An individual who is resident and domiciled in Barbados for tax purposes is subject to income tax on worldwide income, regardless of whether the income is remitted to Barbados. Barbados residents who are not domiciled in Barbados are taxed on income derived from Barbados and on foreign-sourced income remitted to Barbados. Non-residents are taxed on income derived from Barbados only.
Individuals are considered to be tax resident if:
- they are present in Barbados for more than 182 days in a calendar year; or
- they are ordinarily resident in Barbados in a calendar year.
Individuals are deemed to be ordinarily resident if they have a permanent home in Barbados and notify the Commissioner of Inland Revenue that they intend to reside in Barbados for a period of two consecutive years, including the current income year.
Domicile is not defined in the BITA. However, the Barbados Domicile Reform Act (“DRA”) of Barbados provides that, in determining the domicile of a person at or before January 1st 1980, the common law concept of domicile would apply. Thereafter, the DRA would apply to the determination of an individual’s domicile. Generally, under the Act, a person is taken to be domiciled in the jurisdiction that he or she regards as his or her permanent home.
Income subject to tax
Taxable remuneration from employment includes salaries, commissions, bonuses, directors’ fees, perquisites and pension income. In general, employees may be taxed on any benefit that is not conferred wholly, exclusively and necessarily for the performance of duties relating to their employment. For example, the provision of a fully maintained company car is a taxable benefit. This benefit is computed on 10% of the cost of the car. The value of a rent-free residence is included in the employee’s taxable income, up to a maximum of BB$48,000.
Amounts paid as a housing allowance are fully taxable.
Educational allowances provided by employers for their employees’ children are fully taxable.
Taxable profits generally consist of business profits as disclosed in the business operation’s financial accounts, subject to various tax adjustments as outlined for corporation tax. Income tax is imposed on net business income.
A resident’s investment income, other than domestic dividends, domestic interest and income from the rental of property, is aggregated with other income and taxed at the rates set out below.
If a resident company pays an ordinary dividend to a resident individual shareholder, the dividend is subject to a final 12.5% tax withheld at source. For resident individuals, dividends received from shares held under dividend reinvestment plans are exempt from the 12.5% withholding tax if the shares are held for at least five years. However, this exemption is limited to 75% of the value of the dividend, up to a maximum of BB$7,500 per year. Interest received by a resident individual, other than a pensioner, from a resident borrower is also subject to a 12.5% final tax withheld at source. Pensioners over 60 years of age are not subject to tax on interest income.
For residents, 50% of royalties are aggregated with other income and subject to tax at the rates set forth in Rates. The remaining 50% of the royalty is tax free. Net income from the rental of property is taxed at a flat rate of 15%.
Nonresident individuals are taxed on domestic dividend income, interest, royalties and management fees, which are subject to a final 15% tax withheld at source. Rental income is subject to a 25% withholding tax, which represents a prepayment of tax. However, if a nonresident individual has habitually filed tax returns with respect to rental income in prior years, no tax is required to be withheld. Interest earned by nonresidents on debentures, bonds and stock issued by the government of Barbados is exempt from tax.
Taxation of employer-provided stock options
Employees are taxed on the benefit arising on the purchase of shares acquired under a stock option plan at a price which is less than market value. The taxable amount is equal to the difference between the market price of the stock on the date the option is exercised and the price paid for the stock under the option, subject to a deduction of up to 10% of the employee’s assessable income. The benefit is taxed in the same manner and at the same rates as other employment income. If the shares are disposed of within five years after the option is exercised, the 10% deduction is recaptured in the year the shares are sold.
The income tax rates applicable to individuals are shown in the table below:
|Band of Taxable Income BB$||Rate of Tax %||Cumulative Tax BB$|
In respect of income year 2013, residents are entitled to deductions and allowances as follows:
|Basic allowance for taxpayers other than pensioners||25,000|
|Basic allowance for pensioners||40,000|
|Dependant spouse allowance||3,000|
|Contributions to registered retirement (self-employed person)||Lower of 15% of assessable income and 10,000|
|Registered retirement savings (contributions by an employee or self-employed person)||Lower of 15% of assessable income and 10,000|
|Contributions by an individual to a registered retirement plan and to a registered retirement savings plan||Lower of 15% of assessable income and 10,000 in respect of both plans|
|Registered retirement contributions by an employee towards a plan taken out by an employer||Total contributions up to 15% of pensionable income|
|Covenants to incapacitated individuals||5% of assessable income|
|Amounts paid to exempt charities||Allowed in full|
|Amounts of $1 million or less paid to registered charities||10% of the donation|
|Amounts in excess of $1 million paid to registered charities||50% of the donation|
|Investment in a registered venture capital fund or innovation fund||Up to 10,000|
|Rental allowance||Lower or 20% of rent paid and 3,000|
Where a resident individual earns income from sources outside Barbados and transfers the foreign currency so earned to Barbados through the banking system, the individual may utilize a foreign currency earnings credit against taxes payable as set out below.
