WORLD TRADE
ORGANIZATIONG/SCM/N/71/KNA
4 March 2002
(02-1091)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
New and Full Notification Pursuant to Article XVI:1 of the GATT 1994
and Article 25 of the Agreement on Subsidies and
Countervailing Measures
ST. KITTS AND NEVIS
The following communication, dated 28 February 2002,  has been received from the Ministry
of International Trade, CARICOM Affairs, Labour, Social Security, Telecommunication and
Technology in St. Kitts and Nevis.
_______________
The attached as per paragraph 1(b) of the procedures for extension under SCM Article 27.4 in
G/SCM/39, is the notification in respect of the Fiscal Incentive Programme identified in
G/SCM/N/74/KNA. This programme is cont ained in section 1 of the notification.
The programme description is as of 1 September 2001.
The relevant sections of the legislation underlying the notified programmes are attached to the
notification. (Attachment 1)
CONTENTS
Page
SECTION I - (Contents)................................................................................................................... .1
SECTION II - Definitions .................................................................................................................2
SECTION III - Official Notification of Programme.........................................................................2
Appendix I Excerpts from Fis cal Incentives Act 1974-17..................................................................5G/SCM/N/71/KNA
Page 2
SECTION II
Definitions
• An approved enterprise means an enterprise declared by Order of the Governor under section 6
for the purpose of conferring a benefit under this Act.
• A highly capital intensive industry means one such industry whose capital investment is not  less
than US$25 million.
• The Tax holiday period and classification of Approved Enterprises are found in Schedule III of
the Act which is attached.
• Local value added is defined as the amount realised from the sales of the product over a
continuous period of 12 months, minus the cost of imported raw materials, components, parts of
components, fuels and services, and the wages and salaries paid to foreign nationals.
SECTION III
Official Notification
1. Title of the programme for which extension is requested pursuant to procedures in G/SCM/39
A.  Fiscal Incentives Act No. 17 of 1974
- An act to provide incentives to industry
2. Period covered by the notification
A.  This programme is as of 1 September 2001.B . The statistical data provided under data points 7 and 9 covers fiscal 2000-20013. Policy Objective and/or purpose of the subsidy
The objective of this programme is to stimulate export performance, support investment,
economic activity and promote diversification in traditional and non-traditional products.
4. Background and authority for the subsidy
Background
The Government of St. Kitts and Nevis considers that appropriate conditions for encouraging
foreign direct investment is to be promoted in  order to ensure the economy remains in a viable
position.
Authority
No. 17 of 1974- Fiscal Incentives Act of  St.Kitts, Nevis and AnguillaG/SCM/N/71/KNA
Page 3
5.  Form of the subsidy
The subsidy takes the form of a tax exemption.
6. To whom and how the subsidy is provided ( whether to producers, exporters or others),
through what mechanisms, whether it is a fixed sum or fluctuating amount per unit and, if the
latter, how the amount is determined
The Fiscal Incentives Act allows for the granting of a tax holiday of up to fifteen years, for
the manufacture of approved products by approved enterprises.  The duration of these concessions is
in accordance with the local value added generated. In this respect, the Act classifies these approved
enterprises as follows:
1. Group 1 enterprises, where local value added is 50 per cent or more sales, may enjoy
a tax holiday of up to 15 years.
2. Group 2 enterprises, where local value added is between 25 per cent-50 per cent of
sales, may enjoy a tax holiday of up to 12 years.
3. Group 3 enterprises, where local value is between 10 per cent-24 per cent of sales
may enjoy a tax holiday of up to 10 years.
4. Enclave enterprises, where production is exclusively for export, may enjoy a tax
holiday of up to 15 years.
Where an approved enterprise is engaged in a highly capital intensive industry it may receive
some benefit for a period up to 15 years.
The Act also grants import duty exemptions  for the importation of machinery equipment,
spare parts, building materials, raw materials and others, as appropriate to be used in eligible
enterprises.
The Fiscal Incentives Act No. 17, 1974 further provides for income tax relief under certain
circumstances once the tax holiday period has expired. This relief is contingent on exportperformance.  It is granted on the export profits of an enterprise accruing from its exports of its
approved product. Relief is provided for non-traditio nal exports to all countries; however in the case
of exports to Guyana, Jamaica and Trinidad and Tobago, the period of relief is of only five years
immediately following the expiration of the tax holiday period.
