Barbados Business

Barbados is one of the most stable locations in the world for business. The island benefits from a long tradition of political and social stability,  a highly-skilled and productive workforce, sophisticated international telecommunication services, and a superior infrastructure.

Barbados is fast becoming a preferred low tax destination for international businesses and has attracted several such businesses, particularly in the areas of Information Technology, Manufacturing and Financial Services. These businesses have found the legal, financial and accounting services offered by local Barbadian companies to be world-class. The Barbados Government focuses heavily on improving the investment climate of Barbados and on enhancing the infrastructure to support increasing business activity. Measures taken include improvements to the Corporate Registry, and the expansion of taxation treaties with the U.S., Canada and the U.K.

Domestic Taxation and the Law

• Incorporation and The Business Corporations Act
• Corporate Tax
• Personal income tax
• Excise tax

Off Shore Banking

International banking and financial houses have been attracted to Barbados as a result of its tax incentives, the high quality of professional services and the reputation of Barbados as a reputable Offshore Banking Center.

In order to establish an offshore bank in Barbados, details of the proposed bank must first be submitted to the Central Bank of Barbados for approval. Approval must be sought from the Ministry of Finance prior to the incorporation of a company. A company must have a licence before engaging in the offshore banking business. Applications for a licence are submitted to the Central Bank who may issue the licence, subject to the approval of the Minister of Finance. A licence to operate is issued only to qualified foreign bank's and eligible companies. Licences are under the overall control and oversight of the Central Bank of Barbados. Offshore Banks are subject to audit, an annual licence of US$12,500 and income tax on a sliding scale of 2.5% - 1%.

The Offshore Banking Act provides that dividends, royalties, interest, foreign securities funds, gains and assets generated or managed by a licensee are automatically exempt from the provisions of the Exchange Control Act.

Summary of benefits

• Tax at the rate of 1% (on profits over US$15 million), up to 2.5% (profits up to US$5 Million)
• No direct tax or capital gains
• No withholding tax
• No exchange control

Barbados Investment Opportunities

Barbados is an ideal location for reducing manufacturing & information processing costs, while taking advantage of duty-free exports to international markets and increasing profits.

Advantages of establishing your business in Barbados include:

• 10-year tax holiday, with 2½ % tax rate thereafter
• Exemption from import duties
• Full repatriation of capital, profits & dividends
• Low-cost, subsidized factory space available within 10 fully-serviced industrial parks
• Cash grants for worker training
• Cooperative and efficient customs service
• Free consulting services of the Barbados Investment and Development Corporation (BIDC)
• Official welcome from a government committed to private enterprise
• Low operating costs (savings of 40% or more)
• Literate, skilled, trainable and productive workforce with low rates of turnover and absenteeism
• Economic, political and social stability and integrity
• Duty-free access to the U.S.A., Canada and the E.U.

Barbados also offers special business sector incentives to the following areas of business:

Information Technology Services Sector

• Special tax rate of 2 1/2% on net profits.
• Full exemption from import duties on production related equipment such as computers.
• Full and unrestricted repatriation of capital, profits and dividends.
• Subsidized office space available for rental in fully serviced industrial parks.
• Training grant of US $50.00 per employee per week during the first 18 months of operation.

Manufacturing and Production Industries

• Up to ten years exemption from taxes on corporate profits.
• 2 1/2% tax rate for export industries thereafter.
• Exemption from import duties on parts, raw materials and production machinery.
• Expedited customs clearance procedures.
• Full and unrestricted repatriation of capital, profits and dividends.
• Subsidized factory space in well planned and fully serviced industrial parks.
• Training grant of US $50.00 per employee per week during the first 18 months of operation. Click HERE for further details.
• Coordinated investment approval procedures.

Tourism and Hospitality Sector

Barbados Tourism Investment Inc. (BTI) is the development agency of the Government of Barbados with special responsibility for promoting and facilitating investment in the tourism and hospitality sector in Barbados.

Whenever you are considering an investment in a tourism and hospitality related project in Barbados, BTI will assist you in a number of ways. Visit http://barbadostourisminvestment.com for more information.

The Barbados Investment Development Corporation (BIDC)

The BIDC has special responsibility for promoting and facilitating the establishment and expansion of business enterprises in Barbados. The BIDC also administers the Government's incentive program for industry and provides a variety of free advisory services for companies looking to establish business entities on the island, especially in the areas of Information Technology, Manufacturing and Financial Services.
Visit http://bidc.com for more information.

