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Barbados: Double Tax Treaties

Introduction

Barbados has a small number of double tax treaties, but the US and Canadian treaties in particular are extremely favourable for certain types of investor.

As of May 2013, Barbados had 31 tax treaties, including with the following countries: The Caribbean Common Market (CARICOM), the United States, Canada,Austria, United Kingdom, Finland, The Netherlands, Norway, Malta, Sweden, the Seychelles, Switzerland, Cuba, Venezuela, China, Mauritius and Botswana. Treaties with Bahrain, Qatar, Portugal and San Marino are not yet in force. Discussions between Barbadian and Japanese officials over the possibility of a tax agreement took place in August 2006, and Barbados has also explored negotiations for a double tax treaty with India.

Barbados inherited treaties with Switzerland, Sweden, Norway and Finland from the UK, but only the Swiss treaty survived - the other three were replaced with more modern treaties with low rates of withholding, tax-sparing provisions, and limitations on treaty-shopping. The Canadian treaty, dating from 1980 was extensively updated by a protocol signed in November, 2011. The protocol contains provision for the exchange of information and at the time of writing has not yet come into force.

The Finnish treaty has a 51% local ownership limitation of benefits rule, but IBCs and other offshore entities are specifically excluded from the rule, thus giving them access to treaty benefits until a protocol signed in November, 2011, comes into force. The protocol will exclude IBCs and other offshore entities from the benefits.

The Barbados/US tax treaty dates from 1984, and was accompanied by an exchange of tax information agreement (see Other International Agreements below). The treaty creates opportunities for 3rd country investors in US real estate, and is also attractive to US manufacturers. Many US investors are exempted from US accumulated earnings tax on Barbadian profits - this is a rare feature in US tax treaties. A protocol to the US treaty signed in 1991 lowered withholding rates and introduced new 'limitations on benefits' rules.

The US treaty was further amended in 2004 in what was said to be an attempt to counter tax evasion. The second protocol to the 1984 treaty was co-signed by then US Treasury Secretary John Snow and Barbadian Industry and International Business Minister, Dale Marshall.

The protocol was ratified by the US Senate in November, 2004, although some tax experts expressed unease that certain new provisions have found their way into the treaty without being fully reviewed. Judith P. Zelisko, president of the Tax Executives Institute (TEI), whilst supporting the bulk of the new agreement, pointed to concerns over rules expanding the Limitations on Benefits provision to the US treaty network "without thorough analysis." However, Zelisko conceded that despite these reservations, "on balance we agree that ratification of the Barbados Protocol is in the best interest of the country and the business community".

A treaty with Malta entered into force in June, 2002.

A treaty with Mauritius was signed in September, 2004.

As a result of the treaty with China, signed in 2000, Barbados has emerged as the leading jurisdiction for offshore Wholly Foreign Owned Enterprise (WFOE) holding companies in China. Under existing law, payments of dividends by a WFOE to its foreign owners are free of Chinese withholding tax. Payments of interest to foreign lenders are subject to withholding at 20%, typically reduced to 10% under applicable tax treaties. However, where a taxpayer qualifies for benefits under the Barbados-China treaty, the rates are 5% for dividends and 10% for interest.

According to the government of Barbados, the tax treaty with China and its utility in attracting foreign investment to Barbados represents an endorsement of its strategy to expand opportunities for international and pan-Caribbean business in Asia.

In an effort to prevent 'treaty shopping' the Chinese Authorities and Barbados signed an amendment protocol in February, 2010, which has applied since January 1, 2011. Since that date a withholding tax of 5% applies to ownership of 25% or more. Dividends relating to an ownership of less than 25% are subject to a 10% rate.

Technical discussions on the opening of negotiations have also been held with the Republic of Ireland, Brazil and South Africa, while Barbados has also explored the possibilty of new agreements with Slovakia.

In December 2009, the governments of the Netherlands and Barbados signed a protocol which amended the convention on the avoidance of double taxation that they share, in order to quash tax treaty abuse.

The protocol in question amends the convention to prevent Dutch taxpayers from using the treaty to transfer dividends free of tax to a third country through the Caribbean territory.

Upon approval by both governments, the original treaty, in force since January 1, 2008, was thus revised. The new text also stipulates a tax rate of no more than 15% on dividends, and contains more stringent parameters on eligibility.