(Schedule II part two of the Act attached  explains the method of calculating export
allowance).
7. Subsidy per unit, or in cases where this is not possible, the total amount or the annual
budgeted amount for this subsidy ( indicating, if possible, the average subsidy per unit in the
previous year).  Where provision of per unit subsidy information (for the year covered by the
notification, for the previous year or both) is not possible a full explanation should be
provided
Given the nature and coverage of the programme there are no statistics available which reflect
the amount of subsidy per unit.  Further there is no provision within our annual budget to determine
the amount of funds allocated to this form of bene fit provided for approved enterprises because the
nature of assistance is revenue foregone.G/SCM/N/71/KNA
Page 4
Our limited technical and human capacity in the area of data collection in general and in
statistics processing in particular do not permit us to effectively collect, analyse and compile the
relevant data as required  However, just recently the Customs Department made some progress in
improving its database system which would help in processing relevant data.
The data submitted from the Customs Department revealed the following:
The total amount of the customs duties that the government forewent as a result of the
benefits granted under the Fiscal Incentives Programme for the past three months including
November, December and January were E.C.$ 809,494.78, E.C.$454,496.46, and E.C.$1,273,736.19
respectively.  Attached in Section Two (2) [Appe ndix 1] is a table showing a breakdown of totals
from the different Enclave Industries.
N.B. The totals shown above with respect to revenue foregone are only imports through the
seaport. The total for the Airport are recorded manually and as earlier indicated given our
limited technical and human capacity is difficult to assess this information thus making it
readily available.
8. Duration of the subsidy
The duration of the subsidy is subject St.Kitts and Nevis’ rights and obligations under the
WTO Agreements and in particular the SCM Agreement.
9. Statistics on the impact of the programme
The following table shows the total value of St.Kitts and Nevis foreign trade with world
partners on all commodities during the period 2000 and 2001.
Year Imports($EC) Domestic Exports ($EC) Re-Exports ($EC)
2000 529,134,040 78,813,717 9,742,881
2001 510,832,194 77,483,249 6,283,318G/SCM/N/71/KNA
Page 5
Appendix 1
No. 17 of 1974 The Fiscal  Incentives Act, 1974. Saint Christopher,
Nevis and Anguilla
I assent,
P. ALLEN
Governor
25 April1974
SAINT CHRISTOPHER, NEVIS AND ANGUILLA
No. 17 of 1974
AN ACT to give effect to an Agreement on harmonization of fiscal incentives to
industry and for other purposes connected therewith.
(25 April 1974.)Commencement
Be it enacted by the Queen's Most Excellent Majesty, by and with the advice and
consent of the House of Assembly of Saint Christopher, Nevis and Anguilla and by
 the authority of the same as follows:-
1. This Act may be cited as the Fiscal Incentives Act, 1974.Short title
2(1) In this Act -Interpretation
"approved enterprise" means an enterprise declared by Order of the Governor under
section 6 for the  purpose of conferring a benefit under this Act:
approved product" means a product declared by Order of the Governor under section
- 5 for manufacture by an approved enterprise;
benefit" means any relief granted to an approved enterprise under this Act;"Common Market" means until May 1st, 1974, all States referred to in Schedule 1
and thereafter such of those States that are parties to the Treaty establishing the
Caribbean Common Market;
"Comptroller" means the Comptroller of Customs;
“construction day” means the day specified in an
Order made pursuant to section 6(1);
"Enclave Enterprise” &' means an enterprise producing exclusively for export to
countries outside the Common Market;
"Enterprise" means a company incorporated under the Laws of the State and engaged
or about to engage in an industry;G/SCM/N/71/KNA
Page 6
"Group I Enterprise" means an enterprise in  respect of which the local value added is
at least fifty per centum of the amount realised from the sales of an approved
product.
"Group II Enterprise" means an enterprise in respect of which the local value added
is at least twenty-five per centum but less than fifty per centum of the amount
realised from the sales of an approved product.
