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Lowtax
Network Content Update | Issue XXV | 21February 2008 |
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Offshore
Barbados Is In The Caribbean And Caricom Barbados is a sub-tropical island in the Caribbean; it is a member of Caricom, the Caribbean Common Market. Quite densely populated, with 280,000 people of mostly African descent on 430 sq km, Barbados is an independent Commonwealth member. It is politically stable; English is the official language; and the Barbadian dollar is fixed against the US dollar at 2:1. The climate is warm and humid; sea breezes compensate for high summer temperatures. GNP/head of US$19,700 at PP is reasonable. One-Crop Economy Has Successfully Diversified Barbados was mostly a sugar producer but the island has diversified into tourism, manufacturing (with a host of incentives), informatics and financial services. After a bad time in the 1980s, Barbados has grown well in the 1990s, although slowing down in 1998/99. The impact of 9/11 was moderately serious, with the economy contracting slightly in 2002, but rebounding between 2003 and 2007. Unemployment has been reduced from catastrophically high levels to less than 10%. In the last ten years the Government has been business-friendly and economically sound. Barbados's Lowtax Specialisations Barbados has preferred quality to quantity, and has developed a remarkably wide range of offshore formats to suit all tastes! A good US tax treaty and the Foreign Sales Corporation legislation (now repealed) have particularly encouraged US interest; Canada has also been a traditional partner. The offshore insurance sector is as big as the BVI's, and there are 57 offshore banks. Barbados is very picky about who it will have, and probably stands in better with the OECD than many OIFCs, although it is nervous about current developments. There is a stock exchange, fully computerised as from July 2000, with a central depositary; but mutual funds have not yet developed strongly. Barbados probably has a good shot at becoming an e-commerce centre if it plays the right cards - so far the Government doesn't seem sufficiently aware of this. Lots of Taxes In Barbados! Alongside a really large selection of corporate formats, Barbados has many different taxes. Although the introduction of VAT in 1997 got rid of eleven of them, there are plenty left, and for a resident person rates are quite high. The structure of manufacturing and other incentives is complex, but properly used can reduce the tax burden substantially. It may be that fewer, simpler taxes would be beneficial; anyway, an offshore business will be able to avoid all taxation in one way or another. In July 2000, Barbados pledged to make changes to its financial supervisory regime in order to have its name removed from an OECD blacklist; in February, 2002, shortly before the OECD finally published its long-delayed revised list, Barbados was removed. Learn more in our full Barbados Knowledgebase. |
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Offshore
The Bahamas Are An Independent Nation State The Bahamas became independent from the UK in 1973, although the Queen remains Head of State. Beginning 50 miles off Florida, in the Caribbean, the Bahamas has 700 islands and a population of 302,000. The official language is English. The capital is Nassau, there are a number of international airports with good connections, and there are excellent port facilities. The climate is sub-tropical. The Westminster-style government is business-friendly. Elections in 2002 saw a major political upset when the Progressive Liberal Party led by Perry Gladstone Christie ousted the incumbent Free National Movement after a 10-year reign, winning 28 seats out of 40 in the House of Assembly. Economy Based on Financial Services and Tourism The Bahamas was a trust and tourist jurisdiction very early in the 20th century, but was relatively late in developing as a financial centre. The economy is heavily dependent on tourism (4m visitors a year), but financial services are growing in importance. GDP was $5.9bn in 2005, and GDP per head was about $18,800 in 2005 at PPP, good for the region but not wonderful. According to the IMF, the future for the economy looks bright, with GDP growth set to continue in the fiscal years 2006/7 and 2007/8 at rates of 6.5% and 6.7% respectively.Unemployment is a problem, but has eased recently. The Bahamas are very dependent on imports and have a structural trade deficit; recent years have seen budget deficits, which the government will have to address in the context of regional trade liberalisation. The Bahamas' Stock Exchange In May 2000, the Bahamas' new stock exchange (BISX) went live, originally with 2 established brokers; by the end of 2005 there were 19 companies listed on the exchange with a capitalisation of around $2.6 billion. The BISX has an upgraded infrastructure from which remote trading across a secure private WAN and the launch of an international segment can take place. However, the exchange has struggled to develop a secure financial base in the absence of promised privatisations. The Bahamas' Lowtax Specialisations Leading sectors are banking (about 300 banks with assets near $1 trillion) and mutual funds ($100bn under management). Trust management is also prominent. The insurance sector has assets of $700m. Professional services are excellent. The shipping registry has been very successful for larger vessels. No Income Tax in the Bahamas! There is no income tax, capital gains tax, VAT, sales or use tax or wealth tax. Annual government fees are imposed on businesses and there are national insurance, stamp duties and property taxes. Local businesses are controlled by licensing and somewhat protected, although there are good investment incentives in some sectors. Offshore operations take place through International Business Companies or other tax-exempt forms. International Standing After the Bahamas was placed on both the FATF and OECD 'blacklists' in 2000, the government extensively revised its legislative structure to bring the country into conformity with tougher international standards, and the Bahamas was removed from both lists as a result. A Tax Information Exchange Agreement was signed with the US in 2002, and the new Bahamian government in 2002 emphasized its determination to maintain the Bahamas as a fully compliant international financial centre. Some dissatisfaction with the new legislation on the part of the financial sector is being dealt with through adjustment of the regulatory regime. Immigration Controlled by Residence and Work Permits With an unemployment problem, the Government controls access to Bahamian jobs with a system of work permits. Access to housing has been recently relaxed for foreigners, who are now encouraged to buy or build 'second homes'. Also, the finance industry is working with the government to develop a more flexible work permit framework, to allow the Bahamas to attract the best industry talent. Learn more in our full Bahamas Knowledgebase |