Latest Barbados Treaty Updates

Treaty Update: Barbados - Cyprus
22 May, 2017
Barbados and Cyprus signed a DTA on May 10, 2017.
Treaty Update: Italy - Barbados
11 May, 2017
Italy's Chamber of Deputies approved a law to ratify the DTA with Barbados on May 2, 2017.
Treaty Update: Ghana - Barbados
20 June, 2016
Ghana and Barbados have signed a DTA, Barbados's inward investment agency said on June 9, 2016, noting that it is awaiting ratification.
Treaty Update: Poland - Barbados
25 May, 2016
Poland and Barbados intend to negotiate a DTA, the Barbados Government said on May 19, 2016.
Treaty Update: Barbados - Greece
11 November, 2015
Barbados and Greece discussed the possibility of signing a DTA on November 4, 2015.
Treaty Update: Barbados - Slovakia
10 November, 2015
Barbados and Slovakia signed a DTA on October 28, 2015.
Treaty Update: Barbados - Italy
02 September, 2015
Barbados and Italy signed a DTA on August 24, 2015.
Treaty Update: Barbados - Cyprus
19 August, 2015
The Barbados Government has announced that it will soon begin DTA negotiations with Cyprus.
Treaty Update: Barbados - Italy
19 August, 2015
The Barbados Government said on August 10, 2015, that it expects to soon sign a DTA with Italy.
Treaty Update: Barbados - Korea, South
30 July, 2015
During a recent meeting by the Korean Ambassador-Designate to Barbados, Doo-Young Lee, Barbados expressed an interest in launching DTA negotiations with South Korea.
Treaty Update: Barbados - Cyprus
12 March, 2015
Barbados and Cyprus are engaged in negotiations towards a DTA, the Barbados Government confirmed on March 2, 2015.
Treaty Update: Barbados - Israel
24 February, 2015
Barbados and Israel are engaged in negotiations towards the conclusion of a DTA, it was confirmed at a meeting on January 22, 2015.
Treaty Update: South Africa - Barbados
20 February, 2015
A notice was published in the South Africa official gazette on February 17, 2015, reporting that the TIEA with Barbados entered into force on January 19, 2015.
Treaty Update: Barbados - Rwanda
06 January, 2015
According to preliminary media reports, Barbados signed a DTA with Rwanda on December 22, 2014.
Treaty Update: United Arab Emirates - Barbados
30 September, 2014
United Arab Emirates signed a DTA with Barbados on September 24, 2014.
Treaty Update: Barbados - Japan
13 August, 2014
Barbados and Japan have committed to continue negotiations towards a DTA, the Barbados Government confirmed on August 6, 2014.
Treaty Update: Barbados - Brazil
23 June, 2014
Barbados is seeking DTA negotiations with Brazil to enhance economic ties, Barbados's Prime Minister, Freundel Stuart, said on June 16, 2014.
Treaty Update: Singapore - Barbados
19 May, 2014
The DTA between Barbados and Singapore entered into force on April 25, 2014.
Treaty Update: Barbados - Canada
10 January, 2014
The Barbados Government on January 7, 2014, confirmed that the DTA Protocol signed with Canada has become effective.
Treaty Update: Barbados - Singapore
18 July, 2013
Barbados and Singapore signed a DTA on July 15, 2013.
Treaty Update: Bahrain - Barbados
09 July, 2013
According to preliminary media reports, Bahrain completed its domestic ratification procedures in respect of the DTA the nation signed with Barbados on July 1, 2013.
Treaty Update: Bahrain - Barbados
08 May, 2013
Bahrain's upper house of parliament, the Shura Council, approved a law to ratify the DTA signed with Barbados on May 6, 2013.
Treaty Update: Bahrain - Barbados
11 February, 2013
According to Bahrain's state news agency, Bahrain's Cabinet on January 20, 2013, approved the Bahrain-Barbados DTA and decided to forward to it the National Assembly for its approval.
Treaty Update: United Kingdom - Barbados
18 January, 2013
The UK tax authority, HM Revenue and Customs, has recently confirmed that the new DTA between the UK and Barbados, to replace the existing DTA signed in 1970, entered into force on December 19, 2012.
Treaty Update: Barbados - Sweden
16 January, 2013
The Protocol to the Barbados-Sweden DTA entered into force on December 12, 2012, the Barbados government confirmed on January 14, 2013.
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