Unicomer (St. Vincent) Ltd. v Appeal Commissioners and The Comptroller of Inland Revenue

Mikhail Charles Mikhail Charles 29th April 2024

In Unicomer (St. Vincent) Ltd. v Appeal Commissioners and The Comptroller of Inland Revenue, the Court dismissed Unicomer's appeal and affirmed the Comptroller's assessments disallowing certain deductions and imposing withholding taxes.

The key practical takeaways from the judgment are:

(a) Credit protection insurance (CPI) premiums paid by a company may be disregarded as deductions by the Comptroller if the Comptroller reasonably determines the underlying transactions are abnormal or create non-arms length rights/obligations, even if an independent third party insurer is interposed.

(b) CPI premiums paid directly or indirectly by a SVG company to a related non-resident entity are subject to withholding tax, despite an interposed independent third party insurer, if no reinsurance contract exists between the company and non-resident.

(c) For tax purposes, hire purchase income accrues when recorded in a company's books under commercially recognized accounting principles other than cash basis. The Income Tax Act does not allow deferral of such profits to when cash is actually received.

The Court gave deference to the Comptroller's determination that the CPI arrangement, while involving a third party insurer, was still abnormal and allowed profit shifting to a related entity. The financial statements showing premiums paid directly to the related reinsurer were key evidence relied upon.

Unicomer intends to seek leave to appeal to the Privy Council to definitively settle the interpretation and application of these important Income Tax Act provisions. The appeal will examine the extent of the Comptroller's discretion to look through transactions, the evidence required to deem payments as made to a non-resident related party, and when income is considered accrued for tax purposes.

This decision highlights the need for companies to carefully structure related party transactions and insurance arrangements to avoid adverse tax consequences. 


Mikhail Charles has an offshore practice in the Caribbean and is available to represent clients and provide advice to clients in England and Wales about offshore issues. 

Back to blog