Barbados
is well-developed as an international financial
centre, although this has come about in an unspectacular
way. For 25 years the Government has welcomed
offshore business, and has consistently re-invented
its legislative apparatus to stay abreast of
the competition, while preserving its defences
against money-laundering and other criminal
activity. Barbados can't claim to have any of
the world's largest offshore business sectors,
but has growing and successful communities in
banking, insurance, and shipping, as well as
IBC and trust business; mutual funds are a very
recent addition to the Barbados product range,
and there is a stock exchange, which in February
2009 had capitalisation of BDS13bn with listings
from 26 local companies and a number of international
companies including 7 banks.
The
economy has recovered well since a downturn
in 2001, and growth has averaged 3.1% in the
five years to 2007, but fell again to 1.5% in
2008. The international business sector also
remains in a healthy condition.
The
central bank's economic review of 2007 noted
that 470 new business licences were issued during
the year, compared to 537 in 2006. Some 334
licences were granted to international business
companies, a decrease of 57 compared to the
previous year. In addition, 126 societies with
restricted liability, six exempt insurance companies,
one exempt insurance management company and
three new offshore banks were approved for operation.
Construction,
transport, storage and communications and business
and other services have driven non-traded sector
growth, owing to both private and public projects
associated with the Cricket World Cup.
Barbados
has to get to grips with the need to harmonize
onshore and offshore taxation. A 2004 survery
revealed a divided response, with half those
polled believing it would be beneficial, although
most of those (44%) felt that the matter was
not receiving adequate attention. Some 45% would
like to see a single tax rate levied between
5 and 10% whilst 23% think a rate of up to 5%
would suffice. Some 18% of respondents wanted
a single tax rate of between 20 and 25%.
This
section of the lowtax.net site describes the
most important types of offshore business activity
carried out from Barbados.
There
are 57 licensed offshore banks in Barbados (2008).
The Central Bank has recently strengthened its
vetting procedures over applicant banks in response
to international money laundering and criminal
concerns. Subsidiaries of foreign banks have
to provide written authorisation from the parent
supervisory authority, and the activities of
in-house corporate treasury operations must
be consolidated into published group accounts.
Licence
fees for financial institutions were increased
by the 2008 budget, wef January 1, 2009: Local
– main branch: BDS250,000 per bank; Local
– other branches: BDS20,000 per additional
branch; Local – ATM’s: BDS1000 per
ATM other than at branches; International banks
BDS100,000 per bank.
See
Offshore Legal and Tax
Regimes for details of the tax concessions
offered to offshore banks, which are also exempt
from exchange control regulations. The Central
Bank requires quarterly balance sheet reporting,
and filing of full annual accounts, along with
a list of the licensee's directors.
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Barbados Trust Management
Trust Management has been a considerable activity
in Barbados for 30 years or more, much of it
conducted by the trust departments of banks.
Originally the trust was used primarily by wealthy
individuals from the major common law countries,
but it is now accepted as a major technique
of asset protection in all parts of the world.
The International Trusts Act 1995 gave Barbados
a modern, comprehensive, business-oriented trust
regime which has proven attractive, particularly
to corporate users. This new, wider market-place
for trusts is not necessarily interested so
much just in tax avoidance, but also in the
efficient management of wealth in a more general
sense. See Law of
Offshore for a fuller treatment of trust
law in Barbados.
There
is a sophisticated community of professional
advisers on trust matters in Barbados. Individuals
can provide trust services without registration,
but companies offering trust services must be
licensed by the Central Bank under the Offshore
Banking Act 1979. Foreign or Barbados-resident
companies may obtain licenses.
See
Offshore Legal and Tax
Regimes for details of the taxation of trusts
in Barbados. Very tax-efficient structures can
be formed using offshore trusts in combination
with International Business Companies for international
securities management.
Licence
fees for trust management companies were increased
to BDS100,000 per company in the 2008 budget,
wef from January 1, 2009,.
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Barbados
Real Estate Holding
Barbadian International Business Companies have
been put to a variety of uses, but one of the
most popular has been as holding vehicles for
US real estate, taking advantage of the terms
of the US/Barbados double tax convention.
The
US tax convention has anti-treaty-shopping clauses
(strengthened in the Second Protocol ratified
in 2004), but they are more favourable than
is the case in many other double tax treaties.
Essentially, a non-Barbadian person can use
a Barbados International Business Company to
hold the shares of a US real estate company
(which should be income-producing); this structure
can take advantage of the treaty provisions
to escape US estate duty, among other tax benefits.
See Double Tax Treaties
and Offshore Legal and
Tax Regimes for further details.
NB:
This is a heavily simplified description. The
interplay of US tax rules, Barbadian tax rules
and the Barbados/US Tax Convention are complex,
and professional advice is essential before
entering any offshore transaction or structure.
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Barbados Insurance
See Offshore Business
Review – Insurance for a more general
treatment of captive insurance companies.
The Barbados insurance sector is regulated under
the Exempt Insurance Act 1983. The Ministry
of Finance and Economic Affairs is responsible
for the insurance sector, and day-to-day supervision
is in the hands of the Supervisor of Insurance.
