There are a number of special incentive corporate vehicles which are available for use in Barbados. These companies are subject to taxation on their assessable income as determined under the BITA. However, they are allowed to benefit from a range of reduced tax rates and special exemptions.
Following are the tax rates for companies established in the International Business and Financial Services Sector.
|Types of Companies||Rate (%)|
|International business companies||2.5 % on profits and gains up to BDS$10,000,0002% on profits and gains exceeding BDS$10,000,000 but not exceeding BDS$20,000,000|
1.5% o on profits and gains exceeding BDS$20,000,000 but not exceeding BDS$30,000,000
0.25% on profits and gains in excess of BDS$30,000,000
|International financial service companies (i.e offshore banks)|
Same as above
|International societies with restricted liability|
Same as above
|Qualifying insurance companies|
|Exempt insurance companies|
8% of BDS$250,000 after the first 15 financial years
|Exempt insurance management companies|
International Business Company
An international business company (“IBC”) is a company incorporated or registered under the Barbados Companies Act, which is licensed to do business under the provisions of the Barbados International Business Companies Act. An IBC may manufacture, process, package or otherwise prepare products for export outside of Barbados or sell goods from Barbados. The company may also engage in the provision of services to non-residents of Barbados. An IBC is restricted generally from doing business with residents of Barbados.
An IBC may elect to take a credit for taxes paid in a foreign country but may not in this way decrease its tax payable to less than 1% of its taxable income. IBCs also benefit from an exemption from the payment of withholding tax on dividends, interest, royalties, management fees or other fees paid to non-residents or to another IBC. Tax concessions are also available to specially qualified employees of the company, as discussed above.
The Barbados IBC Act stipulates that all transactions executed by a Barbados IBC are to be exempt from ad valorem stamp duty except in the case of the sale of real estate situated in Barbados. Generally, the only stamp duty which is imposed on an IBC is a fixed duty of BDS$10 on the instrument used to effect a transaction.
Exchange control restrictions are not imposed on the activities of an IBC. Moreover, IBCs benefit from an exemption from tax and duties on the importation of machinery, equipment and other specific items to be used in the business, an exemption from taxes on the transfer of securities or certain assets of the IBC to a non-resident of Barbados or to an IBC, a guarantee of tax benefits for 15 years and tax concessions available for specially qualified employees.
International Society with Restricted Liability
A society with restricted liability (“SRL”) is an entity that is organized under the Barbados Societies with Restricted Liability Act. A SRL is subject to the regular Barbados tax regime whereas a SRL which is licensed to conduct international business, an International SRL (“ISRL”), is entitled to special tax benefits. An ISRL is designed to be used mainly for international business and is prohibited from transacting business with persons resident in Barbados.
An ISRL is allowed the same tax advantages as outlined above for an IBC. However, the ISRL is guaranteed tax benefits for a period of 30 years.
International Financial Services Company
An international financial services company (“IFSC”) is a company incorporated or registered under the Barbados Companies Act, which is licensed to carry on international banking business or provide other international financial services from within Barbados under the provisions of the International Financial Services Act (“IFS Act”). An IFSC can conduct business with non-residents and exempt insurance companies, IBCs, ISRLs and international trusts established under the International Trusts Act.
An IFSC is also allowed to benefit from similar taxation advantages as the IBC and the ISRL as outlined above. However, an IFSC is exempted from withholding tax on the payment of dividends, interests and fees paid to non-residents of Barbados only.
Qualifying Insurance Company
A qualifying insurance company (“QIC”) is a domestic insurance company that has 90% of all risks insured originating outside Barbados and which derives at least 90% of its gross premium income from outside Barbados. A QIC is a company incorporated under the Barbados Companies Act and granted a certificate of qualification under the Barbados Insurance Act.
The tax advantages offered to a QIC are: a tax rebate in respect of foreign currency earnings relating to general and life insurance business leading to an effective tax rate as low as 1.75% and 0.35% respectively; no withholding tax on dividends and interest paid to non-residents of Barbados; no capital gains tax; an exemption from exchange control restrictions; an exemption from PTT in certain circumstances; no stamp duty applicable on the transfer of shares issued by or on behalf of a QIC that satisfies certain conditions; importations by a QIC are generally accorded zero-rated status for the purposes of the VAT; and tax concessions available for specially qualified employees.
Exempt Insurance Company
An exempt insurance company (“EIC”) is a company incorporated or registered under the Barbados Companies Act, which has obtained a licence under the Exempt Insurance Act to carry on exempt insurance business which is the business of insuring risks located outside Barbados in respect of which premiums originate outside Barbados. It also includes the business of an underwriter, broker, agent, dealer, or salesperson in respect of that business.
