Regulation of Business and Issues Relating to Foreign Investment
The Central Bank of Barbados
The Central Bank of Barbados was established in May 1972 by the Government of Barbados to advance the pace of economic development in the country. Prior to 1972, the East Caribbean Currency Authority (“ECCA”) was the institution responsible for the management of monetary matters for most of the smaller Eastern Caribbean countries, including Barbados.
At its inception the Central Bank of Barbados had certain objectives. These were:
- Promoting monetary stability
- Promoting a sound financial structure
- Fostering development of the money and capital markets
- Channelling commercial bank credit into productive activities
- Fostering credit and exchange conditions conducive to the orderly and sustained economic development of Barbados.
The Central Bank of Barbados has become the premier financial institution in the country and its main policy is to formulate, in association with Government, monetary and fiscal policies to assist with the country’s economic development programme.
The Exchange Control Authority
Authorised Dealers in gold and foreign currency are obliged to provide to the Exchange Control Authority of the Central Bank of Barbados (the “Exchange Control Authority”) any statistical returns or information that the Central Bank of Barbados requires.
There are no restrictions on direct investment in Barbados but a non-resident investor must register his foreign currency with the Exchange Control Authority if he wishes to repatriate it later.
No one, other than an Authorised Dealer, is permitted to hold foreign currency in Barbados without the permission of the Exchange Control Authority. Foreign currency introduced into Barbados should be offered for sale to an Authorised Dealer.
The exportation of any notes which are or have at any time been legal tender of Barbados or any other country is prohibited except with the permission of the Exchange Control Authority.
As a practical matter, passengers travelling with over BB$10,000 in cash will have to declare the same to the Customs Department.
Business Transactions with Nationals, Residents or Non-Residents
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.
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 BB$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.
Explanation of Export Incentives or Guarantees
The manufacturing, international financial services and information communications and technology sectors are able to take advantage of certain tax incentives available for those sectors. Companies can be incorporated under the International Business Companies Act Cap.77 to sell products outside of Barbados and are able to benefit from various tax benefits including duty free importation of machinery and equipment, exemption from exchange control restrictions and import duties, zero rated value added tax and tax rates ranging from 2.5% to 1%.
Similarly, manufacturers who can qualify for fiscal incentives under the Fiscal Incentives Act Cap.71A may be granted a tax holiday for up to 15 years and are further able to benefit from duty free importation of equipment and raw materials required for the manufacturing process. Even though a company may not be able to take advantage of the incentives under the Fiscal Incentives Act an export allowance may be applicable. An export allowance is permitted for the export of certain products and services such as data processing services and the export of products of a company that purchases wholesale from a local producer exclusively for export. The allowance permits a rebate of tax due on “export taxable profit” of a company which arises from the export of its products and services to countries outside of the Caricom region. A cumulative tax rate of 2.8% is available if the company exports more than 80% of its products.
As a result of several bilateral investment treaties to which Barbados is a party, certain products may be exported to certain regions and countries free of duty. Bilateral investment treaties are in force with Mauritius, China, Canada, Cuba, Italy, Switzerland, Germany, Venezuela. Bilateral investment treaties with Belgium/Luxembourg and tge Economic Union, and with Ghana, are awaiting ratification.
Incentives are available for the production of certain products which are produced by companies approved by the relevant Minister. Incentives are available for the manufacture of products such as medical supplies, electronic components, leather items, electro-mechanical items, wooden furniture, sporting goods and quality apparel.
Outside of the incentives, there is generally no export financing available from the government as of course (such as in the form of loans). There are a number of financial institutions in Barbados, with international connections and applications may be made to them for financing to facilitate the development of a business which will be export oriented.
Incentives are usually only available to companies registered or incorporated under the laws of Barbados.
Grants, Subsidies or Funds Which Barbados Offers Foreign Investors
Grants and subsidies are generally not available to foreign investors. Barbadian manufacturers and service companies may qualify for a grant under the Export Grant & Incentives Scheme (EGIS) which is operated by the Barbados Investment Development Corporation (BIDC) (the investment agency arm of the government). This assistance allows these companies to undertake market sales, promotion and marketing activities in overseas markets. Successful applicants are able to be reimbursed with up to 75% of the cost of the activity. The BIDC is also responsible for processing the applications for tax incentives from the Government.
A training grant is available for the training of Barbadian nationals in the information communications and technology or manufacturing sectors. This grant is also administered by the BIDC. Reimbursement is available for a maximum of 12 weeks training at BDS$100.00 per week. This grant is open to foreign investors.
Prior to the commencement of the marketing activity or the training of Barbadian nationals, an investor is required to obtain the approval of the BIDC. An application which provides the details of the proposed venture must therefore be made to the BIDC. For further information on the BIDC please visit their website at www.bidc.com. The BIDC has indicated that it is likely to take 4-6 weeks for the application to be processed.
There are no facilities in place for the provision of loans to foreign investors from the government or government agencies.
Tax holidays may be given for up to 15 years thereby suggesting that the expectation is that the investment will be long term. There is however no formal requirement for incentives to be based on the duration of the activity. Application for a tax holiday should be made to the BIDC.
Barbados welcomes investment. It is a low-tax jurisdiction. As of April 2009, Barbados was included on the OECD’s White List which identifies the jurisdictions that have substantially implemented the internationally agreed tax standard.
The International Business Unit of the Ministry of Industry & International Business was set up to develop international business and financial services within Barbados. The Unit has principal responsibility for coordinating intra-governmental liaisons affecting the international business and financial services sector and is responsible for oversight of international business companies and international societies with restricted liability.