The term International Business and Financial Centre may invoke images of a busy metropolitan with skyscrapers and unbearable traffic.
Barbados however, has managed to successfully combine International Business and Financial Centre with its golden sunsets, over sparking blue beaches with powder white sand and that unique Caribbean charm.
The scope of International Business in Barbados is covered in the International Financial Services Act and includes the business of receiving foreign funds, the sale, purchase and placement of foreign bonds, certificates and notes, and the business of accepting foreign currencies, personal property, or real property in trust from non-residents. The International Business sector has been reported to have contributed over Nine Hundred Million Dollars to Barbados’ economy and according to the Government of Canada’s statistics Barbados is the third highest recipient of foreign direct investment from Canada, outdone only by the United States and the United Kingdom.
International Financial services involve the accumulation, protection, management and administration of assets and are organized through structures which are tailored to suit the needs of clients. These structures usually include the use of Trust and corporate entities.
Barbados has a collection of modern legislation which governs Trust establishment and administration, including the International Trusts Act, the Trustee Act, and the International Financial Services Act.
Trust services involves establishing and administering Trusts and includes, managing assets, keeping records, purchasing shares or real property, making and receiving loans, making charitable gifts, distributions to beneficiaries, paying bills and much more.
Trust in Barbados can be categorised as Domestic Trusts, Offshore Trusts or International Trusts. Trust is defined by the Barbados International Trust Act (the Act) as a legal relationship created when assets have been placed under the control of a Trustee for the benefit of a Beneficiary or for a specific purpose.
The Settlor of a Trust transfers the legal title of the Trust property to the Trustee who manages the assets for the benefit of the named Beneficiaries who can be individuals or organizations. A Trust can also be settled for a specific purpose. While a Trustee has the legal title to the assets of a Trust those assets do not form part of the Trustee’s estate. The Trust Deed and the laws of Barbados dictate the powers and duties of the Trustee. The Trust Deed also provides guidance on the distribution of funds, addition and removal of beneficiaries and the appointment of a Protector to enforce the Trust, among other things.
The International Trust is the most commonly used Trust. An International Trust is established through a written Trust Deed which must declare that the Act applies. There can be more than one Trustee however at least one must at all times be a resident (individual or corporation) and the Settlor and the Beneficiaries should be non-residents. An International Trust cannot hold Barbados real property. The Trust can either be revocable or irrevocable. If no power of revocation is contained in the Trust Deed the Trust cannot be revoked by the Settlor or his legal personal representative. The perpetuity period is up to 100 years. The proper law of the Trust can be that of Barbados or another jurisdiction and the proper law can be changed from one jurisdiction to another. However, a change of jurisdiction can only be valid if the other jurisdiction recognises the validity of Trust and the interest of the Beneficiaries. Changing the jurisdiction of the Trust does not affect its validity or legality. The Trust is required to be registered but the registration record is not publicly available. The Trust is exempt from exchange controls and Barbados withholding tax, its VAT is zero-rated and only income deemed to be derived in Barbados or remitted to Barbados is liable to be taxed.
Trusts are generally used for tax and estate planning, asset and creditor protection, protection against forced heirship requirements and foreign exchange controls or public sequestration. They are also used for business succession, flexibility in dealing with assets in multiple jurisdictions, additional corporate governance and privacy. Further, depending on other circumstances, the use of a Trust may also reduce or defer personal income taxes, capital gains tax and wealth and inheritance taxes.
Corporate structures too are governed by a collection of legislation which includes the Companies Act, The International Business Companies Act and The Societies and Restricted Liability Act. Under these pieces of legislation the options of corporate structures available include the Domestic Barbados Company, the International Business Company and other specialized entities such as Societies with Restricted Liability, Barbados International Societies of Restricted Liability and Exempt Insurance Companies.
Corporate services includes, the forming, registering and licensing of companies, the provision of registered office, preparing of corporate resolutions, filing of statutory forms and returns, providing director and secretary services, acting as shareholder, controlling assets and the general overseeing and management of companies.
The International Business Company (“IBC”) is most commonly used. An International Business Company (IBC) is a company that is licensed to carry on business in manufacturing, trade or commerce from within Barbados with non-residents.
An IBC must have at least one director (whether resident or not). There is no minimum capital requirement. Shares may be issued to local or foreign entities. No-par value shares are prohibited, however, various classes of shares can be issued. The IBC is exempted from exchange control requirements, withholding taxes on the payment of dividends, interest, management fees and other fees to non-residents and duties on most business related goods. Tax is at a rate of between 0.5% and 2.5% on profit. Annual returns must be filed and an annual audit is required if assets or gross revenue exceed a specified value.
A Trust can be used together with one or more corporate structures in diverse ways. A Trust can hold the shares of a company affording an added level of confidentiality and various types of corporate assets can be held in and invested through a Trust.
Trust and Corporate Services and International Financial Services in general involves highly personalized service with each structure designed to serve a client’s specific needs whether that client is a multinational company involved in oil and gas or pharmaceutical, or a grandparent wishing to provide for his grandchildren.
While each client’s needs may differ there is one constant, our clients all choose Barbados not just because it is a low tax regime but also because they are desirous of conducting business in a business enabling environment from which they are guaranteed professional service in a reputable, well-regulated and politically stable jurisdiction that has consistently been recognised as such by international bodies such as the United Nations and Transparency International.