Taxes are where many new Grenadian businesses come unstuck, not because the rates are unusually high but because there are several different taxes with different deadlines, and some are calculated on figures most owners do not track until an accountant asks for them. A small shop or guesthouse can easily be liable for income tax, Annual Stamp Tax, VAT, payroll deductions, property tax and import duties in the same year.
This explainer sets out each tax, who it applies to and how the timing works, so you can plan cash flow from the first month. Rates and thresholds are those generally reported at the time of writing. Budgets and amendments change them, and special relief measures have been introduced after events such as Hurricane Beryl, so confirm figures with the Inland Revenue Division or a qualified accountant before filing.
Income tax: sole traders and companies
Sole traders and partners. Profits from an unincorporated business are taxed as the owner's personal income. The widely reported structure is a tax-free band on the first EC$36,000 of chargeable income, 10 per cent on the next EC$24,000 and 28 per cent above that. Allowable business expenses reduce the profit, so receipts matter.
Companies. Resident companies pay corporate income tax on profits, at a rate of 28 per cent according to recent published tax summaries. Dividends paid out to shareholders are treated separately, so a director-owner should take advice on the mix of salary and dividends.
Returns and instalments. Annual income tax returns are filed with the Inland Revenue Division after the year end, and businesses may be required to pay instalments during the year based on expected profit. Ask the Division for your filing calendar when you register.
Losses. Losses in early years can generally be carried forward against later profits within set limits, which is another reason to file returns even in a loss-making year.
Capital allowances. Instead of deducting the full cost of equipment, vehicles and buildings in the year of purchase, businesses claim allowances that spread the cost over several years at rates set out in the tax law. Keep invoices for every asset, including the customs entry if it was imported, because the allowance depends on the documented cost.
VAT: the tax that changes how you price
Value Added Tax is charged at a standard rate of 15 per cent, with a reduced rate for some accommodation and tourism services and a list of exempt and zero-rated supplies, including some basic foods and medical services. Registration becomes compulsory once taxable supplies reach EC$300,000 a year. Once registered, you charge VAT on sales, reclaim the VAT you pay on business purchases and imports, and file regular returns, usually monthly, paying the difference.
The practical effect is on pricing. A business that crosses the threshold mid-year and keeps its old prices effectively loses 15 per cent of its margin overnight. Watch your turnover as you approach the threshold and plan the change, including updating invoices to show VAT separately and your registration number. Businesses below the threshold that sell mostly to VAT-registered companies sometimes register voluntarily, because their customers can reclaim the VAT and the business can recover VAT on its own costs.
VAT-registered businesses must issue proper tax invoices showing the supplier's details, the customer, a description of the goods or services, the VAT charged and the registration number. Customers who are themselves registered need these invoices to reclaim VAT, and an incomplete invoice can lose you a business customer. Keep copies for the period required by law.
Annual Stamp Tax and other business levies
The Annual Stamp Tax is a tax on a business's gross receipts, calculated using the previous year's receipts and payable annually. It has been amended several times, with the rate set lower for smaller businesses and a portion of receipts exempt, and some sectors such as petrol sales treated differently. Because it is based on turnover rather than profit, a business can owe it even in a year when it made a loss.
Other levies depend on the activity. Hotels and guesthouses collect accommodation-related taxes and fees on top of VAT, businesses that import goods pay customs duty and related charges, and some sectors pay licence fees to their regulators. Property tax is charged on land and buildings annually, so if your business owns its premises, include it in the budget. The Inland Revenue Division and Customs and Excise Division publish notices when rates change.
If you are unsure whether a levy applies, ask the Inland Revenue Division in writing and keep the reply. Written guidance protects you if the question comes up again in an audit.
A first-year tax calendar for a small business
The exact dates for your business depend on your registrations, but a typical year looks like this.
- Every month: remit PAYE income tax deducted from employees to the Inland Revenue Division and NIS contributions to the National Insurance Scheme. If VAT-registered, file your VAT return and pay.
- Every quarter: pay any income tax instalments the Division has asked for, and review turnover against the VAT threshold.
- Once a year: pay Annual Stamp Tax on the previous year's receipts, file the annual income tax return, issue employees their annual earnings statements, and pay property tax on business premises.
- For companies: file the annual return with CAIPO, which is separate from tax but needed to stay in good standing.
- When importing: pay duties and VAT at clearance through Customs, usually via a licensed customs broker.
- Before tenders and permits: obtain a tax compliance certificate, which government agencies and some banks ask for.
Records to keep, and for how long
Good records are what make every tax return and every query manageable. Keep them for at least the period the Inland Revenue Division can review, generally several years, and longer for property and assets.
- All sales invoices or receipts, numbered in sequence, and daily cash-up figures if you take cash.
- Purchase invoices and receipts for stock, supplies, services and equipment, kept in date order.
- Customs entries and import documents for anything you brought in, which support both VAT claims and the cost of assets.
- Bank statements for every business account, reconciled monthly against your books.
- Payroll records: wages paid, hours, PAYE and NIS deductions, and copies of pay slips.
- Copies of every tax return filed and every receipt for tax paid, so you can prove compliance quickly when a bank, tender or permit application asks.
- A fixed asset list showing what equipment and vehicles the business owns, when they were bought and for how much, which affects capital allowances.
- Loan agreements, leases and major contracts, which help explain interest and rent in your accounts.
Mistakes and how to avoid them
The most expensive mistake is not filing because the business made little money. Penalties and interest apply to late returns regardless, and an unfiled year blocks the tax compliance certificate you will need for government contracts, work permit applications for staff and some loans. File even if the answer is zero.
The second is mixing personal and business money. Without a separate business account and kept receipts, you cannot prove expenses and will pay tax on more than your real profit. A basic bookkeeping routine, done weekly, turns year-end from a crisis into an afternoon.
The third is overlooking concessions. Approved investment projects may receive duty and tax concessions through the Grenada Investment Development Corporation, and government has periodically offered amnesties on penalties and interest. Ask an accountant whether anything applies before you assume full rates.
Frequently asked questions
What is the corporate tax rate in Grenada?
Recent published tax summaries put the corporate income tax rate at 28 per cent of taxable profits. Concessions can apply to approved investment projects. Confirm the rate in force and any changes from the latest budget with the Inland Revenue Division.
Do small businesses have to charge VAT in Grenada?
Only if taxable supplies reach the registration threshold, currently reported as EC$300,000 a year, or if they register voluntarily. Businesses below the threshold do not charge VAT but cannot reclaim VAT on their purchases either.
What is the Annual Stamp Tax?
It is a tax on a business's gross receipts, calculated on the previous year's turnover and paid annually to the Inland Revenue Division. Rates are small percentages that have been adjusted several times, with lower rates for smaller businesses.
Do you pay tax if your business made a loss?
You will not pay income tax on profits you did not make, but you must still file a return. Turnover-based taxes such as Annual Stamp Tax may still be due, and payroll deductions must be paid whatever the result.
What is a tax compliance certificate used for?
It confirms you are up to date with tax filings and payments. Government departments ask for it in tenders and licensing, and it is commonly requested for work permit applications for staff and by lenders.
