All non-resident individuals and/or companies are required to seek the permission of the Exchange Control Authority for any transaction in which any one of the parties is a non-resident individual or legal entity.
For the purposes of the Exchange Control Act, Cap. 71 of the laws of Barbados, persons, firms, companies and institutions in Barbados are treated as either residents or non-residents.
Residents are: (1) Barbadian nationals residing in Barbados or temporarily working abroad and (2) other nationals who have continuously resided in Barbados for not less than five years.
Barbadian nationals residing permanently abroad will be considered non-residents. Temporary visits outside Barbados do not affect residential status.
A firm or company which is incorporated in Barbados or registered in Barbados and is operating in Barbados would be treated as resident in Barbados.
Branch offices are treated as resident where they are situated.
Foreign Investment in Barbados
In most cases, there is no requirement for foreign investors to invest with a local partner. However, it is recommended that foreign investors consult with the appropriate local advisers (legal, financial, tax, etc.)
The permission of the Exchange Control Authority is required for a transfer of land from a resident to a non-resident, and vice versa. In the present economic climate, this is usually a formality only. A transfer includes a sale, lease, mortgage, gift or exchange.
Permission is required for residents to make payments abroad in foreign currency. In the present economic climate, foreign currency can usually be purchased easily.
Permission is required to transfer securities to and from non-residents.
Local commercial banks and residents may not make loans to a non-resident without permission, and may not lend foreign currency to residents without permission.
A non-resident investor will at present be allowed to repatriate in a lump sum immediately on realisation of an authorised investment:— (a) full amount of registered funds plus (b) interest at 4% per annum compounded for the first 5 years after date of investment plus interest at 5% per annum compounded on (a) + (b) = (c) for the next 5 years plus (d) interest at 8% per annum compounded on (c) for the next 5 years. Thereafter the balance can be repatriated at intervals fixed by the Central Bank.
Remittance of dividends, profits, interest and rentals from real estate to non-residents in excess of BDS$100,000.00 require the permission of the Exchange Control Authority of the Central Bank of Barbados. Authorised Dealers may approve remittances below $100,000.00 subject to the production of the correct documentation.
Save for compliance with the Exchange Control Act, there are no other state restrictions imposed on the ownership of real estate by foreign investors or the acquisition of interest in entities which own real estate.
There are no special taxes which are levied solely on foreign individuals or entities acquiring or transferring real estate or interest in entities which acquire real estate.
There are no special reporting requirements required for the acquisition, ownership or disposition of real estate which relate solely to foreign direct or indirect owners of real estate. Foreign direct or indirect owners of real estate are required to follow the same reporting process as Barbadians. That is, the document(s) evidencing the disposition of real property and the acquisition to the purchaser is/are required to be recorded/ registered at the Land Registry and notice in the prescribed form must be sent to the Department of Inland Revenue and the Land Tax Department.
Issues in Ownership of Real Estate
Fee simple absolute property ownership is permitted in Barbados.
For land still under the common law system, a deed is used to convey ownership of real estate. A deed will be construed as conveying the entire estate or interest that the grantor owns unless a contrary intention is expressed in the deed.
For land in respect of which title has been declared under the registered system, a disposition is effected by a transfer, lease or other prescribed form in accordance with the Land Registration Regulations 1988 made under the Land Registration Act Cap 229 (Land Registration Act) or a form approved by the Registrar of Titles.
In order for there to be notice of the existence of a dealing with land under the common law system, the instrument effecting the transaction must be recorded at the Registration Office of the Land Registry. The most common method of finding out the status of a parcel of land is to conduct a title search by means of a grantor/grantee search at the Land Registry. A title search may be conducted by an attorney; however, a title search is generally conducted by a legal clerk, either working for a lawyer or the search company (there is only one such company, privately held). In Barbados a good root of title must begin with an instrument of disposition that is at least 20 years old.
For land that has been registered, instruments effecting transactions dealing with the land must be submitted to the Registrar of Titles for registration, and the Registrar has power to compel a person to submit such an instrument for registration.
To determine the status of registered land, generally an official search is requested from the Registry. Land is indexed by parcel number, not by proprietors’ names as is the case with land still under the common law system.
The official search provides the particulars of subsisting entries in the register respecting the parcel of land to which the search relates.
Title insurance is not readily available in Barbados. Opinions on title can be obtained from attorneys at law, but many attorneys at law do not have significant professional liability insurance.
