The value of a treaty network designed to avoid double taxation and prevent fiscal evasion is not only in its density but its geographical coverage.

For a country like Barbados whose diplomatic footprint has always been bigger than its size and political influence, its foreign policy objective with respect to these economic instruments has been to reflect its long held mantra of ‘friends to all satellites of none’.

It is perhaps no surprise therefore that when the opportunity to negotiate tax treaties with its Middle Eastern colleagues in the OECD Global Forum on Transparency and Exchange of Tax Information arose, Barbados was quick to respond.

Unlike its existing treaty partners in the OECD, the Gulf countries have a different orientation to the conclusion of tax treaties. Like Barbados, these countries view these agreements as important precursors to investment and economic development.

For OECD countries, these agreements are used primarily to protect existing investment flows between treaty partners. This explains the number of tax agreements concluded among developed countries with establish economic ties.

Increasing mobile capital, the disaggregation of global supply chains and robust tax competition has meant that international business and financial services centres like Barbados have maintained a successful tax treaty negotiating programme in the absence of heavy industry.

Moreover tax treaty relations have become an important metric in investment decision- making, pointing not only to the alignment of a country’s international tax policy with global best practices but also to the level of transparency. Tax treaties, as expressions of diplomacy, signal to the private sectors in state parties to the agreement that both sides recognise and wish to reinforce complementarities in their orientation to investment.

In this regard, the recent flurry of diplomatic activity by Middle Eastern countries presents a unique case study in the modern drivers of tax treaty negotiation. As net capital exporters these countries would not likely have concerns about the rates of withholding taxes on the dividends, interest or royalty payments that may attend their investment. Moreover, as their investment vehicles tend to be sovereign funds it would be unlikely too that they could not negotiate concessions far superior to those found in a typical tax treaty.

The impetus for this aggressive treaty expansion programme finds its genesis in the G20 edict to the OECD to universalise the ‘on request’ standard of tax information exchange; and evidenced by appropriate language in tax treaties or tax information exchange agreements.

Of course this is not the only driver of Middle Eastern tax treaty policy.

The world has watched as London’s icons have become part of the investment portfolios of the Qataris. What may not have been obvious to the tenants of these Eastern landlords is that the flood of investment capital was preceded by the conclusion of a tax treaty with the United Kingdom.

The agreement once ratified became the signal to sovereign wealth funds and private investors that the Qatar was keen to see increased capital outflows to the United Kingdom and as a result provided a framework to provide the certainty that such investment thrives on in the post-recession era.

There is of course more that explains why London has become the investment situs of choice for Eastern investors. An allied consideration is the British ‘brand’ and all that it stands for in terms of stability, the rule of law and constitutional protection of private property. Now close to saturation point, Middle Eastern sovereign investors have set their sights farther afield buttressed by the existence of a tax treaty usually with zero rates of dividend withholding tax and special dispensation for sovereign investment houses.

With this in mind, Barbados has leveraged its Global Forum membership to initiate tax treaty negotiations with Middle Eastern countries. Barbados now has tax treaties with Bahrain and Qatar and its agreement with the United Arab Emirates is awaiting signature. Moreover, discussions have commenced with Saudi Arabia with proposals to Kuwait, Jordan and Oman in


The mutuality of interests between Barbados and its Middle Eastern treaty partners is grounded in the strength of the Barbados ‘brand’ and which explains the conclusion of these agreements in within a timeframe unprecedented in negotiating practice.

Besides the benefits that will accrue to both parties in relation to international tax matters, Barbados’ Middle Eastern treaty partners have already begun to explore investment opportunities across a range of sectors including tourism, agriculture, maritime transport, education, health, alternative energy and petroleum.

These new tax treaties stand alongside Barbados’ existing treaties with the Caribbean Community (CARICOM), Austria, Botswana, China, Canada, Cuba, Singapore, Netherlands, Iceland, United States, United Kingdom, Portugal, Spain, Finland, Norway, Sweden, Switzerland, Malta, Mauritius, Seychelles, Mexico, Panama, Venezuela, and the Czech Republic. Agreements with Italy, Ghana, Vietnam, Belgium, and the Slovak Republic are awaiting signature.

About the Author

Françoise L.M Hendy -

Françoise Hendy is an International Treaty Negotiator & Attorney-at-Law.