Entities involved in insurance are licensed
by the Minister under the Act.
More
than 300 insurers are licensed under the Act,
with annual premiums of approximately US$2bn
and assets of US$10bn. A majority of these insurers
originate from the US, and are taking advantage
of the provisions of the Barbados/US Double
Tax Convention, which are not available to insurers
located in the other main Caribbean jurisdictions.
The Convention allows captives and other insurers
in Barbados to write business in the US while
avoiding the creation of a permanent establishment,
and thus to escape much US taxation. See Offshore
Legal and Tax Regimes for details of the
tax benefits available to offshore insurers;
also see Double Tax Treaties.
The
Act defines exempt insurance as the business
of insuring risks outside Barbados by a company
which is not owned by persons resident in Caricom.
An applicant for a license under the Act must:
- be
incorporated under the Companies Act 1982
as a limited liability company or as a mutual
insurance company (see Forms
of Company);
- carry
on only exempt insurance business;
- have
at least one resident Barbadian citizen
as a director;
- have
only shareholders who are resident outside
Caricom;
- must
have minimum issued capital (or reserves,
in the case of a mutual insurer) of BDS250,000.
The
captive insurance industry is growing in Barbados.
Rent-a-captives are permitted, and there is
provision for 'segregated account' companies.
Solvency
rules are as follows:
| Premium
income |
Solvency
Requirement |
| First
year |
Net
assets BDS250,000 |
| Below
BDS1.5m in previous year |
Net
assets BDS250,000 |
| Between
BDS1.5m and 10m in previous year |
Net
assets 20% of income |
| Above
BDS10m in previous year |
Net
assets BDS2m plus 10% of income over
$10m |
Licenses
are issued to insurers as such; holding companies
and management companies involved in offshore
insurance business must register with the Supervisor
of Insurance. Licensees and registrants pay
an application fee of BDS500.
License
fees were raised in the 2008 budget, wef January
1, 2009, from BDS5,000 to BDS20,000 per annum.
Attempts
in the US Congress between 2001 and 2003 to
ban tax deductions for 'expatriating' insurance
companies, which threatened some aspects of
the offshore insurance business have largely
come to nothing, although the renegotiation
of the US/Barbados Tax Treaty in 2004 has restricted
the use of Barbados for 'treaty-shopping'. AIG's
traumas in 2005 gave a boost to the 'anti-offshore'
lobby in Congress, but no harmful legislation
has yet emerged.
In
January, 2005, the Barbados Investment and Development
Corporation hired an international captive insurance
expert to help raise the profile of the jurisdiction’s
exempt insurance company sector. Kate Westover,
Vice President, Alternative Risk Financing Services
at US-based Innovative Captive Strategies Inc,
was appointed as a business representative for
the BIDC as part of the island’s strategy to
bring its regulatory policies more into line
with international standards.
According
to the Barbados' Business Authority, commenting
on Ms Westover’s role, BIDC chief executive
Anthony Sobers observed that: “She has been
able to help us a lot in terms of developing
the local infrastructure to support those persons
who may want to come in. She has some of the
knowledge we need in the market place so that
when we speak with potential investors we can
speak their language and she can show them that
Barbados can be a solution to the problem that
they have.”
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Barbados
Ship Management and Maritime Operations
See Offshore Business
Review – Shipping for a more general
treatment of offshore shipping registries.
The
Shipping Act 1994 established a Barbados Ships
Registry. Barbados had been a member of the
International Maritime Orgaisation since 1969,
and subscribes to all the main maritime safety
and environmental conventions.
The
Principal Registrar is based in London, with
a subsidiary Registrar in Bridgetown, and there
are provisional registration offices with inspectorates
in a number of international maritime centres.
Eleven of the major Classification Societies
act on behalf of the Barbados Registry. The
Registry has obtained ISO 9002 status. Applications
for registration require a fairly standard package
of title, survey and registration documentation.
The
Shipping Act provides for registration of all
types of vessel, however owned, but the new
Registry is particularly aimed at 'foreign-going'
vessels, meaning those which ply to and from
Caricom states (but not within Caricom) or outside
Caricom altogether. 'Foreign-going' vessels
less than 20 years old may join the Registry
if they are 'foreign-owned', which means not
exclusively owned by Barbados persons; older
vessels may join at the Registrar's discretion.
There are tax benefits for 'foreign' vessels
(see Offshore Legal and
Tax Regimes).
The
Shipping Corporations Act 1996, which mirrors
the provisions of the Companies Act 1982, provides
a stand-alone basis for incorporation of a ship
ownership or management company, whether the
ships concerned are registered in Barbados or
elsewhere. Shipping Corporations are non-residential
and are exempt from taxes.
As
is the case with some other offshore sectors
in Barbados, the Barbados/US Tax Convention
provides particularly favourable opportunities
to US shipping owners and operators, who can
obtain domestic tax benefits by operating through
a Barbados resident. 'Resident' is so defined
that it includes an International Business Company
managed and controlled from Barbados. See Offshore
Legal and Tax Regimes for further details.
As
of 2008, Registration fees for the Barbados
Registry are:
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