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BARBADOS JURISDICTION
LINKS IN THIS SECTION
SCOPE OF CORPORATION TAX
CORPORATION TAX RATES
BRANCH OR SUBSIDIARY
CALCULATION OF TAXABLE BASE
FILING REQUIREMENTS AND PAYMENT OF TAX
WITHHOLDING TAX
LAND TAX
STAMP DUTY
RELATED INFORMATION


Direct Corporate Taxation

 

Several new measures were announced in the 2007 Budget by then Prime Minister Owen Arthur to increase the tax competitiveness of the jurisdiction. From the 2007 tax year:

  • Dividends earned by resident companies, including IBCs, from holdings in foreign (non-resident) companies are 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 paid to non-resident shareholders by Barbados companies are exempt from withholding taxes on the portion of income derived from foreign sources.
  • Developers selling homes to first-time buyers at BDS150,000 or less pay a reduced 15% tax.
  • Companies in the construction, manufacturing and tourism sectors achieving an internationally-recognised environmental certificate qualify for a 150% deduction on the costs incurred in obtaining certification.


Barbados 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.

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Barbados Corporation Tax Rates

The standard 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.

Amendments 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.

In 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.

The 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

Branches 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.


Barbados Calculation of Taxable Base

Profits from business and trading operations are calculated according to standard accounting principles, and include interest, royalties and rents.

Dividends 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.

Domestic dividends from resident companies are not included in taxable income (there is a 12.5% withholding tax).

The 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:

  • Losses can be carried forward for nine years; there are no loss carry-back provisions;
  • There are investment allowances of 20% or 40% for certain types of industrial plant and equipment - these do not write down the asset value;
  • First 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%;
  • Balancing charges/credits are made on disposal of capital equipment;
  • There is a tax credit of 50% of certain foreign currency export earnings;
  • Export 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 of 93%;
  • Some export sales promotion costs for sales outside the Caricom area attract 150% allowances; these also apply to some types of tourism promotion expenditure;
  • There is no group or consortium relief.

Under the 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.


Barbados Filing Requirements and Payment of Tax

Company 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 December.

Companies 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.


Barbados Withholding Tax

Barbados-resident 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 partners.

In 2007, non-treaty country withholding taxes were as follows:

  • Dividends paid out of foreign source income 0%
  • Dividends paid from non-foreign source income 15%
  • Interest 15%
  • Rents 25%
  • Royalties 15%
  • Management/Technical Aid Fee 15%
  • Dividends from untaxed profits 25%
  • Services other than Management 25%
  • Covenants 20%
  • Branch profits remitted/deemed remitted 10%
  • Barbados Government Securities 0%
  • Professional fees 0%

Prior to 2007, preference dividends paid by a Barbados-resident company were subject to withholding at 40%.

Dividends paid by a Barbados-resident company out of tax-exempt profits were subject to withholding at 45%.

A 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.

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Barbados Land Tax

Barbados levies an annual land tax at 0.6% on all unimproved land; 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 BDS1 million.

Where 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.

There are also property taxes; however since 2003 the first $125,000 of a Barbadian property's value is exempt from taxation.


Barbados Stamp Duty

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).

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LINKS IN THIS SECTION
SCOPE OF CORPORATION TAX
CORPORATION TAX RATES
BRANCH OR SUBSIDIARY
CALCULATION OF TAXABLE BASE
FILING REQUIREMENTS AND PAYMENT OF TAX
WITHHOLDING TAX
LAND TAX
STAMP DUTY
RELATED INFORMATION

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