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Barbados: Law of Offshore

Trust Law

Trusts in Barbados are governed by English common law and by the Trustees Act Cap 250 as amended, which deals with the powers of trustees. Appeal is to the Privy Council. There is no registration requirement or stamp duty; trustees can be non-resident as long as one is resident. A resident corporation acting as trustee must be licensed under the Offshore Banking Act (see Offshore Legal and Tax Regimes). Exchange controls apply to local trusts.

The Hague Convention has not been implemented; the maximum perpetuity period is 100 years.

Local (domestic) trusts are taxed as separate entities (see Domestic Corporate Taxation).

The International Trusts Act 1995 introduced purpose trusts and asset protection trusts, as well as strengthened protection against forced heirship provisions, non-recognition of foreign judgements, and protection against creditors. Creditors have three years in which to set aside the terms of a trust, but can only do so if they can establish an intent to defraud. A successful creditor can only set aside the terms of the trust in so far as he is prejudiced - he can't overset the whole thing unless that is necessary to satisfy him.

The rule against perpetuities does not apply, and accumulation of income is permitted for up to 100 years.

International trusts have considerable tax advantages (see Offshore Legal and Tax Regimes) and are exempt from exchange control; the following conditions must be fulfilled:

  • the settlor must be non-resident when the trust is created and at subsequent times when property is added to the trust;
  • trust property must not include Barbadian real estate or an interest in it;
  • no beneficiary other than a Barbadian offshore entity can be a resident of Barbados at the time of creation of the trust, or at the time of any subsequent addition of property to the trust;
  • at least one of the trustees must be resident in Barbados.

Note that beneficiaries can include Barbadian offshore entities - this means an exempt insurance company, an offshore bank, and an international business company. The Act defines 'resident' to include: ordinarily resident individuals, bodies, whether incorporated or not, majority-owned by residents; and trust management companies.

The Act lays down specific confidentiality rules, protecting the identity of settlor and beneficiaries, the workings of the trustees, the reasons behind trustees' actions, accounting information, etc. Confidentiality can only be broken by the Court or at the request of a beneficiary.

Trust Management has been a considerable activity in Barbados for 30 years or more, much of it conducted by the trust departments of banks. 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.

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.

 

 

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