Barbados: Domestic Corporate Taxation
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 and have been given tax credits since 2005. 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.