For several decades Barbados has stood as an international business and financial services centre of choice
For several decades Barbados has stood as an international business and financial services centre of choice, mainly for Canadian investors, who valued the advantage provided by the jurisdiction’s legislative and tax regime. However, last year the impact of international regulatory compliance demands resulted in changes to these regimes, which triggered a subtle but powerful shift for Barbados’ corporate landscape. Effective January 1, 2019, four Acts were repealed, nine Acts were amended, and three new Acts were passed by the Government of Barbados to make the island one of the first countries in the Caribbean to converge its domestic and international tax rates.
Barbados was confident in being a first mover in this tax reformation space because it has always prided itself on being a jurisdiction of substance rather than competing in the race to the bottom posed by zero tax environments. These actions fulfilled Barbados’ commitment to be compliant with the Organisation for Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action 5 Initiative. On January 29, 2019, the OECD released its Harmful Tax Practices – 2018 Progress Report on Preferential Regimes report prepared by the Forum on Harmful Tax Practices (FHTP), which listed Barbados as one of 44 such regimes that had delivered on its commitment to make legislative changes to abolish or amend its tax regime and had been therefore found to be “not harmful”. In May 2019, Barbados received a further stamp of approval when the European Union removed Barbados from its list of territories considered “non- cooperative tax jurisdictions”.
These sweeping changes meant that Barbados removed the ‘ring fence’ that had existed around International Business Companies (IBCs), and other special purpose business entities, which no longer legally exist, to keep them separated from the domestic corporate environment. However, the convergence of the tax rate to a considerably lower level has now provided domestic companies with the same advantage previously enjoyed by international entities wanting to use Barbados as a conduit for their global business expansion. Barbados’ deep network of over 30 Double Taxation Agreements (DTAs) and Bilateral Investment Tax Treaties (BITs) provides protection and stronger returns on investment for Barbadian companies looking to expand into emerging economies in nearby Latin America and even Africa. In 2019 Barbados continued to deepen its relations with Africa, having concluded negotiations with Kenya on a BIT, while negotiating both a BIT and a DTA with Ghana and finalising arrangements with Morocco for a DTA.
Barbados has already started to gain global recognition in the financial technology (FinTech) space with a local Barbados company providing the infrastructure to engage in a trial with the Eastern Caribbean Central Bank, which may result in the first central bank in the world to digitise fiat currency. That Barbados could be leading in this area, ahead of China and other economies that have signalled their intention to move in this direction, speaks to the wealth of benefits in the areas of knowledge transfer, technological and infrastructural improvements, and economic and social development that the international business sector has brought to the island over the past five decades. It is on this basis that the BIBA looks toward the future of the global business sector in Barbados with great anticipation. Through the sheer strength of its human capital, this island has become ranked among the international business and financial services centres of choice in the world, including Top 7 globally for captive insurance domiciles, and Top 3 recipient of Canadian direct investment. Now, Barbados has expressed an ambitious target of becoming a leading digital hub for business and living and BIBA will continue to support government in its strategies to engage the general public and private sector in understanding the digital priorities and programs that will be needed to support this transformation to a Smart Barbados.
In a Smart Barbados, the thrust is towards providing specialised knowledge and training required in the use of cutting-edge technologies. Residents will be exposed to more options in terms of job experience and job mobility; and the increased global business activity will provide new sources of revenue for our tourism products, relocation and real estate service providers, and a myriad of ancillary services needed to support these new businesses. The potential exponential growth in our foreign reserves and improvement in other macroeconomic fundamentals makes this a win-win situation for all involved.
BIBA has spent almost two decades championing the benefits of global business to Barbados and the concomitant development that it has brought to this island. As we look to the future, despite the ongoing economic challenges, Barbados continues to see net growth in multinational businesses registering in the jurisdiction. This, along with the benefits reaped by domestic companies due to the ease in their corporate tax obligations makes BIBA confident that, once the economic recovery takes firm hold, we should see a rapid acceleration in the expansion of global business from this small island.