In a landmark ruling, the Caribbean Court of Justice has upheld the imposition of withholding tax on payments made by the Bank of Nova Scotia’s Saint Lucia branch to its foreign head office and regional subsidiaries.
The Court dismissed the bank’s appeal, agreeing with the Eastern Caribbean Supreme Court that these payments, labelled as reimbursements for support services, qualify as “management charges” under Saint Lucia’s Income Tax Act and are subject to withholding tax.
The judgment also clarified that interest expenses incurred by the bank in its operations are considered part of the “cost of sales,” reflecting the modern treatment of financial services. The Court awarded costs to the Comptroller of Inland Revenue totaling over 58 thousand Eastern Caribbean dollars.
The decision reinforces the tax authority’s ability to capture cross-border branch payments and provides important guidance for banks operating across the Caribbean.
