On
this Page:
- BARBADOS
TRADE, MARKETING AND DISTRIBUTION
- BARBADOS BANKING
- BARBADOS TRUST
MANAGEMENT
- BARBADOS REAL
ESTATE HOLDING
- BARBADOS
INSURANCE
- BARBADOS SHIP MANAGEMENT
AND MARITIME OPERATIONS
Barbados
is well-developed as an international financial
centre, although this has come about in an unspectacular
way. For 25 years the Government has welcomed
offshore business, and has consistently re-invented
its legislative apparatus to stay abreast of
the competition, while preserving its defences
against money-laundering and other criminal
activity. Barbados can't claim to have any of
the world's largest offshore business sectors,
but has growing and successful communities in
banking, insurance, and shipping, as well as
IBC and trust business; mutual funds are a very
recent addition to the Barbados product range,
and there is a stock exchange, which in early
2010 had capitalisation of BDS11.3bn.
The
economy recovered from a downturn in 2001, and
growth averaged 3.1% in the five years to 2007,
but fell again to 1.5% in 2008. The economy
contracted by 5.3% in 2009 in the wake of the
financial crisis. The international business
sector also remains in a healthy condition.
According
to the Central Bank of Barbados, in the first
three quarters of 2009, 248 new business licences
were issued to International Business Companies.
This was 123 less than the number issues over
the same period in 2008. A fall in the number
of societies with restricted liabilities was
also recorded, as only 15 licences were approved
in comparison with the 75 granted in the same
period in 2008. In addition, 3 qualifying insurance
companies, 2 exempt insurance companies, and
2 new offshore banks were licensed in the period.
Overall the number of licences issued in this
sector fell by approximately 42%, reflecting
the difficulties faced by some offshore companies
as a result of the global financial crisis.
Prior
to 2007, construction, transport, storage and
communications and business and other services
drove non-traded sector growth, owing to both
private and public projects associated with
that year's Cricket World Cup.
Barbados
has to get to grips with the need to harmonize
onshore and offshore taxation. A 2004 survery
revealed a divided response, with half those
polled believing it would be beneficial, although
most of those (44%) felt that the matter was
not receiving adequate attention. Some 45% would
like to see a single tax rate levied between
5 and 10% whilst 23% think a rate of up to 5%
would suffice. Some 18% of respondents wanted
a single tax rate of between 20 and 25%.
A
Financial Services Commission, which will regulate
the insurance subsector, the cooperative sector,
the Stock Exchange, and all non-banking financial
sectors in general, is scheduled to become operational
by the end of the second quarter of 2010.
This
section of the lowtax.net site describes the
most important types of offshore business activity
carried out from Barbados.
Barbados
Trade, Marketing and Distribution
Barbados has encouraged commercial activity and
manufacturing, especially in high technology.
It has taken advantage of its physical location
alongside the US to attract a considerable number
of Foreign Sales Corporations, although these
will lose most of their purpose as the US responds
to the banning by the WTO of FSC legislation and
its replacement Extra-Territorial Income Exclusion
Act.
The
Government offers either direct or through the
Barbados Investment and Development Corporation
a wide range of investment
incentives applying broadly to manufacturing
industry under the Fiscal Incentives Act 1974
and other legislation, giving tax holidays up
to 15 years, duty-free importation of materials,
assistance with construction of factories, etc.
As
well as the US-aimed Foreign Sales Corporation
(now no longer used after the US repealed its
FSC legislation in 2004), there is a wide variety
of offshore company formats
to choose from to suit all purposes.
Along
with other offshore jurisdictions, Barbados is
a suitable place in which to base e-commerce services
for retail or wholesale distribution of material
or non-material goods: see Offshore-e-com.com
for extended descriptions of how such businesses
can take advantage of the combination of offshore
and e-commerce. Indeed Barbados has developed
a strong computer facilities industry, and can
probably give better support to e-commerce than
many other jurisdictions.
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Barbados
Banking
Barbados established an offshore banking sector
under the Offshore Banking Act 1979 as amended.
The Act provided for the licensing of offshore
banks, and contained a precise description of
offshore banking (see Law
of Offshore for details) as the obtaining
of funds as deposits or through the sale of
financial instruments, the use of such funds
to give advances or finance investment, and
the use of trusts to hold money or property.
The
Offshore Banking Act was repealed and replaced
by the International Financial Services Act,
2003. The Act defines international financial
service as the business of:
Offshore/International
Banking also includes the acceptance in trust
of:
-
Amounts of money in foreign currencies, foreign
securities or both;
- Foreign
personal or movable properties; and/or
- Real
or immovable property outside Barbados from
persons resident outside Barbados.
