Barbados
Scope of Corporation Tax
Under the Income Tax Act,
Barbados imposes corporation tax on 'companies':
this term includes all companies incorporated
or registered in Barbados, and any foreign company
which carries on business or has an office or
place of business in Barbados. Resident companies
are taxed on their world-wide income; 'resident'
means managed and controlled from Barbados.
Non-resident companies are taxed only on income
derived from Barbados, meaning from business
actually conducted in Barbados.
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Barbados Corporation Tax Rates
The standard rate of corporation tax was 40%
but this was reduced to 37.5% in 2003. For the
2005 tax year the rate was 30%, reducing further
to 25% from 2006.
Amendments
to the Barbados Small Business Development Act
in 2007 have provided registered incorporated
small businesses with a number of incentives.
These incentives include, among others: a reduced
rate of corporation tax of 15% (instead of 25%)
on the profits of the business; exemption from
import duty on raw materials, plant and equipment
imported for use in the business; and exemption
from withholding tax on dividends and interest
earned on investment in an approved small business,
or in any fund approved for investment in small
businesses.
In
addition, there is an exemption from the payment
of stamp duty, under the Stamp Duty Act, on
all documents related to business where the
registration of those documents is required
by law; and a deduction of corporation tax of
an amount equal to 20% of the actual expenditure
incurred in respect of the use of technology,
market research and any other activity that
is, in the opinion of the Commissioner of Inland
Revenue, directly related to the development
of the business.
The
Act was first passed in December of 1999, and
recent amendment has re-defined a small business
as any enterprise that satisfies two of the
following criteria: is incorporated under the
Companies Act of Barbados; has not more than
BDS1 million as stated or paid up capital; has
not more than BDS2 million in annual sales;
and employs not more than 25 persons.
Barbados Branch or
Subsidiary
Branches pay an additional 10% corporation tax
if profits have been remitted, or are deemed
to have been remitted, unless profits are reinvested
in Barbados other than for the replacement of
fixed assets.
NB:
If a branch has any significant level of activity
in Barbados, it is likely to have had to register
as an 'external company',
and is treated in all respects as a company;
so in Barbados at least the concept of a branch
doesn't have much substance.
Barbados
Calculation of Taxable Base
Profits from business and trading operations
are calculated according to standard accounting
principles, and include interest, royalties
and rents.
Dividends
received by local companies from trading and
investment activities extra CARICOM in nontreaty
countries have attracted withholding tax at
various rates and have been given tax credits
since 2005. In the 2007 Budget, then Prime Minister
Owen Arthur announced that dividends earned
by resident companies from holdings in foreign
(non-resident) companies would be exempt from
tax, provided the Barbados company owns more
than 10% in of the dividend-paying company and
the holding is not merely a portfolio investment.
Domestic
dividends from resident companies are not included
in taxable income (there is a 12.5% withholding
tax).
The
following list of permitted deductions and other
aspects of calculation of the taxable base in
Barbados merely summarises some of the chief
points; the rules in many cases are quite complex:
-
Losses
can be carried forward for nine years; there
are no loss carry-back provisions;
-
There
are investment allowances of 20% or 40%
for certain types of industrial plant and
equipment - these do not write down the
asset value;
-
First
year allowances on plant and equipment are
usually 20%, and continue at the same rate
on a straight-line basis; for industrial
buildings the rate is 4%; and for commercial
buildings it is 2%;
-
Balancing
charges/credits are made on disposal of
capital equipment;
-
There
is a tax credit of 50% of certain foreign
currency export earnings;
-
Export
allowances can be claimed on certain specified
types of export outside the Caricom area;
these are calculated as a percentage rebate
on tax due on export profits, and the percentage
goes up, the higher proportion export profits
form of total profits, to a maximum of 93%;
-
Some
export sales promotion costs for sales outside
the Caricom area attract 150% allowances;
these also apply to some types of tourism
promotion expenditure;
-
There
is no group or consortium relief.
Under the Barbados Income Tax Act a company
may benefit from a tax credit in respect of
taxes paid on foreign income pursuant to a double
taxation agreement, on a reciprocal basis, where
the person has paid or is liable to pay income
tax in a Commonwealth country and where an international
business company, international society with
restricted liability or a company licensed under
the international financial services act, pays
foreign tax on income earned outside of Barbados.
Income from an entity other than in the circumstances
mentioned above currently will not qualify for
the credit.
Barbados Filing Requirements
and Payment of Tax
Company tax returns must be filed in respect
of each fiscal year by 15th March in the year
following the fiscal year if it ends between
1st January and 30th September, and by 15th
June if it ends between 1st October and 31st
December.
Companies
must make an advance tax payment of 50% of their
previous year's assessment by 15th September
if their year ends by 30th September or otherwise
by 15th December; then a further 50% is due
by 15th March. Any balance of tax due is payable
at the filing date.
Barbados
Withholding Tax
Barbados-resident companies apply withholding
tax at 15% on dividend payments to non-residents
and 12.5% to residents. Dividends paid out of
foreign source income do not attract withholding
tax. See Double Taxation
Treaties for details of withholding rates
for Treaty partners.
In
2007, non-treaty country withholding taxes were
as follows:
A
company must keep a clear division in its accounts
between the different streams of revenue and
dividends paid out of them, and make appropriate
reports to the tax authorities when remitting
the withholding tax.
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Barbados
Land Tax
Barbados levies an annual land tax at 0.6%
on all unimproved land;
0% on improved value up to BDS150,000; 0.10%
tax on on the excess of the improved value
up to BDS400,000, 0.45% tax up to BDS1 million,
and 0.75% tax above BDS1 million.
Where
a company that is incorporated and resident
in Barbados or an individual who is a citizen
or a resident of Barbados has title to land
that is being used exclusively for agricultural
purposes, a rebate of tax of 0.5% may be granted
under certain circumstances.
If
the company owning the land is non-Barbadian,
or owned by a non-Barbadian company, the rates
go up to 3% for unimproved land, and 2% for
improved land. Some Tax
Treaties include exemption from this tax.
There
are also property taxes; however since 2003
the first BDS125,000 of a Barbadian property's
value is exempt from taxation.
Barbados Stamp Duty
Stamp Duty is payable in a number of situations
in Barbados; those most likely to affect businesses
are transfers of real estate and shares (1%),
leases (1%), mortgages (BDS5 on the first
BDS500, and BDS3 on each subsequent BDS500),
and imported goods (varies).
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