(1) Despite section 37, where a person carrying on business in Saint Lucia incurs expenditure by way of paragraph 1(1)(a) and 1(1)(b) of Schedule 3, or by way of head office expenses being expenditure payable—
(a) to a non-resident (such non-resident not being engaged in a business in Saint Lucia giving rise to such management charges); or
(b) by a branch of a non-resident company to its head office or to some other branch outside Saint Lucia of such company, a deduction shall be allowed of the lesser of—
(i) the aggregate of such charges, or
(ii) ten per cent of the deductions (exclusive of such charges) allowable under section 37 (excluding cost of sales) and the provisions of section 38(1) other than section 39(1)(a), or such higher amount as in the opinion of the Comptroller is reasonable.
(Amended by Act 7 of 2006)
(2) Despite section 37, in ascertaining the chargeable income of a controlled company for any year of income, the Comptroller may disallow any amount, otherwise deductible, which is paid or payable to a shareholder or any associate of a shareholder by way of—
(a) employment income; or
(b) interest on a loan by such person to the company,
and which in the opinion of the Comptroller is excessive in amount, having regard to the duties performed or the rate of interest payable on such loan.
(3) For the purposes of subsection (2)—
(a) “a controlled company” means a resident company which is owned and controlled by not more than 5 shareholders excluding the Government and any company which is not itself a controlled company;
(b) “an associate of a shareholder” means, in relation to a shareholder, an individual who is—
(i) the spouse or the shareholder, or
(ii) a lineal ancestor, child or other lineal descendant, brother, sister, uncle, aunt, nephew or niece of the shareholder or of his or her spouse;
(c) a company shall be deemed to be owned and controlled by not more than 5 shareholders where 5 or less individual persons and any associates of such persons (within the meaning of paragraph (b)) beneficially own shares carrying between them, directly or indirectly—
(i) the right to exercise more than 1/2 of the voting power in that company,
(ii) the right to receive more than 1/2 of any dividends that might be paid by that company, and
(iii) the right to receive more than 1/2 of any capital distribution in the event of the winding up or of a reduction in the share capital of that company.
(4) Despite section 37, a deduction shall be allowed in respect of expenditure incurred by a married person by way of employment income within the meaning of section 34 to his or her spouse as an employee or former employee, only to the extent to which the Comptroller is satisfied that such expenditure is reasonable in amount, and any amount which is not allowed as a deduction by reason of this subsection shall be deemed not to be employment income of the spouse to whom it was paid.
(5) Subsection (4) applies to a partnership in respect of employment income paid or payable to the spouse of one of the partners and, despite section 21, any amount which is not allowed as a deduction is chargeable income of such partner.