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Barbados

Overview of the Tax Regime in Barbados.

Barbados

ECONOMIC OVERVIEW


Barbados is the wealthiest and most developed country in the Eastern Caribbean and enjoys one of the highest per capita incomes in Latin America. Historically, the Barbadian economy was dependent on sugarcane cultivation and related activities. However, in recent years the economy has diversified into light industry and tourism with about four-fifths of GDP and of exports being attributed to services. Offshore finance and information services are important foreign exchange earners and thrive from having the same time zone as eastern US financial centers and a relatively highly educated workforce.

BARBADOS TAXES


INCOME TAX


Income tax rates – Individuals

 

Taxable Income Rate of Tax
BDS$ %
1 – 35,000 16
Over 35,000 33.5
Tax on net residential rental income 15

Personal Allowance

  • Persons in receipt of pension – Bds $40,000
  • All other persons  – Bds $25,000

Note: Certain expatriates working in the International Business and Financial Sector may qualify for a tax exemption ranging from 35% to 60% depending on the level of Income for an initial period of 3 years.

 


PERSONAL ALLOWANCES


 

Basic deduction $25,000
Dependent spouse allowance $3,000
Child allowance:
Under 18 years or over 18 years but under 25 years and receiving full time education $1,000 each in respect of 2 children (maximum)
Capital Gains
Not Taxable
150% of the cost of conducting energy audits and 150% of 50% of the cost retrofitting premises or installing systems to produce electricity from sources other than fossil fuels:  
Individuals $10,000 (max p.a)
Registered businesses $25,000 (max p.a.)
Retrofitting of residential property with roof straps and shutters $2,500 (Max)
NIS contributions paid on behalf of an employee Allowed in full
Annual payments/covenants 5% of assessable income
Amounts contributed to exempt charities Allowed in full
Amounts of less than BDS $1 million paid to registered charities 10% of assessable income
Amounts in excess of BDS $1 million paid to registered charities 50% of assessable income
Royalties received in Barbados 50% Exempt

Payments

 

(i) Employment income earners only: Any balance due – 50% on 30 April and 50% on 30 September

(ii) Individuals earning Business Income exceeding 25% of the assessable income: Installments on 15 June, 15 September, 15 December and balance on 30 April following year

 

Filing Deadline

 

• Returns are due to be filed by 30 April in the year following the year of income

Note: In practice where the filing and payment deadlines fall on a Saturday, the deadlines are extended to the next business day.


NATIONAL INSURANCE CONTRIBUTIONS


(Based on a % of maximum insurable earnings of $4,650 per month)

Employee Employer Total

Employed persons

% % %
National Insurance 6.75 6.75 13.50
Non-Contributory 2.00 2.00 4.00
Employment Injury 0.75 0.75
Unemployment 0.75 0.75 1.50
Severance Fund 0.50 0.50
Training Levy 0.50 0.50 1.00
Catastrophe Fund 0.10 0.10
10.10 11.25 21.35

 

Employed Persons Under age 16 or 66 years or over

Employee Employer Total
Employment Injury 0.75 0.75
Training Levy 0.50 0.50 1.00
Catastrophe Fund 0.10 1.85
0.60 1.25 1.85

 

Self-Employed Persons

Total
National Insurance 13.50
Non-Contributory 2.00
Training Levy 0.50
Catastrophe Fund 0.10
16.10

SEVERANCE PAYMENTS


For each complete year of employment
up to 10 years 2.5 weeks’ basic pay*
11 years to 20 years 3 weeks’ basic pay*
21 years to 33 years 3.5 weeks’ basic pay*
*Basic pay means the insurable earnings of the employee for National Insurance purposes.

Note: Severance payments are not taxable.


CORPORATION TAX RATES


 

Basic rate 25%
Rental of residential properties 15%
Approved Small Business 15%
Approved Developer in Special Development Area 15%
Manufacturing companies 15%
Companies engaged in the construction of houses for sale
not exceeding $150,000 inclusive of land 15%
Inter-Company ordinary dividends Exempt
Inter-Company dividends received from a non-resident company Exempt

Tax Payments

With a year end between: Payment due date
  • 1 January and 30 September (inclusive)
prepayment of tax on 15 September and final payment on 15 March of the year after the year end.
  • 1 October and 31 December (inclusive)
prepayment of tax on 15 December, 15 March and final payment on 15 June of the year after the year end.

Dates for Filing Returns

With a year end between: Filing due date
  • 1 January and 30 September (inclusive)
15th March following year
  • 1 October and 31 December (inclusive)
15th June following year

Note: In practice where the filing and payment deadlines fall on a Saturday, the deadlines are extended to the next business day.


BANKS (TAX ON ASSETS)

The provisions of the Banks (Tax on Assets) Act which had previously expired on 31 March 2016, have now been revived by The Banks (Tax on Assets) Act 2017, which has an effective date of 1 April 2016 so as to allow for seamless continuation of the previous provisions.