 

International Financial Services Companies

Barbados has established a reputation as a world-class international financial services center, developing a network of double taxation treaties, domestic tax policies, and legislation which facilitates a thriving industry.

• Offshore Banks
• Exempt Insurance Companies
• International Business Companies
• Foreign Sales Corporations
• Societies with Restricted Liability
• Trust Companies
• Ship Registration and Shipping Activities

Contact a Barbados offshore management company:

• Platinum Offshore Management Services
• Offshore Corporate Services

Tax Treaties

Barbados has entered into tax treaties with

• USA
• Canada
• United Kingdom
• Finland
• Sweden
• Norway
• Switzerland
• Venezuela
• Cuba
• China

Bilateral Investment treaties have been signed with

• Canada
• Cuba
• Germany
• Italy
• Switzerland
• United Kingdom
• Venezuela

Provisions of Bilateral Investment Protection treaties

• Investment promotion and protection
• Provision of compensation for losses
• The granting of most-favoured nation and national treatment provisions
• Protection from unfair expropriation and nationalisation of investment
• Procedures for the fair and equitable settlement of disputes arising
• Procedures for the timely repatriation of investment and returns
• Procedures for prompt transfer of funds
• Subrogation

FINANCIAL SERVICES

Barbados has been a financial services center since the enactment of the International Business Companies Act in 1965.

Over the last fifteen (15) years, it has worked to develop an impressive range of legislation designed to promote international business and financial services. This, together with its reputation as a well-regulated, clean jurisdiction; its impressive network of tax and bi-lateral investment treaties and cadre of highly qualified investment professionals, has widened Barbados' appeal to international investors worldwide. It is now considered a major international financial services center enjoying spectacular growth.

Presently, some 6,775 offshore entities are licensed to do business in Barbados.

INTERNATIONAL BUSINESS COMPANIES

In 1965, the International Business Companies (IBC) Act was passed in Barbados and it has permitted companies that do not "trade in the Caribbean region" to establish their headquarters in Barbados. The Act was subsequently amended in 1991 and provides for a broad range of activities that an IBC can conduct.

The IBC status is conferred on companies that are either carrying on the business of international manufacturing or international trade and commerce. It provides tax reductions, exemption and various other benefits for the foregoing areas of activities

Requirements To Qualify As An IBC

·         It must be incorporated in Barbados or be a local branch of a foreign corporation.

·         It must not trade in goods or services in Barbados or any of the Caribbean countries which form part of CARICOM.

·         It may not carry on any business under other offshore incentive legislation.

·         It must obtain a license from the Minister of finance. The annual fee for the license is US$100.00.

Summary Of Incentives

·         A 2.5% maximum corporate tax rate on net profits.

·         An IBC incorporated outside of Barbados will be taxed in Barbados only on the profits earned from its Barbados operations.

·         Taxes paid to a foreign country may be credited against tax payable in Barbados.

·         The credit cannot reduce the tax payable to less than one percent (1%) of the taxable income for the particular income year.

·         Capital gains are not subject to tax in Barbados.

·         The Government of Barbados is prepared to guarantee the existing International Business Company benefits for at least fifteen (15) years.

·         There are no withholding taxes on dividends, royalties, management fees, interest payments and other fees paid by an international business company to non-residents of Barbados or to another IBC.

·         An IBC is exempt from exchange control restrictions and may keep its records and financial statements in a foreign currency.

·         Expatriate staff, who may readily obtain work permits, can be exempted from income tax and exchange control on up to 35% of their remuneration from an IBC.

·         An IBC may import, free from all customs duties, equipment, machinery or materials for use in its business.

·         Barbados has a comprehensive double taxation treaty with Canada. Therefore, dividends paid out of the active business income of a foreign affiliate operating in Barbados are fully deductible in the determination of the taxable income of a recipient Canadian resident corporation.

·         Barbados is certified as a "North American Area" and therefore business convention expenses incurred in Barbados by US corporations and organizations are automatically deductible in the US against US taxes.

·         Profits of an IBC whose shares are wholly owned by a trust which is managed by a licensed offshore bank are exempt from tax.

·         No minimum capital requirements.

·         Ease of incorporation.

·         Provision for pre-incorporation contracts and telephone directors' meetings.

·         Exemption from public filing of financial statements.

·         No investment restrictions.

·         Single shareholder companies permitted.

·         A company may buy back its shares or reduce stated capital subject to solvency tests.