To
qualify and obtain a license, an applicant must:
-
Obtain the consent of the Minister to incorporate
for the purpose of offshore banking. The government
imposes a flat annual license fee of US $12,500.
- Show
that it is an eligible company or a qualified
foreign bank
-
State the names and addresses of its director
-
Submit a certified copy of its articles of incorporation;
-
Give particulars of the proposed banking activity
-
Submit the names of shareholders who are residents
of Barbados and the number of shares held by
them.
-
Have at least one of the directors resident
in Barbados.
- Minimum
capital requirement for residents and non-residents
of US $500,000 and US $125,000 respectively.
There
were 52 licensed offshore banks in Barbados in
November 2009. The Central Bank has recently strengthened
its vetting procedures over applicant banks in
response to international money laundering and
criminal concerns. Subsidiaries of foreign banks
have to provide written authorisation from the
parent supervisory authority, and the activities
of in-house corporate treasury operations must
be consolidated into published group accounts.
Licence
fees for financial institutions were increased
by the 2008 budget, from January 1, 2009: Local
– main branch: BDS250,000 per bank; Local
– other branches: BDS20,000 per additional
branch; Local – ATM’s: BDS1000 per
ATM other than at branches; International banks
BDS100,000 per bank.
See
Offshore Legal and Tax Regimes
for details of the tax concessions offered to
offshore banks, which are also exempt from exchange
control regulations. The Central Bank requires
quarterly balance sheet reporting, and filing
of full annual accounts, along with a list of
the licensee's directors.
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Barbados Trust Management
Trust Management has been a considerable activity
in Barbados for 30 years or more, much of it conducted
by the trust departments of banks. Originally
the trust was used primarily by wealthy individuals
from the major common law countries, but it is
now accepted as a major technique of asset protection
in all parts of the world. The International Trusts
Act 1995 gave Barbados a modern, comprehensive,
business-oriented trust regime which has proven
attractive, particularly to corporate users. This
new, wider market-place for trusts is not necessarily
interested so much just in tax avoidance, but
also in the efficient management of wealth in
a more general sense. See Law
of Offshore for a fuller treatment of
trust law in Barbados.
There
is a sophisticated community of professional advisers
on trust matters in Barbados. Individuals can
provide trust services without registration, but
companies offering trust services must be licensed
by the Central Bank under the Offshore Banking
Act 1979. Foreign or Barbados-resident companies
may obtain licenses.
See
Offshore Legal and Tax
Regimes for details of the taxation of trusts
in Barbados. Very tax-efficient structures can
be formed using offshore trusts in combination
with International Business Companies for international
securities management.
Licence
fees for trust management companies were increased
to BDS100,000 per company in the 2008 budget,
with effect from January 1, 2009.
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Barbados
Real Estate Holding
Barbadian International Business Companies have
been put to a variety of uses, but one of the
most popular has been as holding vehicles for
US real estate, taking advantage of the terms
of the US/Barbados double tax convention.
The
US tax convention has anti-treaty-shopping clauses
(strengthened in the Second Protocol ratified
in 2004), but they are more favourable than is
the case in many other double tax treaties. Essentially,
a non-Barbadian person can use a Barbados International
Business Company to hold the shares of a US real
estate company (which should be income-producing);
this structure can take advantage of the treaty
provisions to escape US estate duty, among other
tax benefits. See Double
Tax Treaties and Offshore
Legal and Tax Regimes for further details.
NB:
This is a heavily simplified description. The
interplay of US tax rules, Barbadian tax rules
and the Barbados/US Tax Convention are complex,
and professional advice is essential before entering
any offshore transaction or structure.
BACK TO TOP
Barbados Insurance
See Offshore Business Review
– Insurance for a more general treatment
of captive insurance companies.
The Barbados insurance sector is regulated under
the Exempt Insurance Act 1983. The Ministry of
Finance and Economic Affairs is responsible for
the insurance sector, and day-to-day supervision
is in the hands of the Supervisor of Insurance.
Entities involved in insurance are licensed by
the Minister under the Act.
More
than 300 insurers are licensed under the Act,
with annual premiums of approximately US$2bn and
assets of US$10bn. A majority of these insurers
originate from the US, and are taking advantage
of the provisions of the Barbados/US Double Tax
Convention, which are not available to insurers
located in the other main Caribbean jurisdictions.
The Convention allows captives and other insurers
in Barbados to write business in the US while
avoiding the creation of a permanent establishment,
and thus to escape much US taxation. See Offshore
Legal and Tax Regimes for details of the tax
benefits available to offshore insurers; also
see Double Tax Treaties.
