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Barbados has been a financial services center since the enactment of the International Business Companies Act in 1965. Over the last fifteen years, it has worked to develop an impressive range of legislation designed to promote international business and financial services. |
This, together with its reputation as a well regulated, clean jurisdiction; its impressive network of tax and bi-lateral investment treaties and cadre of highly qualified investment professionals, has widened Barbados' appeal to international investors worldwide. It is now considered a major international financial services center enjoying spectacular growth. Presently, some 6,775 offshore entities are licensed to do business in Barbados.
The current legislation covers:
- International Business Companies
- Offshore Banks
- Exempt Insurance Companies
International Business Companies
In 1965, the International Business Companies (IBC) Act was passed in Barbados and it has permitted companies that do not "trade in the Caribbean region" to establish their headquarters in Barbados. The Act was subsequently amended in 1991 and provides for a broad range of activities that an IBC can conduct. The IBC status is conferred on companies that are either carrying on the business of international manufacturing or international trade and commerce. It provides tax reductions, exemption and various other benefits for the foregoing areas of activities.
Requirements to qualify as an IBC
- It must be incorporated in Barbados or be a local branch of a foreign corporation
- It must not trade in goods or services in Barbados or any of the Caribbean countries, which form part of CARICOM
- It may not carry on any business under other offshore incentive legislation
- It must obtain a license from the Minister of finance. The annual fee for the license is US$100, 00
Summary of incentives
- A 2.5% maximum corporate tax rate on net profits
- An IBC incorporated outside of Barbados will be taxed in Barbados only on the profits earned from its Barbados operations
- Taxes paid to a foreign country may be credited against tax payable in Barbados
- The credit cannot reduce the tax payable to less than one percent (1%) of the taxable income for the particular income year
- Capital gains are not subject to tax in Barbados
- The Government of Barbados is prepared to guarantee the existing International Business Company benefits for at least fifteen (15) years
- There are no withholding taxes on dividends, royalties, management fees, interest payments and other fees paid by an international business company to non-residents of Barbados or to another IBC
- An IBC is exempt from exchange control restrictions and may keep its records and financial statements in a foreign currency
- Expatriate staff, who may readily obtain work permits, can be exempted from income tax and exchange control on up to 35% of their remuneration from an IBC
- An IBC may import, free from all customs duties, equipment, machinery or materials for use in its business
- Barbados has a comprehensive double taxation treaty with Canada. Therefore, dividends paid out of the active business income of a foreign affiliate operating in Barbados are fully deductible in the determination of the taxable income of a recipient Canadian resident corporation
- Barbados is certified as a "North American Area" and therefore business convention expenses incurred in Barbados by US corporations and organizations are automatically deductible in the US against US taxes
- Profits of an IBC whose shares are wholly owned by a trust, which is managed by a licensed offshore bank, are exempt from tax
- No minimum capital requirements
- Ease of incorporation
- Provision for pre-incorporation contracts and telephone directors' meetings
- Exemption from public filing of financial statements
- No investment restrictions
- Single shareholder companies permitted
- A company may buy back its shares or reduce stated capital subject to solvency tests
GOWEALTHY.COM © 2006
For comments: editor@gowealthy.com
Source: www.bidc.com
