There
is no capital gains tax in Barbados, nor are
there estate, inheritance or gift taxes. Income
tax is the main tax. VAT was introduced in
1997 at 15% on a range of goods and services,
replacing many old sales taxes.
"For
the first time in this country, a government
is doing two things that have tremendous fiscal
implications - raising the income threshold
below which people do not pay tax from $15,000
to $25,000 and cutting the rate of tax," said
Owen at the time of the announcement.
"And
while we're doing that, we are also seeking
to bring the taxes paid by companies in Barbados
down to the most competitive level in CARICOM,
from 40% to 25% to give Barbados a chance
in the new single market and economy to be
the preferred location for doing business,"
he added.
Barbados Residence
and Liability for Taxation
Residence
is defined as presence in the country for
more than 182 days in a calendar year (which
is the tax year), and then applies to the
whole year. There is no legal definition of
domicile in the Income Tax Act; but it is
usually acquired by birth or by a conscious
decision to base oneself permanently in a
country. The following categories of people
can be distinguished from a tax point of view:
A
resident and domiciled individual is taxed
on worldwide income whether or not remitted
to Barbados;
A
resident but not domiciled individual is
taxed on income derived from Barbados, including
from an office or employment exercised there,
and income remitted to Barbados;
A
non-resident is taxed on income derived
from Barbados, including from an office
or employment exercised there.
Taxable
income is defined very broadly, and includes
the following categories:
Remuneration from an office or employment,
including accommodation, car and other benefits;
Director's
fees;
Taxable
profits from a trade or business;
Interest,
dividends, annual payments;
Royalties;
Social
benefits;
Trust
income, whether or not received;
Partnership
income;
Income
from the disposal of shares issued to employees;
The
benefit of loans at under-value;
Dividends received from resident companies carry
a tax credit and are grossed up accordingly.
See
Double Tax Treaties
for details of Treaty exemptions and reliefs
as regards the taxation of foreign-source income
for residents.
There are various personal allowances under
Barbados tax law. In the 2003 budget, it was
announced that personal allowances would be
increased from BBD15,000 to BBD25,000 in four
annual increments of BBD2,500.
The
2007 budget introduced indexation of the personal
tax allowance, with the figure adjusted every
three years starting from the 2007 income year
(with the first adjustment expected in 2010).
However, it is unclear whether the allowance
will be adjusted on the basis of wage increases
negotiated by trade unions, or figures compiled
by the Central Bank.
Until
2002 chargeable income (after all allowances)
was taxed at 25% on the first BBD$24,200 and
at 40% thereafter. The basic rate was reduced
to 22.5% in 2003 and to 20% in 2004, and the
top rate was reduced to 37.5% in income year
2005, and to 35% in income year 2006.
In
2007, the basic and top rate remained at 20%
on the first BBD24,200 of taxable income, and
35% thereafter.
Barbados
tax law also provides for numerous other personal
reliefs and tax allowances, a non-exhaustive
list of which include:
Rental
allowance, which is equal to the lower of
20% of rent paid and BBD3,000
50%
exemption for royalties received in Barbados
75%
of value of bonus converted to shares government
bonds/debentures or mutual funds up to BBD7,500,
up to a maximum of BBD7,500
A
BBD10,000 allowance on the purchase of new
shares in a public company, and investments
in mutual funds and credit unions
A
BBD10,000 allowance in investments in a Registered
Venture Capital Fund or Innovation Fund
A
5% allowance of assessable income from annual
payments/covenants
Tax
exemption on severance payments.
Employers
collect income tax from employees under a 'pay
as you earn' scheme, along with social security
contributions (see below).
Foreign
employees working in Barbados are taxed at normal
rates and are subject to Barbadian exchange
controls (soon to be abolished), but if their
employer is able to take advantage of the special
schemes described above, up to one third of
their remuneration is paid tax-free and is exempt
from exchange controls.
In
2006 the government introduced enhanced tax
concessions for specially qualified individuals
employed in the International Financial Services
Sector, as follows:
Up
to $150,000 per annum 35%
Over
$150,000 but less than $500,000 50%
Over
$500,000 60%
Tax
changes in the 2006 budget included:
individuals converting property to rental
units will be permitted an initial allowance
of 50 per cent on capital expenditure incurred;
the remainder may be claimed at an annual
rate of 4 per cent annually thereafter,
effective this income year
a
flat rate of tax of 15 per cent will be
placed on all income derived from rental
of home accommodation, effective in 2006
tenants
will be allowed to claim an amount of 20
per cent of the assessable income or $3,000
which ever is lesser against the tax payable
in any income year.
the
levy on extra-regional imports will be increased
by three percentage points to 6 per cent
with immediate effect (not applicable to
those food items which are zero rated under
the VAT Act.)
a
0.1 per cent deduction will be taken from
earnings up the national insurance maximum,
which is currently $3,290 per month, to
provide a catastrophe fund to pay for the
rebuilding of residential properties where
the home owners are uninsured.
Individuals
file income tax returns by 30th April; if tax
is due, half is payable with the return, and
the other half on 30th September. If an individual
has self-employment or business income, then
the tax is payable as a proportion of the previous
year's tax, in instalments during the tax year,
on 15th June, 15th September and 15th December.
National
Insurance contributions for employees total
are 6.75% for both employees and employers.
There are also additional levies, including
a non-contributory levy, Employment injury levy,
unemployment levy, training levy, and a catastrophe
fund levy, bringing total contributions to 10.1%
for the employee and 11.25% for the employer.
The
self-employed pay National Insurance contributions
at a rate of 13.5% (2007), plus a 2% non-contributiry
levy and a 0.5% training levy.
Barbados levies an annual
land tax at 0.6% on all unimproved land;
the tax-free threshold on improved property
is BBD150,000 and the following rates then apply:
0.10% on amounts between BBD150,000 and BBD400,000;
0.45% on amounts between BBD400,000 and BBD1
million; and 0.75% on amounts in excess of BBD
1 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.
Stamp Duty is payable in a number of situations
in Barbados, including transfers of real estate
and shares (1%), leases (1%), and mortgages
(BDS5 on the first $500, and $3 on each subsequent
$500).
Property Transfer Tax is payable on the transfer
by gift, sale or other method of any direct
or indirect interest in land. Until recently,
it was a significant tax, at 5% for citizens
and permanent residents, and 8% for vendors
who are neither citizens nor residents. A purchaser
who is neither a citizen nor a resident paid
10% (this was in addition to the vendor's payment).
'Citizen'
is defined to include dependants of citizens
and companies controlled by citizens, and there
is a similar definition for residents.
However,
it was announced in 2007 that the rate of property
transfer tax would be reduced to 2.5%, with
exemptions on the first BBD50,000 of share sales
and the first BBD125,000 of the sale of land
and houses. The purchaser would longer pay the
tax.
In
addition where the sale of property by a non-resident
is to another non-resident and there is no net
foreign exchange loss to the country, the proceeds
of sale can be repatriated without restrictions.
Customs
Duties are imposed under the Customs Tariff
(Amendment) Order 1991, which recognised the
Common External Tariff of Caricom. Goods traded
within Caricom are exempt from duty.
The
rates of Customs Duty vary widely in themselves,
and also because of a network of exemptions
and reductions in duty under foreign investment
legislation; rates can rise as high as 30% on
some items.
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