Country Name: Grenada
Currency: East Caribbean Dollar (XCD)
Primary Tax Authority: Inland Revenue Division (IRD)
Key Legislation:
- Income Tax Act
- Value Added Tax Act
- Corporate Tax Act
Fiscal Authority Allocation
Centralized Fiscal System:
Grenada operates a centralized tax system, with the Inland Revenue Division (IRD) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), and value-added tax (VAT). Local governments collect minor fees, but the central government is responsible for most tax revenue collection.
Corporate Income Tax (CIT)
Standard Rate: 28%
Grenada applies a corporate income tax rate of 28% on net taxable income for resident companies. Non-resident companies are taxed on Grenada-sourced income.
Corporate Forms and Taxation:
- Corporation (Company): The most common corporate form, subject to the 28% CIT rate.
- International Business Company (IBC): IBCs conducting business outside Grenada are exempt from CIT on foreign-sourced income.
- Branches of Foreign Companies: Taxed at the same 28% CIT rate on Grenada-sourced income.
Exemptions and Incentives:
- Tax Holidays: Companies in sectors such as manufacturing, tourism, and agriculture may qualify for tax holidays of up to 15 years.
- Investment Incentives: Grenada offers various incentives for businesses investing in key sectors, including tourism and renewable energy. These incentives may include CIT reductions, customs duty exemptions, and VAT exemptions.
Goods and Services Tax (GST) / Value-Added Tax (VAT)
Standard Rate: 15%
Grenada applies a VAT rate of 15% on most goods and services. VAT is levied on the sale of goods, provision of services, and imports.
Reduced Rate: 10% for certain tourism-related services.
Exemptions: Basic food items, educational services, healthcare services, and certain financial services are exempt from VAT. Exports are zero-rated, allowing businesses to reclaim VAT on inputs used in export production.
Personal Income Tax (PIT)
Progressive Rates:
Grenada applies progressive personal income tax rates to residents and non-residents earning Grenada-sourced income:
- Up to XCD 24,000: 0%
- Above XCD 24,000: 10% for the first XCD 24,001 – 36,000 and 28% for income above XCD 36,000
Dividends:
Dividends paid to residents are exempt from income tax, while dividends paid to non-residents are subject to a 15% withholding tax.
Additional Mandatory Contributions
Social Security Contributions:
Employers and employees must contribute to Grenada’s social security system, which provides pensions, healthcare, and unemployment benefits.
- Employer Contribution: 6% of gross salary.
- Employee Contribution: 4% of gross salary.
Withholding Taxes
- Dividends: 15% for non-residents (exempt for residents).
- Interest: 15%
- Royalties: 15%
Withholding tax rates may be reduced under Grenada’s double taxation agreements (DTAs).
Transfer Pricing Rules
Grenada does not have formal transfer pricing regulations but expects that related-party transactions are conducted at arm’s length and comply with international best practices.
Special Tax Regimes
- International Business Companies (IBCs): IBCs conducting business outside Grenada are exempt from income tax, capital gains tax, and withholding taxes on foreign-sourced income, making Grenada attractive for offshore operations.
- Tourism Incentives: Companies investing in Grenada’s tourism sector can benefit from tax holidays, VAT exemptions, and reduced import duties on tourism-related equipment.
- Renewable Energy Incentives: Grenada provides tax incentives for investments in renewable energy projects, including CIT exemptions, VAT reductions, and accelerated depreciation for qualifying green energy investments.
Other Taxes
- Real Estate Tax: Property taxes in Grenada are based on the value of the property and range between 0.1% and 0.5% of the assessed value.
- Capital Gains Tax: Grenada does not impose a specific capital gains tax. Capital gains are generally included as part of ordinary income and taxed at the applicable CIT or PIT rates.
- Excise Taxes: Grenada imposes excise taxes on specific products, such as alcohol, tobacco, and fuel.
Double Taxation Agreements (DTAs)
Grenada has signed double taxation agreements with countries including the United Kingdom and CARICOM member states. These agreements help reduce withholding taxes on dividends, interest, and royalties and prevent double taxation of cross-border income.
Local Taxes
Local governments in Grenada collect property taxes and certain minor fees, but the Inland Revenue Division (IRD) administers most major taxes, including income tax and VAT.
Compliance and Reporting
Annual Filing:
Corporate tax returns must be filed by March 31st of the following year. Personal income tax returns are due by the same date. The tax year in Grenada follows the calendar year.
Penalties for Late Filing:
Penalties for non-compliance or late filing include interest on overdue taxes and fines. Interest on unpaid taxes is generally set at 1.5% per month, with additional penalties for significant delays.
Recent Developments
Digital Economy and E-commerce:
Grenada is working on developing regulations to tax digital services and e-commerce activities. With the rise of online business, the government is aiming to capture tax revenue from digital platforms providing services to Grenadian consumers.
Green Energy and Sustainability:
Grenada continues to promote investment in renewable energy projects by offering tax incentives and reduced rates on customs duties for businesses involved in solar, wind, and geothermal energy projects. The government’s goal is to reduce the island’s dependence on imported fossil fuels.
Citizenship by Investment (CBI) Program:
Grenada’s Citizenship by Investment program continues to attract foreign investors by offering tax benefits, including exemptions from CIT, VAT, and import duties, for individuals who invest in real estate and other sectors of the economy.
Subscribe to my free newsletter for regular updates on law, taxation and business worldwide.