may simply shift tax to the owner's home country if that country taxes foreign profits of controlled companies.
Taking profit out: salary, dividends or fees
How an owner extracts money from a Grenadian company shapes the total tax bill. A salary paid to an owner who works in Grenada is deductible for the company but taxed as employment income through PAYE, with NIS on top. Dividends are paid from profits that have already borne corporation tax, and may carry withholding tax if the shareholder is non-resident. Management or consulting fees charged from abroad are deductible if genuine and fairly priced, but may also be subject to withholding.
The right mix depends on where the owner lives, how their home country treats each type of payment, whether a credit is available for Grenadian tax, and immigration status: an owner drawing a salary for work done in Grenada will normally need a work permit unless exempt as an OECS or qualifying CARICOM national.
There is no universal answer, which is why owners should model the options with an accountant before the first distribution. Changing approach later is possible, but past payments are taxed as they were made.
A basic compliance calendar
Owners who run a simple calendar from the start avoid most penalties and delays.
- Each month: remit PAYE and NIS deducted from staff, and file VAT returns if registered.
- Each quarter: pay any corporation tax instalments required and check turnover against the VAT threshold.
- Each year: prepare accounts, file the corporate income tax return and pay any balance, settle Annual Stamp Tax, and file the annual return with CAIPO.
- Whenever paying non-residents: deduct and remit withholding tax, and keep the supporting agreements and invoices.
- Before renewals: obtain a tax clearance certificate in good time for work permits, licences and contracts.
- On any change: tell the IRD, NIS and CAIPO promptly about new directors, a new registered address, a change of business activity or the closure of a branch, since outdated records delay clearances.
- Keep books and supporting records for at least the period the tax law requires, commonly several years, in a form an auditor or IRD officer can follow without the owner present.
Compliance mistakes foreign owners make
Treating the company as a personal account. Paying personal bills from company funds creates taxable benefits, complicates the accounts and can lead to withholding questions if the owner is non-resident.
Ignoring the tax clearance certificate. Work permit renewals, government contracts, some licences and property transactions require a certificate that the company's taxes are up to date across every tax it is registered for.
Forgetting CAIPO. Filing an annual return with CAIPO is separate from tax but needed to keep the company in good standing. Struck-off companies cannot open accounts or sign contracts.
Charging management fees without documentation. Fees paid to a related company abroad should reflect real services at a fair price, supported by agreements and invoices.
Leaving Annual Stamp Tax off the budget. Because it is based on turnover, not profit, start-ups are sometimes surprised to owe it in their first loss-making year.
Frequently asked questions
What is the corporate tax rate in Grenada?
Recent published summaries report a flat corporate income tax rate of 28 per cent on chargeable profits for resident companies. Incentive regimes can reduce this for approved projects. Confirm the current rate and any concessions with the Inland Revenue Division or an accountant.
Does Grenada withhold tax on dividends paid to foreign shareholders?
Withholding tax applies to certain payments to non-residents, and dividends are among those commonly listed, at a rate widely reported as 15 per cent. Residents of participating CARICOM states may be able to claim relief under the regional agreement.
Do Grenadian companies pay tax on turnover?
Yes, through Annual Stamp Tax, which is levied on gross business receipts at rates that vary by business size, with some receipts exempt. It is payable regardless of profit, so include it in cash-flow forecasts from the first year.
When does a company need to register for VAT in Grenada?
Registration is compulsory once taxable turnover exceeds the threshold set by the VAT Act, and voluntary registration is possible below it. Confirm the current threshold with the Inland Revenue Division, as it has been revised over the years.
Can a foreign company trade in Grenada without forming a local company?
A foreign company can register a branch as an external company with CAIPO and is then taxed on profits attributable to Grenada. Licensing, immigration and land-holding rules still apply, so compare the branch and subsidiary options with a local lawyer.