"Group III Enterprise" means an enterprise in respect of which the local value added
is at least ten per centum but less than twenty-five per centum of the amount realised
from the sales of an approved product;
"industry" means a manufacturing or processing industry and includes deep sea
fishing and shrimping where they form part of an integrated processing operation, but
does not include Agriculture and Tourism;
"local value added" means the amount (expressed as a percentage of the total sales of
an approved product) by which the amount realised from the sales of an approved
product over a continuous period of twelve months, exceeds the aggregate amount of
the following:-
(i) the value of imported raw materials, content of components and parts
thereof, fuels and services 1 but for the purpose of determining the value of
the content of a component no account shall be taken of any element in the
cost of a component other than the value of the  imported raw material;
(ii) wages,  salaries or both paid during the twelve month period to persons who
are not nationals of a Member State;
(iii) profits distributed or remitted directly or indirectly to persons (including
companies) who are not resident in a Member State;
(iv) interest, management charges and other Income payment or any of them
accruing directly or indirectly to persons (including companies) who are not
resident in a Member State, other than a branch or agency of a bank not
resident in a Member State;
(v) depreciation in the imports of plant, machinery and equipment, or any of
them;
"Member State" means a State listed in Schedule I;  "Minister" means the member of
the Cabinet to whom responsibility for the subject of trade is assigned;
"National" means a person who is a citizen of a Member State and includes a person
whose connection with such a State entitles him to be regarded as belonging to, or
being a native or resident of the State for the purposes of the laws relating to
immigration for the time being in force;G/SCM/N/71/KNA
Page 7
“non-resident in a Member State” in relation to a Company means a company that is
controlled directly or indirectly by a person (including a company) who is not
resident in a Member State;
"production day" means the day on which an approved enterprise commences
production of an approved product;
"sale" means the proceeds of sale ex-factory of an approved product exclusive of the
cost of distribution;
(2) References in this Act to a section or a schedule & unless the contrary
intention appears to a section of or a schedule of this Act as the case may be;
and references in a section to a subsection are unless the
Of  the provisions of this section shall be guilty of an offence and liable on
summary conviction before a Magistrate to a penalty of three times the value of thearticle, the disposal of which contravenes such provisions.
Benefits to be
Granted to
approved
enterprises andmode of
classification of
enterprises.
10. (1) An  approved  enterprise may be granted a benefit under this Act if it is
classified under one of the following categories -
(a) Group  I Enterprise
Group II Enterprise
Group III Enterprise;
(b) Enclave Enterprise. (2) Prior to the classification of an approved enterprise as a Group I, Group l[
or Group [II Enterprise, the local value added as computed in accordance with
section 3 shall be determined.
Benefits to be
approvedenterprise
engaged In
highly capitalintensive
Industry.
Schedule Ill
11. (1) Where an approved enterprise is engaged in a highly capital intensive
industry, the Governor may by Order published in the Gazette grant it any benefit fora period not exceeding that for which a benefit may be granted to an Enclave
Enterprise in accordance with Schedule III.
(2) In this section "highly capital  intensive industry" means an industry the
capital investment in which is not less than twenty-five million dollars.G/SCM/N/71/KNA
Page 8
Exemption from
Income tax for
approved
enterprises
Schedule III
12. (1) The  Governor  may  grant to  an approved enterprise complete or partial
exemption from income tax from the production day for a period not exceeding the
period specified in Schedule III (hereinafter referred to as “the tax holiday period”).
(2) Where the expiration of the tax holiday period does not coincide
with the end of the accounting period of an  approved enterprise, the income for the
accounting period during which the last day of the tax holiday period falls shall be
apportioned between the parts of the accounting periods which respectively precede
and follow the end of the tax holiday period; the income thus apportioned to the partof the accounting period which precedes the end of the tax holiday period shall be
exempt from income tax.
13. In computing the profits of an approved enterprise for the purpose of'
exemption from income tax under subsection (1) of section 12, allowance shall be
made for any depreciation in value resulting from any wear and tear which would,
but for the exemption, be claimable in that year.
14 (1) The provisions of the Special Development (Additional Incentives)
Act, 1968 shall apply to an approved enterprise, from the first year of income
following the year of Income during which the tax holiday period ends, except that &
deduction as an initial allowance for capital expenditure shall only be in respect ofexpenditure incurred after the expiration of the period of exemption from income tax.Computation of
profits for
purpose of
exemption fromtax
purpose of
exemption fromtax.
Deduction for
capital
expenditure for
purpose ofIncome tax relief
and set  off.
Act No.21 of 1968.
(2) Any loss incurred by an approved enterprise during the tax holiday
period may be set-off in accordance with the provisions of subsection (1) of
section 15.