|Foreign earnings as a percentage of total earnings||Rebate of income tax (expressed as a percentage of income tax on foreign earnings)|
|20% and under||35%|
|Over 20% but under 41%||45%|
|41% but under 61%||64%|
|61% but under 81%||79%|
|81% and over||93%|
In respect of residential property:
|Retrofitting of residential property with roof straps and shutters|
|Home allowance||Up to 10,000|
|150% of the cost of conducting energy audits and 150% of 50% of the cost of retrofitting premises or installing systems to produc electricity from sources other than fossil fuels||Up to 10,000|
Non-residents may not claim the above deductions and allowances.
Specially qualified individuals working in the international business and financial services sector may qualify for tax exemptions equal to percentages of their remuneration, including salary, fees or any other emoluments, if they hold a valid work permit for at least three years. The following are the tax exemptions:
|Income||Percentage of remuneration exempted|
|Income not exceeding BB$150,000||35%|
|Income exceeding BB$150,000 but not exceeding BB$500,000||50%|
|Income in excess of BB$500,000||60%|
Tax filing and payment procedures
Individual taxpayers must file income tax returns by 30 April following the income year, which ends 31 December. Self-employed persons must file returns regardless of the amount of their taxable income. They must also prepay income tax quarterly based on the tax payable for the preceding year. The Barbados Department of Inland Revenue makes provision for taxpayers to file returns online via the website https://etax.ird.gov.bb.
Employees normally prepay their taxes. The amount of the tax is withheld from their wages or salary by their employers through the Pay-As-You-Earn (PAYE) system. Individuals with employment income only must pay 50% of any balance of tax due on filing; the remainder is payable by 30 September of that year.
Individuals with business income which exceeds 25% of their assessable income must make prepayments equal to one quarter of the corresponding tax payable on 15 June, 15 September, 15 December, and 30 April on filing.
Married persons are taxed separately, not jointly, on all types of income.
National Insurance Scheme
Individuals employed or exercising their employment in Barbados must make contributions to the National Insurance Scheme. It is based on their monthly insurable earnings up to a maximum of BB$4,270 at the following rates:
|Percentage||Amount of Contribution|
|For self-employed persons||16.10%||BB$687.47|
Employed persons under the age of 16 or over the age of 66 are required to make contributions to the National Insurance Scheme at the following rates:
|Percentage||Amount of Contribution|
These payments are not tax deductible by the employees but contributions made by employers are tax deductible
Barbados has entered into social security or totalization agreements with Canada, CARICOM and the United Kingdom. These provide relief from an employee having to pay social security taxes in more than one territory on the same earnings. They also ensure benefit coverage.
Contributions to the National Insurance Scheme must be submitted on or before the 15th of the month following deduction.
Sample income tax calculation
A sample tax calculation is provided below for an expatriate resident in Barbados who is married with two children. The calculation is based on the following assumptions:
- The expatriate works in the international business and financial services sector and qualifies for a tax exemption on his salary and benefits;
- The expatriate’s employer provides rent-free accommodation to him and pays the annual rent of BB$60,000;
- The employer provides a fully maintained company car costing BB$60,000;
- The expatriate makes annual charitable payments of BB$12,000 under a deed of covenant; and
- The expatriate’s wife has no income.
|Calculation of taxable income||BB$||BB$|
|BB$150,000 at 35%BB$4,000 at 50%||(52,000)(2,000)|
|Total tax exemption||(54,500)|
|Dependent spouse allowance||(3,000)|
|Charitable deed of covenant||(9,950)|
|Calculation of tax|
|Tax on BB$35,000 at 17.5%||6,125|
|Tax on BB$24,550 at 35%||8,593|
 This allowance is available for each child up to a maximum of two children.
 This allowance includes amounts expended as mortgage interest payments, home repairs and amounts spent on energy audits and materials up to a maximum of BB$2,000 per annum.