Business Barbados 2022

An SRL has the characteristics set out below: • Limited liability • Perpetual duration • The rights, powers and privileges of an individual • Stipulation that the transfer of quotas in a society will not confer on the transferee the right to become a member or participate in the management of the society without the written consent of all the members. Organisation for Economic Co-operation and Development (OECD) Considerations In October of 2017 the OECD, through its Forum on Harmful Tax Practices (FHTP) required Barbados to revise or abolish the international business regimes outlined above. As a result, these regimes in their current form were closed on December 31, 2018. We have provided a table below outlining the key changes resulting from the changes to the international business regimes. Economic Substance Requirements The Companies (Economic Substance) Act (“The Act”) took effect from 1 January 2019. The Act and its accompanying guidelines require a resident entity that earns income from carrying on relevant activities (see list below) to satisfy an economic substance test in relation to that activity. Note that these economic substance rules took effect for grandfathered international entities (e.g., IBCs and ISRLs) on 1 January 2021. In order to meet the economic substance requirements entities, including a partnership formed in Barbados which is carrying on one or more relevant activities, will be required to show that, for each relevant activity that it carries on, the core income generating activities of the entity are conducted in Barbados and the company is directed, managed and controlled in Barbados in relation to that activity. This would take into account various factors such as the number of employees, premises used in the business, etc. Entities that conduct relevant activities must demonstrate compliance by filing an annual economic substance declaration with the Ministry of International Business. Entities that do not conduct relevant activities are not required to comply with the legislation but are however required to file a declaration which would be limited to confirming that the entity conducts no relevant activities. The list of relevant activities currently includes: Foreign Currency Permit Effective 1 January 2019 all entities which earn 100% of their income in foreign currency are entitled to receive a Foreign Currency Permit (FCP) allowing them the following benefits where certain requirements are met: • Exemption from exchange control • Exemption from payment of ad valorem stamp duty and property transfer tax • Exemption from payment of value added tax and duties on importation of plant, machinery and raw materials • Income tax concessions for specifically qualified individuals TAXATION Companies and individuals who are resident and domiciled in Barbados for tax purposes are subject to income tax on their worldwide income whether or not the income is remitted to Barbados. Persons who are resident but not domiciled in Barbados are taxed on their income derived from Barbados and on any overseas income remitted to (or from which a benefit is received in) Barbados. Non-residents are taxed only on income derived from Barbados. Corporations (including Foreign Currency Earning Banks) are taxed in accordance with the rates illustrated in the table below. BARBADOS LEGISLATIVE REFORM Legislation Action Grandfathered Comments International Business Companies Act Abolished Yes Legislation Society with Restricted Liability Act (SRL) Amended Yes SRL Act retained Exempt Insurance Act Abolished Yes Now governed by the Insurance Act Qualifying Insurance Company Abolished Yes Now governed by the Insurance Act Foreign Currency Earnings Allowance (section 12H of the Income Tax Act) Abolished No FCEA retained for individuals and trusts only International Financial Services Act Abolished Yes Now governed by the Financial Institutions Act International Trusts Act Abolished No Now governed by the Trusts (Miscellaneous Provisions) Act • banking business • insurance business • fund management business • finance and leasing business • headquarters business • shipping business • holding company business • intellectual property holding business • distribution and service centre business • such other activities as may be prescribed Taxable Income (US) Rate % Up to $500,000 5.5 Above $500,000 to $10 million 3.0 Above $10 million to $15 million 2.5 Above $15 million 1.0 119 BUSINESS BARBADOS 2022 B U S I N E S S B A R B A D O S F A C T F A C T S G U I D E 2 0 2 2