The currency of Barbados has been aligned to a world currency for generations. Since July 1975, the Barbados dollar has been pegged to the United States dollar at the rate of one United States dollar for two Barbados dollars. This fixed rate of exchange has been passionately maintained by successive Governments.
The stability of the currency, along with the attractive business climate and environment, which includes having in effect a number of bilateral investment treaties (BITs), notably with Canada, China, the United Kingdom and Venezuela, has supported the continuing trend of investment in Barbados by non-nationals. Investors are confident that the value of their investments will remain aligned to a world currency and that when lifestyle or business changes occur their investments can be liquidated and, within a reasonable timeframe, the funds originally invested can be repatriated to their original source. This provides a level of “comfort” that has contributed to the growth of foreign direct investment in Barbados.
In principle, there are no provisions that restrict the ownership of property of any kind in Barbados by non-nationals; the regime of foreign investment controls in Barbados is in effect one that manages and monitors the flows of foreign currency in and out of the Island. Exchange control, as we know it now, was introduced in 1967 shortly after Independence and generally requires that a non-national investor obtains permission for an investment and remits foreign currency to Barbados to execute the transaction. The principal exception to this requirement is within the international business sector.
Corporations operating under international licences such as international business companies, international societies, international banks and international insurance companies are exempted from the application of exchange controls with respect to their corporate ownership, assets and financial transactions as the source of the funds for their transactions and business are in a foreign currency from outside of Barbados. These corporations, though resident in Barbados, may hold bank accounts in foreign currencies in and outside of Barbados and as well hold investments and assets denominated in any foreign currency outside of Barbados. Such corporations are permitted to hold bank accounts in Barbados dollars with local commercial banks for the purpose of paying for local inputs to their international businesses e.g. employment costs and office expenses. Credits to these accounts are restricted to foreign currency except where the corporation can demonstrate that the Barbados dollars arose from a transaction that was originally sourced in foreign currency; for example where an international corporation owned a motor vehicle which it had paid for with foreign sourced funds and then sold it to a local resident. In that case the Barbados dollars arising from the sale of the vehicle may be deposited to the Barbados dollar account of the international corporation. International corporations can transfer and deal with their international assets and transact their international business from Barbados free of any exchange controls in Barbados. Also, on the dissolution and wind-up of an international corporation all foreign currency assets and funds may be repatriated to the investors and beneficial owners without restriction of exchange controls. Any bank accounts that had been denominated in Barbados dollars can readily be converted to foreign currency and repatriated.
As part of its support to international business, the Government of Barbados will provide, on application, a guarantee of benefits to new businesses. The period of guarantee is provided in the specific incentive legislation.
Other international corporations
Corporations that will be carrying on international business but that do not operate under international licences will readily obtain permissions to transact business in foreign currencies in a manner similar to licenced international corporations if the source of the funds for the business and the business transactions themselves are conducted in foreign currency outside of Barbados. In effect, the circumstances where the transactions of the corporations have no impact on the foreign reserve balances of Barbados.
Other non-national investors will need to submit an application for permission to invest in Barbados to the Exchange Control Authority (ECA). The functions of the ECA have been delegated to the Central Bank of Barbados and are carried out by the Foreign Exchange and Export Credits Department of the Bank.
The applications are usually submitted by the applicant or their professional advisor prior to the execution of the transaction contemplated, for permission “in principle”. This permission is readily granted, especially if employment in Barbados will be created, but usually states that the permission is subject to the remittance to Barbados of foreign currency and that evidence of the remittance be submitted to the ECA. Once permission in principle is obtained the transaction is completed and evidence of the foreign remittance submitted to the ECA; the amount of foreign currency becomes registered with the ECA. The certificate of registration of these funds is an important document as it must be presented at any time in the future that the investment proceeds are to be repatriated from Barbados.
The investment vehicle or business in which the non-national has invested is treated as resident and all transactions in foreign currency will be subject to exchange control permission or guidelines under delegated authority to the commercial banks. In certain circumstances when a business earns foreign exchange a commercial bank may open a foreign currency account in Barbados for the business. The commercial bank is required to monitor the transactions on the account in accordance with the guidelines issued by the ECA from time to time and to submit information on the transactions.
Non-national investors or corporations controlled by non-nationals are generally required to finance their operations from sources external to Barbados. Where a significant project is being undertaken in Barbados that will create employment and foreign exchange earnings the ECA will consider applications for permission for financing arrangements that vary from the general requirement.
Caribbean Community (CARICOM)
As part of its commitment to the Caribbean Single Market and Economy (CSME) most transactions of resident corporations and individuals with other member states of CARICOM have been liberalised. Transactions that may be completed without limitation by the ECA include the remittance of dividends, profits, interest and management fees. Some transactions that have limitations without the specific permission of the ECA are gifts and loan repayments.
CARICOM residents are still required to register their investments in unlisted securities and real estate with the ECA.
In 2007, in order to further encourage foreign direct investment in property in Barbados in a transparent manner, the Government approved a new regime for the remittance of the proceeds of real estate transactions between non-residents of Barbados. Under this regime non resident vendors may repatriate the full proceeds of the sale of their property whether through a commercial bank in Barbados or through the parties’ overseas accounts. The commercial bank or, as appropriate, the Attorneys-at-Law in Barbados for the parties are obligated to ensure that before repatriation of the proceeds of sale, all statutory and other domestic obligations of the parties have been met. The purchaser will be required to register their investment in the property with the ECA.
The Barbados Stock Exchange has delegated authority from the ECA to approve transactions in any securities listed or cross-listed or cross-traded on any CARICOM stock exchange. The ECA monitors the transactions through submission of details by the Stock Exchange.
All Barbadian nationals resident in Barbados and non-nationals who have been continuously resident for at least 3 years are treated as residents for exchange control purposes and therefore subject to the exchange controls in force at any time. However, a non-national on a work permit in the international business sector is treated as an “Offshore non-resident” irrespective of the period of residence in Barbados. The Offshore non-resident will be able to maintain foreign currency accounts in Barbados and thereby undertake transactions in foreign currency without restriction.
Non resident directors of international corporations
Commercial Banks may provide non-resident directors of corporations licenced as international corporations with foreign currency, in cash, up to the equivalent of Barbados $10,000 which may be carried by the individual on their person or in their luggage outside of Barbados.