Limited liability companies are the most common forms of investment vehicles. For persons resident overseas, these are often BVI or Cayman companies, which are registered in Barbados as external companies and which hold the land. On a sale, the shares of the company are sold outside of Barbados.
Under the Property Transfer Tax Act Cap 84A (the “PTT Act”) property transfer tax is payable in respect of every transfer of property. A transfer of property means any transfer, whether by sale, exchange, gift, or other disposition inter vivos whereby any property or any estate or interest in any property is legally or equitably transferred to or vested in a purchaser or any other person on his behalf or by his direction.
No property transfer tax is payable on leases that do not exceed 25 years.
The tax is payable when the document is presented for stamping and recording (see below on stamp duty) and in the case of a sale, the tax is charged on the consideration stated in the deed or on the improved value of the land as set out on the land tax demand notice (whichever is greater). The tax is payable by a vendor on a sale. The PTT Act contains a few very specific exemptions to transfer tax liability. The Minister of Finance also has power to waive the tax, and this is usually in connection with large projects where significant investment has been made. An application must be made to the Ministry of Finance in this regard, providing significant details of the project and its benefit to Barbados.
Stamp Duty is also payable under the Stamp Duty Act Cap 91 (the “Stamp Duty Act”). This is payable by the person at whose direction the document was prepared, in practice, usually the vendor.
There is also a nominal fee for recording or registration of the deed or transfer.
Stamp Duty and Property Transfer Tax are payable on share sales generally, whether or not the company in respect of which the shares are being sold holds real estate or not. Both taxes are based on the consideration for the sale or the fair market value of the shares, whichever is greater.
For a company that is a special purpose vehicle with real estate as its only asset, the value of the real estate will generally be taken as the value of the company and the value of the shares, and consequently the quantum of the tax, will flow from this.
Property Transfer Tax is at the rate of 2.5% of the consideration for the sale or the value of the property transferred (whichever is greater) for both land and share sales.
Stamp duty is at the rate of 1 % of the consideration for the sale in both cases.
Issues Relating To Commercial Leasing
Leases attract stamp duty of 1% of the annual rental. Where the annual rent varies, the average rent is used. Where the consideration is other than money the stamp duty is US$12.50. On renewal the stamp duty is the same as though a new lease was created.
Property transfer tax of 2.5% of the value of the lease is payable on leases exceeding 24 years. The tax is payable where the term of a lease for 24 years or less expires and a new lease is granted within 2 years to the same tenant which causes the total time the tenant is in possession to exceed 24 years. This also applies in the case of the renewal of a lease which will take the term over 24 years.
The value of the lease is assessed by the Commissioner of Valuations.
A lease for more than one year must be recorded at the Land Registry at US$2.00 per page, save in the case of land registered under the Land Registration system, where the lease must be registered and a prescribed fee, based on the value of the land, but not exceeding US$150.00, must be paid.
On assignment of a lease the stamp duty is 3/5 of 1% of the value of the lease, and the Property Transfer Tax is assessed in the same manner as on creation of a new lease.
There are no restrictions on the maximum term of a lease but please see above in respect of Property Transfer Tax accruing on leases in excess of 24 years.
There are no laws which force a landlord to allow a tenant to renew its lease but many commercial leases have provisions which do allow for renewal if the tenant is in compliance with all of the terms of the lease. If this is the case, the landlord must honour these provisions if the tenant is so in compliance.
There are no restrictions on rent that may be charged to a tenant.
There are no statutes that permit the tenant to terminate a lease prior to its stated expiration date. A tenant will have to rely on common law provisions which, in the case of the landlord’s gross neglect or refusal to comply with the provisions of the lease that impose obligations on it, would allow the tenant to claim that the landlord has repudiated its contract with the tenant.
However, most leases do have provisions for early termination by either party.
The Property Act Cap.236 (the “Property Act”) contains a provision which implies a covenant on the tenant’s part not to assign sublet or otherwise part with possession of the premises or part thereof without the landlord’s consent. Parties can contract out of this provision. Most leases do contain provisions imposing such prohibitions as well.
The Property Act provides that there is an implied covenant on tenant’s part not to transfer, charge, sublet or otherwise part with possession of leased premises or part thereof without the landlord’s written consent. Parties can contract out of this provision.
