Scope of Corporation Tax
Under the Income Tax Act, Barbados
imposes corporation tax on 'companies': this term includes
all companies incorporated or registered in Barbados,
and any foreign company which carries on business or
has an office or place of business in Barbados. Resident
companies are taxed on their world-wide income; 'resident'
means managed and controlled from Barbados. Non-resident
companies are taxed only on income derived from Barbados,
meaning from business actually conducted in Barbados.
Barbados Corporation Tax Rates
rate of corporation tax was 40% but this was reduced
to 37.5% in 2003. For the 2005 tax year the rate was
30%, reducing further to 25% from 2006.
to the Barbados Small Business Development Act in 2007
have provided registered incorporated small businesses
with a number of incentives. These incentives include,
among others: a reduced rate of corporation tax of 15%
(instead of 25%) on the profits of the business; exemption
from import duty on raw materials, plant and equipment
imported for use in the business; and exemption from
withholding tax on dividends and interest earned on
investment in an approved small business, or in any
fund approved for investment in small businesses.
addition, there is an exemption from the payment of
stamp duty, under the Stamp Duty Act, on all documents
related to business where the registration of those
documents is required by law; and a deduction of corporation
tax of an amount equal to 20% of the actual expenditure
incurred in respect of the use of technology, market
research and any other activity that is, in the opinion
of the Commissioner of Inland Revenue, directly related
to the development of the business.
Act was first passed in December of 1999, and the recent
amendment has re-defined a small business as any enterprise
that satisfies two of the following criteria: is incorporated
under the Companies Act of Barbados; has not more than
$1 million as stated or paid up capital; has not more
than $2 million in annual sales; and employs not more
than 25 persons.
Barbados Branch or Subsidiary
pay an additional 10% corporation tax if profits have
been remitted, or are deemed to have been remitted,
unless profits are reinvested in Barbados other than
for the replacement of fixed assets.
NB: If a branch
has any significant level of activity in Barbados, it
is likely to have had to register as an 'external
company', and is treated in all respects as a company;
so in Barbados at least the concept of a branch doesn't
have much substance.
Calculation of Taxable Base
business and trading operations are calculated according
to standard accounting principles, and include interest,
royalties and rents.
received by local companies from trading and investment
activities extra CARICOM in nontreaty countries have
attracted withholding tax at various rates; until 2004
such dividends were nonetheless included in taxable
profits, but as from 2005 a tax credit was given for
such dividends. In the 2007 Budget, then Prime Minister
Owen Arthur announced that dividends earned by resident
companies from holdings in foreign (non-resident) companies
would be exempt from tax, provided the Barbados company
owns more than 10% in of the dividend-paying company
and the holding is not merely a portfolio investment.
dividends from resident companies are not included in
taxable income (there is a 12.5% withholding tax).
following list of permitted deductions and other aspects
of calculation of the taxable base in Barbados merely
summarises some of the chief points; the rules in many
cases are quite complex:
can be carried forward for nine years; there are
no loss carry-back provisions;
are investment allowances of 20% or 40% for certain
types of industrial plant and equipment - these
do not write down the asset value;
year allowances on plant and equipment are usually
20%, and continue at the same rate on a straight-line
basis; for industrial buildings the rate is 4%;
and for commercial buildings it is 2%;
charges/credits are made on disposal of capital
is a tax credit of 50% of certain foreign currency
allowances can be claimed on certain specified types
of export outside the Caricom area; these are calculated
as a percentage rebate on tax due on export profits,
and the percentage goes up, the higher proportion
export profits form of total profits, to a maximum
export sales promotion costs for sales outside the
Caricom area attract 150% allowances; these also
apply to some types of tourism promotion expenditure;
is no group or consortium relief.
Barbados Income Tax Act a company may benefit from a
tax credit in respect of taxes paid on foreign income
pursuant to a double taxation agreement, on a reciprocal
basis, where the person has paid or is liable to pay
income tax in a Commonwealth country and where an international
business company, international society with restricted
liability or a company licensed under the international
financial services act, pays foreign tax on income earned
outside of Barbados. Income from an entity other than
in the circumstances mentioned above currently will
not qualify for the credit.
Filing Requirements and Payment of Tax
returns must be filed in respect of each fiscal year
by 15th March in the year following the fiscal year
if it ends between 1st January and 30th September, and
by 15th June if it ends between 1st October and 31st
must make an advance tax payment of 50% of their previous
year's assessment by 15th September if their year ends
by 30th September or otherwise by 15th December; then
a further 50% is due by 15th March. Any balance of tax
due is payable at the filing date.
companies apply withholding tax at 15% on dividend payments
to non-residents and 12.5% to residents. Dividends paid
out of foreign source income do not attract withholding
tax. See Double Taxation
Treaties for details of withholding rates for Treaty
2007, non-treaty country withholding taxes were as follows:
to 2007, preference dividends paid by a Barbados-resident
company were subject to withholding at 40%.
paid by a Barbados-resident company out of tax-exempt
profits were subject to withholding at 45%.
company must keep a clear division in its accounts between
the different streams of revenue and dividends paid
out of them, and make appropriate reports to the tax
authorities when remitting the withholding tax.
levies an annual land tax at 0.6% on all unimproved
0% on improved value up to BDS150,000; 0.10% tax on
on the excess of the improved value up to BDS400,000,
0.45% tax up to BDS1 million, and 0.75% tax above
a company that is incorporated and resident in Barbados
or an individual who is a citizen or a resident of
Barbados has title to land that is being used exclusively
for agricultural purposes, a rebate of tax of 0.5%
may be granted under certain circumstances.
If the company
owning the land is non-Barbadian, or owned by a non-Barbadian
company, the rates go up to 3% for unimproved land,
and 2% for improved land. Some Tax
Treaties include exemption from this tax.
are also property taxes; however since 2003 the first
$125,000 of a Barbadian property's value is exempt
Barbados Stamp Duty
is payable in a number of situations in Barbados;
those most likely to affect businesses are transfers
of real estate and shares (1%), leases (1%), mortgages
(BDS5 on the first $500, and $3 on each subsequent
$500), and imported goods (varies).