How are corporations taxed in Barbados?
At the end of 2018, Barbados introduced a corporate tax reform. All corporations are now subject to the same tax rates and the special regime applicable to international business companies or IBCs was abolished.
All Barbados companies (except insurance companies) are subject to the following tax rates on their taxable income:
First BBD 1 million 5.5%
BBD 1 million to BBD 20 million 3%
BBD 20 million to BBD 30 million 2.5%
Excess over BBD 30 million 1%
Captive insurance companies that only insure intra-group risk enjoy a zero-tax rate. All other insurance companies are subject to tax at the rate of 2%.
Dividends paid to non-resident persons are subject to 5% withholding tax, but there is no withholding tax if the dividends are derived from income earned from sources outside Barbados. Dividends paid to resident individuals are subject to 15% withholding tax and dividends paid to a resident company are not taxable.
Barbados no longer levies withholding tax on interest, management fees and royalties paid to non-residents. However, thin capitalization rules limit the deductibility of interest on related party loans where the debt to equity ratio exceeds 1.5:1.
Companies that earn their income from sources outside of Barbados may apply for a foreign currency permit (FCP). Companies holding a FCP are exempt from ad valorem stamp duty (except in respect of real estate situate in Barbados), exchange control, taxes on the transfer of any securities or assets (other than real estate situate in Barbados) and taxes and duties on plant, machinery, raw materials, goods and other articles imported into Barbados for use in their business.
What are the most common types of IBC Structures formed in Barbados?
There most common IBC structures are: sales companies, group finance companies, intellectual property holding companies and corporate holding companies.
Barbados has been renowned for its political maturity, social stability, successful economy, financial independence, integrity of its legal system and well-educated population. These strong characteristics have earned Barbados its reputation as one of the world’s most respected international financial services domiciles, consistently meeting international best practice standards.
The legislation provides attractive tax concessions and incentives. Barbados also has a well-developed tax treaty network with several countries.
The decision to choose Barbados as a location for carrying on international business goes far beyond its low tax regime, its strong regulatory reputation and its international agreements. Barbados continues to distinguish itself from other similar neighbouring jurisdictions through the high quality of its human resources. The Government of Barbados has invested heavily in education at all levels, which translates into a steady stream of both high school and tertiary graduates, in an increasingly diverse range of disciplines. As a result, Barbados’ high standard of education has produced an adequate supply of professionals and skilled labour.