Barbados has become well-known in the international business circles as a reputable and very attractive international business centre. Over the past several years, many foreign investors have established operations in Barbados to take advantage of the tax incentives offered under Barbados’ legislation and the double taxation agreements (“DTAs”) entered into with other countries.
Currently, a wide range of entities can be registered or incorporated in Barbados to carry on international business from within Barbados. The legislation offers generous tax incentives to International Business Companies (“IBCs”), International Societies with Restricted Liability (“ISRLs”), International Financial Services Companies (“IFSCs”), Qualifying Insurance Companies (“QICs”) and Exempt Insurance Companies (“EICs”).
The special incentives generally offered to such companies under Barbados’ international business legislation include the following:
- low tax rate between 1% and 2.5% on business profits, and 0% in the case of EICs;
- exemption from withholding taxes on dividends, interest, royalties, fees or other income paid to a non-resident of Barbados;
- foreign tax credits (not available to EICs) in respect of taxes paid outside of Barbados, in so far as it does not reduce tax payable to
less than 1%;
- exemption from import duty and value added tax (“VAT”) on the import of plant, machinery, equipment, raw materials, and
other goods required for their business;
- specified services provided to them are zero-rated for VAT;
- income tax concessions are provided to certain specially qualified expatriate employees;
- exemption from property transfer tax on the transfer of the shares or other assets of an IBC, except in the case of the transfer of real estate located in Barbados;
- exemption from ad valorem stamp duties, except in respect of transfers of real estate in Barbados; and
- freedom from exchange controls.
In addition to the incentives discussed above, Barbados’ domestic legislation offers other interesting tax incentives, available to both local and international companies, including:
- no tax on capital gains;
- foreign currency earnings credits available to certain qualifying international activities, e.g. architectural and engineering, investment management, e-commerce, etc.;
- no tax on dividends received from a foreign subsidiary in which it owns at least 10%.
A further advantage consists of Barbados’ network of DTAs which allows investors to structure international transactions and conduct business globally in a tax efficient manner. DTAs are in place with 19 countries including Canada, the United States,the United Kingdom, Botswana, Cuba, Caricom , China, Sweden, Mexico, Panama and Venezuela. Barbados has signed DTAs with Ghana and Luxembourg which have not yet been ratified. Further, discussions are ongoing with other Latin American, European and African countries. Most of Barbados’ DTAs do not preclude companies that are licensed to carry on international business from taking advantage of treaty benefits. These benefits include the following:
- reduced with holding tax rates on certain types of income such as dividends, interest and royalties;
- credits for foreign taxes paid;
- opportunities for reduced exposure to capital gains taxes on the disposition of certain types of property; and
- certainty as to the taxation of activities in a foreign jurisdiction by establishing thresholds for determining whether a taxable presence has been created.
Other incentives available to investors under other legislation are as follows in the chart below:
|Tourism Development Act|
(applicable to owners and operations of hotels, restaurants, villas, attractions)
|exemption from the payment of customs duty, environmental levy, excise tax and VAT on building materials and supplies|
exemption from payment of customs duty, environmental levy, excise tax and VAT on certain supplies required for refurbishment
deduction of capital expenditure for a period of 15 years
deduction of 150% of interest paid on loans
exemption from withholding tax on dividends paid to a share holder
|Special Development Areas Act|
(applicable to development located in specific areas in Barbados)
|exemption from customs duty, VAT and environmental levy on inputs for construction of new buildings and renovation or refurbishment of existing buildings|
reduction of corporate tax rate to 15%
deduction of capital expenditure in respect of commercial buildings and industrial buildings
exemption from land tax
exemption on property transfer tax on the initial purchase of property
|Fiscal Incentives Act|
(applicable to companies declared as approved enterprises)
|exemption from income tax from the date of production for the period of the tax holiday|
allowance for the depreciation in value which may be claimed in that year but for the exemption
carry forward of any loss incurred during the tax holiday for a nine year period following the period of the tax holiday
exemption from with holding tax on dividends paid to share holders
exemption from customs duty, VAT and environmental levy on importation of equipment, raw materials and other items in special circumstances
The Caricom Tax Treaty is a multilateral tax treaty. The Member States of Caricom that have ratified the Treaty are Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent, and the Grenadines and Trinidad and Tobago.
As you can see, Barbados has the legislation in place to assist companies compete on the international scene in a tax-efficient manner. But to make sense to your business, all these tax attributes must be part of a wider favourable business environment: political and economic stability, a pool of knowledgeable and qualified professionals and a well-developed infrastructure, including excellent telecommunication services.
Barbados has it all, and this is why it is a jurisdiction of choice for investors.