EICs enjoy the following benefits:
- 0% income tax on profits and gains for the first 15 years;
- Thereafter, income tax of 8% on the first US$125,000 of taxable income and 0% on any excess ;
- No withholding tax on dividends and interest paid to non-residents;
- Exemption from exchange control restrictions;
- Guarantee of tax benefits for 30 years;
- Exemption from tax on the transfer of the EIC’s assets and securities;
- Exemption from ad valorem stamp duties; and
- Tax concessions available for specially qualified expatriate employees.
Special Development Areas
The Barbados Special Development Areas Act makes provision for the designation of special development areas on the island and the provision of tax relief to persons carrying out work in those areas. The Act also provides tax relief to persons financing such work.
An approved developer under the Act benefits from a reduced corporation tax rate of 15% as well as the following exemptions from the following taxes and duties:
- import duty, environmental levy and value added tax on inputs for the construction of new buildings and the renovation or refurbishment of existing buildings;
- charges on the repatriation of interest and capital for a period of 15 years commencing on a date prescribed by the Minister;
- land tax on the improved value of land; and
- PTT payable on the initial purchase of property.
Tourism Development Act
The Tourism Development Act (“TDA”) aims to encourage the sustainable development of the tourism industry by providing duty-free concessions and income tax concessions for approved tourism projects and certain tourism entities.
Under the Act, the owner or operator of an approved tourism project is exempt from the payment of customs duty on specific items as outlined in the Second Schedule to the Act. These items are categorized according to the specific type of operator where applicable.
The Act also provides that in calculating the assessable income of an owner or operator of a tourism project for an income year, a deduction equal to 150% of expenditure incurred may be deducted. This expenditure must have been incurred for the purpose of a tourism product development, tourism research, the provision of an apprenticeship scheme, or the organization and hosting of tourism exhibitions and trade fairs.
Moreover, where an owner of a tourism project has incurred expenditure for the purpose of providing accommodation or a facility for guests for reward and incurs approved capital expenditure of up to BDS$200 million, then that expenditure can be set off against the income of that owner for a period of 15 years.
The additional benefits available under the TDA include an investment tax credit where applicable, as well as an exemption from withholding tax on those dividends paid to a shareholder by the owner of a tourism project.
Small Business Development
Under the Small Business Development Act, approved small businesses are subject to corporation tax at the rate of 15%. In order to become an approved small business under the Act, an application must be made to the Minister. Applications must be accompanied by the following:
- a certificate of incorporation;
- a declaration verifying the name, residential address and occupation of each share shareholder and director, the number of shares held or to be held by each shareholder in the company to which the application relates, the names of all other companies in which the shareholders and directors are also shareholders or directors, and the extent of any such shareholding, the type of business and location, the actual or estimated investment in plant and equipment, the number of persons employed or to be employed, the estimated annual income of the business, where applicable, particulars to enable a determination of the level of exports, foreign exchange earnings and foreign exchange savings;
- the audited financial statements of the company for the financial year immediately preceding that in which the application is made;
- the date of the commencement of the business or the date on which the business is likely to commence, as the case may be; and
- such other information as the Minister considers necessary to enable him to make a decision.
To qualify as a small business, a company must meet also the following requirements:
- Its authorized capital does not exceed BDS$1 million;
- Its annual sales do not exceed BDS$2 million;
- It does not have more than 25 employees; and
- It is not a wholly owned or majority-owned subsidiary in a group of companies.
Where a small business is granted an approved status by the Minister, it will qualify for the following tax benefits:
- Exemption from withholding tax on dividends or interest paid;
- Exemption from import duty on plant and equipment; and
- Exemption from stamp duty on the execution and registration of financial documents.
Only income directly related to the business qualifies for the above tax benefits.
Foreign-exchange controls in Barbados are administered by the Central Bank, which considers all applications. Certain transactions and routine commercial matters are delegated to the commercial banks. The Central Bank generally allows the repatriation of funds previously registered as an investment if it has been established that all local tax liabilities have been met. Certain types of entities operating in the International Business and Financial Services Sector, such as IFSCs, QICs, exempt insurance companies, IBCs and ISRLs are effectively exempt from foreign-exchange regulations with respect to their offshore activities.
There are no thin-capitalization rules in Barbados.
 These rates are the minimum applicable to general and life insurance companies respectively.