OFFSHORE BANKS

The Offshore Banking Act was enacted on July 26, 1979. Its purpose is to provide incentives by way of tax reductions and other exemptions and benefits for offshore banking carried on from within Barbados.

Offshore Banking is defined as:

A) Receiving foreign funds through:

·         Acceptance of foreign money deposits payable on demand, after a fixed period, or after notice;

·         Sale or placement of foreign bonds, certificates, notes or other debt obligations, or other foreign securities;

·         Any similar activity involving foreign money or foreign securities.

B) Using the foreign funds mentioned above to finance:

·         Loans, advances and investments; OR

·         Activities of the person carrying on the business.

Offshore Banking also includes the acceptance in trust of:

·         Amounts of money in foreign currencies, foreign securities or both;

·         Foreign personal or movable properties; AND/OR

·         Real or immovable property outside Barbados from persons resident outside Barbados.

To qualify and obtain a license, an applicant must:

·         Obtain the consent of the Minister to incorporate for the purpose of offshore banking. The government imposes a flat annual license fee of US $12,500.

·         Show that it is an eligible company or a qualified foreign bank

·         State the names and addresses of its director

·         Submit a certified copy of its articles of incorporation;

·         Give particulars of the proposed banking activity

·         Submit the names of shareholders who are residents of Barbados and the number of shares held by them.

·         Have at least one of the directors resident in Barbados.

·         Minimum capital requirement for residents and non-residents of US $500,000 and US $125,000 respectively.

 Summary of Incentives

·         Low rate of tax on net profits (maximum 2.5%).

·         No capital gains tax.

·         No taxes on dividends or interest paid to non-residents.

·         No estate, inheritance or succession tax on shares, securities or assets beneficially owned by non-residents.

·         No tax or duty in respect of the transfer of securities or other assets to non-residents.

·         No tax upon the incremental value of property or other assets in Barbados.

·         No tax on trusts established by a non-resident for the benefit of another non-resident if trust assets consist solely of foreign currency or foreign securities.

·         Availability of Government guarantee regarding future taxation.

·         Availability of exemption from customs duties on goods imported into Barbados (including equipment or fixtures) for doing business from within Barbados.

·         Tax treaties with US, Canada, UK, Switzerland, Sweden, Norway and Finland.

·         Dividends paid from the active business income of a Barbados resident foreign affiliate to its Canadian corporate shareholder may be considered exempt surplus and thus not taxable in Canada.

·         Simplified corporate mobility.

·         Exchange control exemptions

·         Provision for redeemable shares (subject to solvency tests).

·         Provision for pre-incorporation contracts.

·         Provision for telephone meetings.

·         Income tax and exchange control concessions for expatriate employees.

·         No requirement for public filing of financial statement.

·         Confidentiality relating to the affairs of the banks non-resident customers.

·         Freedom to conduct trust business.

EXEMPT INSURANCE

The Exempt Insurance Act was introduced in 1983 to establish Barbados as a domicile for international insurance activities. The approach of the Act is both modern and flexible and it facilitates the licensing of exempt (captive) insurance companies and the registration of management companies and holding companies.

Presently, Barbados has developed into a viable alternative to Bermuda for the location of exempt insurance companies and generally for the conduct of international insurance Business.

Requirements for exempt insurance business:

• The company must be incorporated under the Companies Act as a company limited by shares or as a mutual insurance company;
• Its activities are the transaction of exempt insurance business;
• Its articles of incorporation are acceptable to the Minister;
• Must have at least one resident citizen as a director;
• It must have paid-up capital, or in the case of a mutual insurance company approved by the Supervisor, contributed reserves amounting to not less than US $125,000.00;
• Its articles of incorporation provide that upon liquidation of the company, monies payable to shareholders are payable to or for the benefit or persons resident outside the Caribbean community.

Conditions of a license

• In issuing a license, the Minister may specify the class of insurance to be carried on. It is a condition of a license that the licensee will not, without prior consent:
• Enter into a merger;
• Transfer its assets or liabilities except in the ordinary course of business;
• Change its name;
• Engage in business other than that specified in the license; and
• Alter its articles of incorporation.

