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Barbados: Offshore Legal and Tax Regimes

Tax Treatment of Offshore Operations

See Domestic Corporate Taxation for the general principles of Barbados corporate taxation, which also apply to offshore entities.

International Business Companies pay corporation tax as follows:

Taxable Profits, BDS '000
Rate of Tax, %
Up to 5,000
2.5
Between 5,000 and 10,000
2.0
Between 10,000 and 15,000
1.5
Over 15,000
0.25

Foreign tax credits are deductible, but only in so far as the tax paid stays above 1%.

An external IBC (incorporated outside Barbados) pays tax only on its local revenues. IBCs are exempt from stamp duty on transfers to other IBCs or non-resident persons; they are exempt from exchange control regulations; they are exempt from customs duties on goods and materials imported for their international business, and they are exempt from withholding taxes on payments of all types made to other IBCs or to non-resident persons.

The Minister may grant exemption from income tax on a proportion (usually one third) of the earnings of those IBC employees or sub-contractors who are essential to its business but are difficult to attract or retain.

Foreign Sales Corporations are exempt from corporation tax, from withholding tax on payments to non-residents, from customs duties on goods and materials imported for their foreign trade, from ad valorem stamp duties, consumption tax, and property transfer tax on the transfer of shares to non-residents. Their foreign trade transactions are exempt from exchange control, and they do not have to file tax returns.

A stamp duty of BDS10 is payable on documents, agreements, assignments, bills of exchange, bonds, covenants, debentures and deeds.

The Minister may grant exemption from income tax on a proportion (usually one third) of the earnings of those FSC employees or sub-contractors who are essential to its business but are difficult to attract or retain.

The US owners of Barbados Foreign Sales Corporations receive tax benefits under US Tax Reform Act 1984 and the subsequent Extra-Territorial Income Exclusion Act 2002. However, following rulings by the World Trade Organisation after complaints from the EU, this legislation was repealed in 2004.

Offshore Banks pay corporation tax on the same basis as an International Business Company (see table above). They are exempt from withholding tax on payments to nonresidents or other offshore entities, from customs duties on goods and materials imported for their offshore business, from estate duties on any of their shares, securities or assets owned by a non-resident, and from property transfer tax on the transfer of shares, securities or other assets. Their offshore transactions are exempt from exchange control, and they are exempt from ad valorem stamp duty.

A stamp duty of BDS10 is payable on documents, agreements, assignments, bills of exchange, bonds, covenants, debentures and deeds.

The Minister may grant exemption from income tax on a proportion (usually one third) of the earnings of those offshore bank employees or subcontractors who are essential to its business but are difficult to attract or retain.

Exempt Insurance Companies and registered holding or management companies are exempt from income tax, capital gains tax, withholding tax and all other direct taxes on profits or transfers of assets or securities for 15 years, and thereafter, 8% on the first US$125,000 of profits. They are also exempt from exchange controls, and putative investors in an exempt insurance company do not require exchange control permission for the investment. No tax filings need to be made.

A stamp duty of BDS10 is payable on documents, agreements, assignments, bills of exchange, bonds, covenants, debentures and deeds.

The Minister may grant exemption from income tax on a proportion (usually one third) of the earnings of those insurance company employees or subcontractors who are essential to its business but are difficult to attract or retain.

Exempted Limited Partnership: nonresident partners will be exempt from income tax, capital gains tax, withholding tax and all other direct taxes on partnership income attributable to them. An Exempted Limited Partnership may import duty- and tax-free all types of goods and materials that are exclusively for the use of the partnership.

International Trusts: Trusts are taxed as persons in Barbados, but an International Trust with nonresident settler and beneficiaries, and without Barbadian real estate assets, will at worst be taxed only on income remitted to Barbados; this is easily avoided, of course. If other Barbadian offshore entities are trust beneficiaries, they are treated as nonresident

Shipping Management Companies are treated as nonresident and are exempt from income taxes. Under the Shipping Incentives Act, which predates the Shipping Corporations Act, shipping companies involved in the operation or leasing of ships, or in shipbuilding, are entitled to a number of tax benefits, including freedom from import duty on ships and materials used in building or repairing them, exemption from tax for dividends paid to residents, reductions in taxes for dividends paid to nonresidents, and (at the Minister's discretion) full or partial exemption from taxes on profits. Shipping companies choosing to be incorporated in Barbados are eligible to tax on profits according to the following scale:

  • 2.5% on all profits and gains up to USD5 million
  • 2% on all profits and gains exceeding USD5 million but not exceeding USD10 million
  • 1.5% on all profits and gains exceeding USD10 million but not exceeding USD15 million
  • 0.25% on all profits and gains exceeding USD15 million

Societies with Restricted Liability: Exempt SRLs (ie those without Barbadian resident shareholders, without Barbadian investment assets, and not trading with residents) are taxed on the same basis as International Business Companies (see above); indeed a Barbados-incorporated IBC can convert itself into an SRL by special resolution, and a foreign (registered) IBC can do so by applying to the Registrar for a Certificate of Continuance as an SRL.

 

 

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