15. (1)  Notwithstanding the provisions of section 12 of the Income Tax
Ordinance 1 on the expiration of the tax holiday period, the net losses incurred during
that period, may be carried forward for the purpose of set-off in computing the profits
of an approved enterprise for the five year period following the tax holiday period.
(2) Where the Order declaring an enterprise an approved enterprise is
revoked by virtue of subsection (3) of section 16, such an enterprise shall, for the
purposes if carrying forward net losses incu rred prior to the revocation of the Order,
be deemed to be an approved enterprise.G/SCM/N/71/KNA
Page 9
(3) For the purposes of this section "net losses" means the excess of all
losses over all profits made during the tax holiday period.
16. (1) Where a company has made export sales to a territory other than a
territory listed in Schedule 2 in computin g the tax chargeable for any year of income
of such company there shall be set off for the purposes of collection against the tax
chargeable on the chargeable income if such company an export allowance calculated
in the manner specified in Part 2 of Schedule II if the company in a claim. made for
the purpose satisfies the Comptroller of Inland Revenue that the provisions of this
section and if Schedule II  are applicable to it.
Export alIowance
may be granted
for Purpose ofincome tax relief.
Schedule II.Act No.28 of 1968.
Regulation,.
an application to be declared a special developer was made by a pioneer
manufacturer under the Special Development (Additional Incentives) Act, 1968, the
provisions of that Act shall continue to apply to that application.
25. (1) The Governor may make such regulations as he thinks necessary or
expedient for giving effect to the provisions of this Act.
(2) Regulations made under subsection (1) shall be laid before the
House of Assembly within thirty days af ter they have been made, and the House of
Assembly may by resolution amend or revoke the said regulations but without
prejudice to the validity of anything previously done thereunder.
(3) In reckoning such period of thirty days no account shall be taken of
any time during which the House of Assembly is dissolved or prorogued.
(4) The Governor may give retrospective effect to a regulation if it is
equitable for such regulation to have retrospective effect in order to confer a
benefit on, or to remove a disability from an approved enterprise.
26. The Governor shall exercise the powers vested in him by this Act in
accordance with the advice of the Cabinet.G/SCM/N/71/KNA
Page 10
Exercise of
powers of
Governor
Section 2
SCHEDULE I
MEMBER STATES
(a) Antigua Jamaica
Barbados MontserratBelize St' Kitts/Nevis/Anguilla
Dominica St. Lucia
Grenada St. Vincent
Guyana Trinidad and Tobago
(b) any other state of the Caribbean region that becomes a member of
the Common Market.
SCHEDULE II
PART 1
EXPORTS TO THE FOLLOWING TERRITORIES ARE
NOT ELIGIBLE FOR EXPORT ALLOWANCE
Antigua Grenada
Barbados Montserrat
Belize St. LuciaDominica St' Vincent
PART 2
METHOD OF CALCULATING EXPORT ALLOWANCE
1. An export allowance set off for the purposes of section 16 shall  be
calculated as follows:
Export profits as a percentage Rebate of income tax as a
                         of total profits percentage of income tax
   on export profits
10 but under 21 25%
21 but under 41 35%
41 but under 61 45%
61 and over 50%.
2. For the purposes of calculation -(a) "export profits as a percentage of total profits" shall be deemed to be “export
sales as a percentage of total sales”Section 16G/SCM/N/71/KNA
Page 11
profit attributable to exports shall be taken to be the amount resulting from the
formula P x E where –
                 S
(i) "P" represents the chargeable profit of a company for its year of income;
(ii) "E" represents the proceeds of sales (ex-factory) of the output of a company
exported during its year of income;
(iii) "S" represents the proceeds of sales (ox-factory) of the total output of the
company during its year of income.
3. In computing the proceeds of all sales for the year of income there shall be
deducted any excise duty paid on goods sold during that year.
SCHEDULE III
TAX HOLIDAY PERIODS
Classification of
Approved Enterprise Tax Holiday Period
Group Years
Group I Enterprise 15
Group II Enterprise 12
Group III Enterprise 10Enclave Enterprise 15Section 117, 12,
19(2)
W.F. GLASFORD Speaker
Passed in the House of Assembly this 17th day of April, 1974.
JAMES FLEMING
Ag. Clerk of the House of Assembly.
__________