A license issued remains valid until revoked and is subject to the payment of an annual fee. The fees payable are as follows:

On application US $ 250

Certificate on registration US $ 2,500

Annual fee US $ 2,500

Incentives And Exemptions

• Exempt insurance companies and management companies pay no income or capital gains tax on their profits or gains or on their transfers of securities to persons who are not residents of Barbados.
• Exempt from withholding tax and exchange control restrictions
• Expatriate staff, who may readily obtain work permits, can be exempted from income tax and exchange control on up to 35% of their remuneration.

SOCIETIES WITH RESTRICTED LIABILITY (SRL)

The SRL Act was enacted in 1995 and the legislation allows for the creation of a true hybrid entity which may be recognized as either a corporation or a partnership depending on the nature of its organizational documents.

Definition

A SRL is an entity with full judicial personality, but whose members will enjoy the advantage of limited liability available to limited partners of a limited partnership. One or more persons may organize a society by signing and sending articles of organization in the prescribed form to the Registrar together with the prescribed fee.

Characteristics of an SRL

• It has full judicial personality.
• It can have a life of up to fifty (50) years.
• Limited liability.
• An SRL is required to have and continuously maintain registered office and an agent in Barbados.
• It may be recognized as a partnership or a corporation depending on the nature of its organizational documents.
• It must have a minimum of two (2) members.
• Contributions to capital may be made in cash or other property but not services.
• It is not dissolvable on the death of a ember except where the articles specifically so provides.

A SRL can be formed either as an "exempt society" or as a "non-exempt society".

Exempt SRL's are designed to be used mainly for international transactions and are taxed at reduced rates. Non-exempt SRL's are subject to the normal tax rate.

An Exempt Society may:

• Acquire such goods and services in Barbados as it requires for the conduct of its business; and
• Transact in Barbados such business as may be prescribed with:
• Another exempt society; OR
• An international business company licensed under the International Business Companies Act;
• An offshore bank licensed under the Offshore Act, AND
• An exempt insurance company licensed under the Exempt Insurance Act.

An Exempt Society may however not:

• Acquire or hold land in Barbados, other than land required for its business held by way of lease or a tenancy agreement for a term not exceeding the period fixed in the articles for the duration of the Society of for such shorter period as circumstances require.
• Transact business with any person resident in the CARICOM region (which is primarily the English-speaking Caribbean.
• Take deposits from any person in contravention of the Financial Institutions Act 1996.

Benefits Of Exempt Society:

• Tax on income on a sliding scale (from a maximum of 2.5% to a minimum of 1%).
• Exemption from all withholding taxes.
• No capital gains tax or estate duty.
• Tax credit in respect of taxes paid outside of Barbados is allowable but only in-so-far that the credit cannot reduce tax payable in Barbados to less than 1%.
• Complete freedom from exchange control.
• Books of accounts may be kept outside Barbados.
• No minimum capital or "thin capitalization" rules.
• Bearer shares quotas are not permitted.
• Benefits Of Exempt Society Continued:
• Inward and outward re-domiciliation provisions.
• Convention expenses allowed by U.S. tax authorities.
• Modern and flexible corporate law.
• The sale of foreign real estate or investments and the transfer of equity in an SRL, are not subject to local transfer taxes and stamp duty.
• An SRL may import - free from all customs duties - machinery or materials for use in its business.

TRUSTS

How is a trust created?

A trust is usually created by deed or by will. The deed or will is known as the trust instrument and this, together with the general law of trusts, will govern the administration of the trust assets.

For the international client a trust instrument can be prepared to meet the particular requirements and circumstances of the settlor and intended beneficiaries. In recognition of possible changes in circumstances the instrument will usually contain provision for:

·         Acceptance of additional property into the trust.

·         The appointment of trustees outside the jurisdiction of choice.

·         Changing the governing law.

·         Appointment of additional beneficiaries and exclusion of any beneficiary.

·         Distribution of the trust fund to another trust.

A settlor can set out in the trust instrument the way in which he wishes the trustee to administer and invest trust property and provide the beneficiaries with fixed entitlements respecting distributions of trust property ( a fixed trust). The modern tendency, however, is to provide the trustee (a) by way of the trust instrument with wide discretions with respect to both investment and distributions and (b) by way of a non-legally-binding letter, with guidance as to how the settlor wishes the trustee to exercise these discretions (a discretionary trust).

Types of trusts

A trust is an adaptable instrument. By including different clauses in the trust document a variety of trust "types" can be set-up, such as:

·         Interest in possession trusts.

·         Discretionary trusts.

·         Asset protection trusts.

·         Purpose trusts.

