Grenada’s citizenship‑by‑investment (CBI) program offers a passport that can be used for travel and, for many investors, as a base for a low‑tax lifestyle. The key tax considerations revolve around residency rules, the territorial tax system, and the treatment of capital gains.
Tax residency in Grenada
- 183‑day rule – Anyone who spends 183 days or more in a calendar year on the island is deemed a tax resident. Staying fewer than 183 days means you are not a tax resident, regardless of citizenship status.
- The rule applies uniformly to tourists, citizens, temporary or permanent residents.
Territorial tax system
- Grenada taxes only income sourced within the country.
- Grenadian‑source income (e.g., local employment, business profits, rental income from Grenadian property) is subject to tax.
- Foreign‑source income (e.g., dividends, interest, capital gains, rental income from abroad) is not taxed in Grenada.
- This makes Grenada one of the most tax‑friendly Caribbean CBI jurisdictions.
Capital gains
- No capital gains tax is levied on any asset, whether stocks, cryptocurrency, or other investments, regardless of where the gain originates.
Implications for U.S. citizens
- The United States taxes its citizens on worldwide income, regardless of residence. Obtaining Grenadian citizenship does not change U.S. filing obligations (Form 1040, FBAR, Form 5471 for foreign corporations, etc.).
- Grenadian residency can help satisfy the Foreign Earned Income Exclusion (FEIE):
- Physical presence test – 330 days outside the U.S. in a 12‑month period.
- Bona‑fide residence test – Requires proof of genuine ties to Grenada (e.g., owning a home, spending ≥6 months annually). This test can be more flexible for those who need to spend more time in the U.S. than the physical‑presence test allows.
- Grenada also offers potential access to the U.S. E‑2 investor visa, but the 2022 “Amigos Act” now requires three years of domicile in Grenada before eligibility.
Implications for other nationals (Canada, UK, EU)
- Citizens of countries that tax on residency (rather than citizenship) can relocate to Grenada, become tax residents, and enjoy territorial taxation.
- After properly severing tax residency in the home country, foreign‑source income and capital gains remain untaxed in Grenada.
Practical steps for prospective investors
- Determine residency intent – Decide whether you will spend ≥183 days in Grenada.
- Assess source of income – Verify that the bulk of your earnings is foreign‑source to benefit from the territorial regime.
- Plan for capital gains – If a significant portion of wealth comes from asset appreciation, Grenada’s lack of capital gains tax is a direct advantage.
- For U.S. persons –
- Continue filing U.S. returns and comply with FBAR/ FATCA.
- Use Grenadian residency to support the FEIE, choosing the test that aligns with your travel pattern.
- Consider the three‑year domicile requirement if the E‑2 visa is a goal.
- Exit planning – If you are leaving another tax jurisdiction, ensure you meet that country’s “departure” rules to avoid lingering tax obligations.
Risks and caveats
- U.S. worldwide tax – U.S. citizens remain fully liable to U.S. tax, so Grenada does not eliminate U.S. filing duties.
- Residency proof – The bona‑fide residence test can be subjective; documentation of physical presence, property ownership, and local ties may be required.
- Changing legislation – Tax and immigration rules can evolve; the three‑year domicile rule for the E‑2 visa is a recent example.
- Dual‑tax treaties – Grenada has limited treaty network; reliance on treaty relief is minimal.
Overall, Grenada’s CBI program provides a passport that, when combined with at least six months of physical presence, yields a territorial, capital‑gains‑free tax environment. For U.S. citizens, it can simplify the path to the foreign earned income exclusion, while for other nationals it offers a straightforward way to relocate and minimize tax on global investments.
