Barbados Introduces Indirect Tax Changes
by Jason Gorringe, Lowtax.net, London
31 May, 2019
Starting May 1, 2019, Barbados introduced a new obligation on foreign suppliers to charge VAT on supplies to consumers in Barbados.
The measure was announced in the recent Budget. Further, also effective May 1, 2019, Barbados introduced a 20 percent withholding tax on gambling winnings from lotteries and betting.
Other provisions announced in the Budget include new limits on the amount of related-party interest that can be deducted from income derived from a business or property. In addition, effective September 1, 2019, a thin capitalization rule, with a ratio of 1.5 to 1, will be introduced. Interest payable on outstanding debts due to non-resident related parties that own more than 10 percent of the company will be deductible to the extent that the total amount of the debt does not exceed one and a half times the equity of the company. Any portion of interest that exceeds this ratio will no longer be deductible. The Budget also included a commitment to introduce transfer pricing rules in the near future.
Effective July 1, 2019, Barbados will remove the 16 percent lowest income tax rate and the second rate of 33.5 percent. Instead, the lowest tax rate on income up to BSD50,000 will be 12.5 percent. The rate on income above this threshold will fall from 40 percent top 33.5 percent, between July 1, 2019, and December 31, 2019, and from January 1, 2020, the rate will fall to 28.5 percent.
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