Advantages and uses of a trust

When settling a jurisdiction in which to establish a trust, it is important that professional advice be obtained to determine, as far as possible, that the trust will be recognized as such in the tax jurisdiction to which a client is subject. Depending upon the laws existing in their jurisdiction and their circumstances, clients will find that a trust appointing SMTC in Barbados offers the following opportunities:

·         Preservation of family wealth by the avoidance of death duties.

·         Continuity of ownership and management of business assets.

·         Asset protection against future unknown claims.

·         Planning for emigration/immigration in the event of restrictions or changes in law.

·         Tax reduction or avoidance in relation to income or assets.

·         Avoiding or reducing probate formalities where assets such as bank accounts are held in several countries.

·         Protection for infant children, aged parents or persons or unsound mind.

·         Protect family property from wastrels.

·         Confidentiality.

·         Provide pensions for retired employees and their dependants.

Types Of Barbados Trusts

International Trusts Act 1995 (Barbados)

This act defines an International Trust as one that:

·         Is created by a settlor resident outside of Barbados.

·         Has at least one trustee who is resident in Barbados.

·         Has no beneficiaries resident in Barbados.

·         Has no immovable property in Barbados.

·         The trust deed stipulates that the International Trusts Act, 1995, applies.

The benefits of this statute are:

·         Trust period up to 100 years.

·         Trusts permitted for a non-charitable purpose provided said purpose is specific, reasonable and capable of fulfillment and a protector is appointed to enforce the trust

·         Rule against perpetuities does not apply.

·         Fraudulent disposition provisions protect the rights of existing and certain defined future creditors.

·         Exemption from Barbados exchange control.

·         Creditor has burden of establishing intent to defraud.

·         Avoids adverse consequence of forced heirship requirements of settlor's home jurisdiction.

·         Barbados incorporated International Business Companies, Exempt Insurance Companies and Offshore Banks, can be beneficiaries.

·         International Trusts can be used to conduct commercial ventures.

An International Trust is deemed to be a non-resident of Barbados for tax purposes. As such, it is subject to tax in Barbados on its Barbados source income, and on any overseas income that is permitted to Barbados.

The Offshore Trust

Offshore Trusts are exempt from all Barbados taxes and duties. As with International Trusts, they are not subject to exchange control.

To qualify as an Offshore Trust the following conditions must be fulfilled:

 

i. An offshore bank must act as trustee

ii The Settlor and beneficiaries must be non-residents of Barbados

iii. The assets must consist solely of foreign securities and currencies.

 
The Domestic Trust

A Domestic Trust is subject to Barbados tax on trust income that is not distributed in the calendar year in which it is earned. A beneficiary is subject to Barbados tax only if he is a Barbadian, or if the source of the income is Barbados. Capital gains are not taxable under any circumstances.

There are no registration requirements governing Domestic Trusts and the only regulation of them is through the Trustee Act.

A trust administered in Barbados may also benefit from Barbados' treaty network, especially where it does not rely on an offshore exempting statute, such as the Offshore Banking Act, for its status. Most notably, use may be made of the Barbados/Canada treaty where Canadian assets are included in the trust property and so, in particular, the trust may avoid certain Canadian capital gains taxes.

Barbados does not have a capital gains tax, a wealth tax or an inheritance tax.
 

SHIP'S REGISTRY

The Barbados Shipping Act, based on UK Merchant shipping legislation, provides for the registration of ships under the Barbados Flag. It is intended primarily for trade between ports outside of the CARICOM region to or from but not within the states of the CARICOM. A ship must not be more than twenty years old to qualify for registration.

Eligible ships include:

·         Foreign-going vessels of at least 500 gross registered tons;

·         Pleasure yachts,used exclusively for pleasure, and do not carry passengers or cargo for hire or reward.

Exemptions may be granted to permit registration of ships of less than 500 gross registered tons. For additional information see www.ships-barbados.demon.uk

 

REGISTRATION PROCEDURES

Application for registration must be made either by the individual owner or his agent or by an individual authorized to act on his behalf. This application must be made to the Barbados Ship's Registry based at the Barbados High Commission,1 Great Russell Street., London WC1 3JY. For additional information on registration procedures click www.ships-barbados.demon.uk

TAXATION

Barbados does not impose any tax on income, capital gains or similar financial revenues. Thus, the income and operation or any capital gain on the sale of a ship registered under the Barbados flag is completely free of tax in Barbados, whether the ship is owned directly by a foreign person or entity or by an offshore Barbados company.