The fiscal (income) year is the accounting period of the corporate taxpayer but may not generally extend beyond a 53 week period. Tax is calculated on the profits earned during the accounting period.
A corporation is required to determine its own tax liability and to prepare and file a corporation tax return. Corporations with year-ends from 1 January to 30 September must prepay tax by 15 September and file their returns by 15 March of the following year. If the year-end is after 30 September, the tax must be prepaid on 15 December of the income year and on the following 15 March. The return is filed 15 June of the year following the income year. Each tax prepayment must be 50% of the previous year’s tax. Any balance of tax due is paid when the return is filed.
The Commissioner of Inland Revenue may levy a penalty of BB$500 plus 5% of tax payable for late filing and 5% of tax due for late payment. Additionally, interest of 1% per month is applicable for failure to file a return and pay tax due. Interest is computed on the tax payable and late filing and late payment penalties.
A penalty of 10% and interest of 0.5% per month applies for failure to prepay corporate tax on the prescribed dates.
Sample corporation tax computation
A sample tax calculation is provided below for a Barbados resident company. The calculation is based on the following assumptions:
- The company is a regular Barbados company taxable at the rate of 25%;
- The company has fixed assets which qualify for capital allowances;
- The company earns local and foreign sourced dividends; and
- The company maintains an approved and registered pension plan.
|Calculation of taxable income||BB$||BB$|
|Income/(Loss) before taxation per financial statements||12,500,000|
|Loss on disposal of fixed assets||85,000|
|Unrealized foreign exchange losses||15,000|
|Commercial building allowance||38,000|
|Gain on disposal of fixed assets||50,000|
|Ordinary dividends received||60,000|
|Foreign dividends received||100,000|
|Pension contributions paid||95,000|
|Unrealized foreign exchange gains||65,000|
|Losses brought forward||(800,000)|
|Tax payable @ 25%||2,688,025|
Anti-avoidance provisions may be applied to transactions between related persons that are not carried out at arm’s length and to artificial transactions if the primary purpose of the transaction is the artificial reduction of taxable income.