In addition to its revival, the rate of tax will now be increased from 0.20% to 0.35% of the domestic assets of banks in Barbados.


WITHHOLDING TAX


Residents

 

Interest paid to individuals over $100 12.5%
Barbados Government Securities 12.5%
Ordinary dividends paid to individuals in cash 12.5%
Dividends received from shares under a dividend reinvestment plan but restricted to 75% of the dividend up to $7,500 p.a. NIL

Non-Residents

 

Non-Treaty Countries %
Dividends paid out of foreign source income NIL
Dividends paid from non-foreign source income 15
Interest 15
Rents 25
Royalties 15
Management/Technical Aid Fee 15
Dividends from untaxed profits 25
Services other than Management 25
Covenants 20
Branch profits remitted/deemed remitted 10
Barbados Government Securities NIL
Professional fees NIL+

Key:

+ Paid by local companies to non-resident associates for services performed in the International Business & Financial Services Sector.

Note: These rates may be reduced under the existence of a Double Tax Treaty


DOUBLE TAXATION TREATIES


Barbados has entered into the following double taxation treaties (download here):

Austria Norway
Bahrain Panama
Botswana Republic of Seychelles
Canada Republic of Mexico
Caricom San Marino
China Singapore
Czech Republic Spain
Cuba State of Qatar
Finland Sweden
Iceland Switzerland
Kingdom of the Netherlands The United Kingdom
Luxembourg USA
Malta Venezuela
 Mauritius  

VALUE ADDED TAX


VAT is imposed on:

(a) the taxable supply in Barbados of goods or services by a registrant; and

(b) Goods imported into Barbados.

VAT rates are below:

Standard Rated Goods and Services 17.5%
Hotel Accommodation 8.75%
Supplies related to Tourism◊ 7.5%
Mobile Services (w.e.f. January 1, 2016) 22%
Supplies related to Tourism◊ 7.5%
◊ This rate is applicable to specific goods and services provided by qualified registrants as provided by the VAT Act.
Note: Exemptions are available to certain legal structures, such as International Business Companies, International Banks and Exempt Insurance Companies.

Zero Rated Goods / Exempt Services

 

Zero-rated Goods

Exempt Services
International Freight Services Gambling, Betting, Lotteries, Bingo and Instant Money Tickets
Prescription medicines and drugs Financial Services
Exports Sale of Real Estate
Selected food Items Medical Services
Certain supplies of services to non-residents Training & Education (Approved Institutions)
Unconditional gift of goods or services to a charity Rental of residential property
Crude oil Insurance Services
Water Water and Sewages provided by the Barbados Water Authority
Public Postal Services

Domestic Travel by Bus, Taxi or Coach

VAT return filing and payment deadline

 

• Returns must be filed, and any VAT liability settled, within 21 days of the end of the registrant’s taxable period.

Note: In practice where the filing and payment deadlines fall on a Saturday, the deadlines are extended to the next business day.


NATIONAL SOCIAL RESPONSIBILITY LEVY

During the 2016/2017 Financial Statements and Budgetary Proposals on 16 August 2016, the Minister of Finance announced the imposition of a National Social Responsibility Levy which will be effective as at 1 September 2016.

The levy will be applied at the rate of 2% on domestic outputs as well as on the customs value of all imports, with the exception of goods for the manufacturing, agriculture and tourism sectors.

To date, the enabling legislation for this Levy has not been enacted.


PROPERTY TAXES


Land Tax

 

Residential Rates Improved Value
0% on first $190,000
0.10% on next $310,000
0.45% on next $750,000
0.75% on excess over $1,250,000

Pensioners who occupy their own homes will pay residential rates, but on 50% of the amount by which the improved value exceeds $190,000.

Land tax is capped at $60,000 where a dwelling house is used exclusively as a residence by the person who owns the land on which the dwelling house is erected.

Commercial, Industrial, Hotel and Villa Rate Improved Value 65%
Unimproved Land Site Value 60%

Rebate of 50% granted to hotels and 25% granted to villas on production of certificate from the Barbados Tourism Authority.


PROPERTY TRANSFER TAX


Shares and real property

 

Rates of tax

 

Vendor:
  • First $50,000 on sale of shares;
  • First $150,000 on sale of house and land
Exempt
  • Excess
2.5%
The purchaser does not pay property transfer tax.
Creation or transfer of lease 25 years or more of a residential or commercial property 2.5%
Securities traded on the Securities Exchange are exempt.

CAVEAT


The information on this page is provided as at March 26th, 2017, and is provided for information purposes only.

It is not intended to be relied upon for specific tax and/or business advice and as such, readers are encouraged to consult with professional advisors on specific matters prior to making any decision.

Should you require tax advice, please contact us and we shall be happy to make a referral to a local tax practitioner.

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La-Tanya Edwards LLB, LLM

La-Tanya Edwards

LLB, LLM

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