Most leases do provide for specific restrictions of some kind as well.
Service of a notice to quit is the first step in an eviction proceeding. If the tenant does not quit the premises the landlord can service a notice of intention to apply to the court for eviction. If the tenant still does not vacate the premises, application must be made to the magistrates’ court accompanied by evidence that the first two steps have been taken.
The entire process can take 3 to 6 months.
The Property Act provides that there is an implied covenant on the tenant’s part not to charge the leased premises without the written consent of the landlord. Parties can contract out of this provision.
Lenders are reluctant to take a leasehold interest as security for a loan in Barbados, as they are dependent on the tenant’s compliance with the terms of the lease in order to avoid forfeiture by the Landlord. The Property Act contains provisions to provide relief to mortgagees on forfeiture by a landlord which will, if successful, put the mortgagee in the position of the tenant. This does not suit most mortgagees, who consider this to be an insufficient remedy, as what they require is a right to sell the leasehold interest in the premises without incurring for themselves any additional responsibilities (such as for payment of rent and upkeep of the premises).
However, most leases do have provisions which limit the assignment or sub-lease of the term.
There are no taxes that the landlord must collect from the tenant but the landlord must pay income tax on all its income – and rental income is included as part of the landlord’s income.
Tenancies must be registered under the Landlord and Tenant (Registration of Tenancies) Act so that the Government can keep track of their existence.
The remedy of distress is only available for recovery of unpaid rent. A landlord may not distrain against:
- things that are in actual use, (such as, an object in the tenant’s hand at the time, so that to take it would cause a breach of the peace)
- things delivered to the tenant by way of trade or business, wearing apparel and bedding,
- tools and implements of the tenant’s trade,
- machinery equipment or items belonging to a third-party where the landlord has or receives notice of such third-party ownership.
The Property Act also provides that a Landlord may not exercise the right of forfeiture until he has served notice specifying the breach complained of, and if that breach is capable of being remedied, requiring the tenant to remedy it within a reasonable period of time, and in any case other than non-payment of rent, requiring the tenant to make monetary compensation for the breach, and the tenant has failed to comply with the notice.
The Property Act permits tenants, sub-lessees and mortgagees to seek relief from the court if a lease is ripe for forfeiture by a landlord.
The Property Act allows a landlord to forfeit a lease where the tenant is in breach of its terms by re-taking possession of the premises or court action (see above). Re-taking possession itself has limitations under the common law and should not be attempted without legal advice and the help of the appropriate authorities, including the police.
Most leases do provide other remedies for a landlord, such as penalties or interest payable.
Prior to forfeiture the landlord must serve a notice requiring the tenant to remedy the breach and, where the breach is other than the non-payment of rent, to pay monetary compensation.
The landlord has a common law remedy of distress which has been codified to some extent in the Landlord and Tenant Act Cap 230 which allows the landlord to enter the premises, take up certain assets belonging to the tenant, and impound and/or sell the same as compensation. This is a complex remedy and should not be executed without legal guidance and the assistance of the Chief Marshal.
All leases of more than one year must be in writing and must be stamped and recorded or registered at the Land Registry within 3 months of execution. Where a lease exceeds 24 years Property Transfer Tax must be paid on the lease. For a new or renewed lease to be exempt from this tax it must contain a declaration that it is not one which when added to any previous term totals 25 years or more.
A lease should be by deed, executed by both parties and witnessed by attorneys-at-law or notaries public.
In order to record the lease, an attorney-at-law must affix his “Drawn and Prepared” stamp to the lease and sign it.
A lease of land that is registered under the Registration System must conform to the prescribed form.
There are no restrictions on the transfer of ownership of real property subject to a lease but the transferee would take the property subject to the existing lease.
The Central Bank of Barbados, like many jurisdictions around the world, has issued “Know Your Customer” guidelines which are intended to guard against money laundering, and which are supported by legislation. In October 2013, the Central Bank of Barbados issued an Anti-Money Laundering Terrorist Financial Guideline pursuant to the Money Laundering and Financing of Terrorism (Prevention & Control) Act, 2011-13 (MLFTA). The Guideline replaces the 2006 KYC Guideline.
Transactions in excess of BDS$10,000.00 (or its equivalent in foreign currency) must be reported and the source of the funds revealed.
In addition, commercial banks and professionals are also under an obligation to investigate and know their customers and clients.