The
Act defines exempt insurance as the business of
insuring risks outside Barbados by a company which
is not owned by persons resident in Caricom. An
applicant for a license under the Act must:
- be
incorporated under the Companies Act 1982
as a limited liability company or as a mutual
insurance company (see Forms
of Company);
- carry
on only exempt insurance business;
- have
at least one resident Barbadian citizen as
a director;
- have
only shareholders who are resident outside
Caricom;
- must
have minimum issued capital (or reserves,
in the case of a mutual insurer) of BDS250,000.
The
captive insurance industry is growing in Barbados.
Rent-a-captives are permitted, and there is provision
for 'segregated account' companies.
Solvency
rules are as follows:
| Premium
income |
Solvency
Requirement |
| First
year |
Net
assets BDS250,000 |
| Below
BDS1.5m in previous year |
Net
assets BDS250,000 |
| Between
BDS1.5m and 10m in previous year |
Net
assets 20% of income |
| Above
BDS10m in previous year |
Net
assets BDS2m plus 10% of income over $10m |
Licenses
are issued to insurers as such; holding companies
and management companies involved in offshore
insurance business must register with the Supervisor
of Insurance. Licensees and registrants pay an
application fee of BDS500.
License
fees were raised in the 2008 budget, with effect
from January 1, 2009, from BDS5,000 to BDS20,000
per annum.
Attempts
in the US Congress between 2001 and 2003 to ban
tax deductions for 'expatriating' insurance companies,
which threatened some aspects of the offshore
insurance business have largely come to nothing,
although the renegotiation of the US/Barbados
Tax Treaty in 2004 has restricted the use of Barbados
for 'treaty-shopping'. AIG's traumas in 2005 gave
a boost to the 'anti-offshore' lobby in Congress,
but no harmful legislation has yet emerged.
In
January, 2005, the Barbados Investment and Development
Corporation hired an international captive insurance
expert to help raise the profile of the jurisdiction’s
exempt insurance company sector. Kate Westover,
Vice President, Alternative Risk Financing Services
at US-based Innovative Captive Strategies Inc,
was appointed as a business representative for
the BIDC as part of the island’s strategy to bring
its regulatory policies more into line with international
standards.
According
to the Barbados' Business Authority, commenting
on Ms Westover’s role, BIDC chief executive Anthony
Sobers observed that: “She has been able to help
us a lot in terms of developing the local infrastructure
to support those persons who may want to come
in. She has some of the knowledge we need in the
market place so that when we speak with potential
investors we can speak their language and she
can show them that Barbados can be a solution
to the problem that they have.”
BACK
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Barbados
Ship Management and Maritime Operations
See Offshore Business Review
– Shipping for a more general treatment
of offshore shipping registries.
The
Shipping Act 1994 established a Barbados Ships
Registry. Barbados had been a member of the International
Maritime Orgaisation since 1969, and subscribes
to all the main maritime safety and environmental
conventions.
The
Principal Registrar is based in London, with a
subsidiary Registrar in Bridgetown, and there
are provisional registration offices with inspectorates
in a number of international maritime centres.
Eleven of the major Classification Societies act
on behalf of the Barbados Registry. The Registry
has obtained ISO 9002 status. Applications for
registration require a fairly standard package
of title, survey and registration documentation.
The
Shipping Act provides for registration of all
types of vessel, however owned, but the new Registry
is particularly aimed at 'foreign-going' vessels,
meaning those which ply to and from Caricom states
(but not within Caricom) or outside Caricom altogether.
'Foreign-going' vessels less than 20 years old
may join the Registry if they are 'foreign-owned',
which means not exclusively owned by Barbados
persons; older vessels may join at the Registrar's
discretion. There are tax benefits for 'foreign'
vessels (see Offshore Legal
and Tax Regimes).
The
Shipping Corporations Act 1996, which mirrors
the provisions of the Companies Act 1982, provides
a stand-alone basis for incorporation of a ship
ownership or management company, whether the ships
concerned are registered in Barbados or elsewhere.
Shipping Corporations are non-residential and
are exempt from taxes.
As
is the case with some other offshore sectors in
Barbados, the Barbados/US Tax Convention provides
particularly favourable opportunities to US shipping
owners and operators, who can obtain domestic
tax benefits by operating through a Barbados resident.
'Resident' is so defined that it includes an International
Business Company managed and controlled from Barbados.
See Offshore Legal and
Tax Regimes for further details.
As
of 2010, Registration fees for the Barbados Registry
are:
-
For
ships up to 2,000 tonnes, a flat fee of USD2,760;
-
For
ships between 2,001 and 5,000 tonnes, USD1.20
per tonne + USD400;
-
For
ships between 5,001 tonnes and 25,000 tonnes,
USD0.5 per tonne + USD4,000
-
For
ships over 25,001 tonnes, USD0.20 per tonne
+ USD11,500
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