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Barbados

Country Name: Barbados
Currency: Barbadian Dollar (BBD)
Primary Tax Authority: Barbados Revenue Authority (BRA)
Key Legislation:

  • Income Tax Act
  • Value Added Tax Act
  • Corporate Tax Act
  • Tax Collection Act

Fiscal Authority Allocation

Centralized Fiscal System:
Barbados operates a centralized tax system, with the Barbados Revenue Authority (BRA) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), and value-added tax (VAT). Local governments do not have taxing authority; all tax revenue is collected by the central government.

Corporate Income Tax (CIT)

Standard Rate:
Barbados levies a corporate income tax based on a sliding scale, ranging from:

  • 5.5% for taxable income over BBD 30 million.
  • 3% for income between BBD 20 million and BBD 30 million.
  • 2.5% for income between BBD 10 million and BBD 20 million.
  • 1% for income below BBD 1 million.

Foreign companies operating in Barbados are taxed at the same rates.

Corporate Forms and Taxation:

  1. Corporation (Company): The most common corporate form for businesses in Barbados, subject to the standard CIT rates.
  2. International Business Company (IBC): IBCs are now subject to the same CIT rates as domestic companies following the OECD’s Base Erosion and Profit Shifting (BEPS) guidelines.
  3. Branches of Foreign Companies: Taxed at the same CIT rates on Barbados-sourced income.

Exemptions and Incentives:

  • Special Development Areas: Companies operating in designated Special Development Areas (SDAs) receive tax concessions, including CIT reductions and exemptions from property taxes and import duties.
  • Tourism Sector Incentives: Businesses in the tourism sector may qualify for reduced CIT rates and exemptions from certain taxes, such as VAT on tourism-related services.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 17.5%
Barbados applies a VAT rate of 17.5% on most goods and services. VAT is levied on the sale of goods, provision of services, and imports.

Reduced Rate: 7.5% for hotel accommodations and some tourism services.
Exemptions: Basic food items, educational services, and healthcare services are exempt from VAT. Exports are zero-rated, allowing businesses to reclaim VAT paid on inputs used to produce goods for export.

Personal Income Tax (PIT)

Progressive Rates:
Barbados applies progressive personal income tax rates as follows:

  • Up to BBD 50,000: 12.5%
  • Above BBD 50,001: 28.5%

Dividends:
Dividends paid to residents are subject to a withholding tax of 12.5%, while dividends paid to non-residents are subject to a 15% withholding tax.

Additional Mandatory Contributions

National Insurance Contributions:
Employers and employees must contribute to Barbados’ National Insurance Scheme (NIS), which provides pensions, healthcare, and unemployment benefits.

  • Employer Contribution: 12.75% of gross salary.
  • Employee Contribution: 6.75% of gross salary.

Withholding Taxes

  • Dividends: 15% for non-residents (12.5% for residents).
  • Interest: 15%
  • Royalties: 15%
    Withholding tax rates may be reduced under Barbados’ double taxation agreements (DTAs).

Transfer Pricing Rules

Barbados follows OECD transfer pricing guidelines. Related-party transactions must comply with the arm’s-length principle, and companies must maintain documentation to support the pricing of cross-border related-party transactions.

Special Tax Regimes

  • Barbados Special Development Areas (SDAs): Companies investing in SDAs are granted tax concessions, such as CIT reductions, property tax exemptions, and duty-free importation of equipment.
  • International Business Companies (IBCs): Although the preferential tax regime for IBCs has been phased out, Barbados continues to offer incentives for companies in sectors such as financial services, information technology, and renewable energy.
  • Tourism Development Act: Tourism-related businesses can benefit from tax concessions, including CIT reductions, VAT exemptions, and customs duty waivers on tourism-related imports.

Other Taxes

  • Real Estate Tax: Property taxes are levied annually based on the market value of real estate. Rates typically range from 0.1% to 0.7% of the property’s assessed value, depending on its use and location.
  • Capital Gains Tax: Barbados does not impose a specific capital gains tax. Capital gains are generally taxed as ordinary income and subject to the applicable CIT or PIT rates.
  • Excise Taxes: Excise duties are imposed on specific products, such as alcohol, tobacco, and fuel.

Double Taxation Agreements (DTAs)

Barbados has signed several double taxation agreements (DTAs), including with countries such as Canada, the United States, the United Kingdom, and CARICOM member states. These agreements help reduce withholding taxes on dividends, interest, and royalties and prevent the double taxation of cross-border income.

Local Taxes

Local governments in Barbados do not collect taxes. All tax collection, including income tax, VAT, and property tax, is handled by the central Barbados Revenue Authority (BRA).

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 15th of the following year. Personal income tax returns are due by April 30th. The tax year in Barbados follows the calendar year.

Penalties for Late Filing:
Penalties for non-compliance or late filing include interest on overdue taxes and fines. Interest on unpaid taxes is generally set at 1.5% per month, with additional penalties for significant delays.

Recent Developments

Economic Substance Rules:
Barbados has introduced economic substance rules to comply with OECD guidelines on harmful tax practices. These rules require companies engaged in relevant activities, such as financial services and holding companies, to demonstrate sufficient economic substance within Barbados.

Tourism Expansion and Tax Incentives:
The Barbados government continues to focus on expanding the tourism sector through targeted tax incentives. These include VAT reductions for tourism-related businesses, extended tax holidays, and exemptions from customs duties on tourism-related equipment.

Green Energy and Sustainability:
Barbados is promoting renewable energy investments by offering tax incentives for solar, wind, and geothermal energy projects. These incentives include CIT exemptions, VAT reductions, and customs duty exemptions for renewable energy infrastructure.

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