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Corporate Tax Guide: Barbados
Barbados

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The information is valid for the entire country except where indicated. For example, in the case of Malaysia, Labuan is part of Malaysia but has a special tax regime, so this is noted.
Barbados – entire country.
The corporate tax rate shown is the typical corporate tax rate that a domestic corporation owned by non-resident persons would pay. The tax rate does not include withholding tax on dividends, but does include a distribution tax shown separately if applicable. Certain countries have a low corporate tax rate, but charge an additional tax when a dividend is distributed. Because this tax is paid by the corporation, and not deducted from the amount of the dividend itself, it is not a dividend withholding tax. As a result, it typically cannot be reduced by an international tax treaty.
  • 25.00% for resident domestic company and domestic office, branch or agency of a non-resident external company.
  • 15% for domestic manufacturing company and net income derived from rental of residential property.
  • 2.50% - 0.25% for various licenced international business companies and licensed international business office, branch or agency of a non-resident external company.
The basis of taxation for a corporation will typically be one of:
  • World income (i.e. income from all sources)
  • Territorial (i.e. only income from within the jurisdiction)
  • Territorial and remittance (income earned within the jurisdiction and income remitted into the jurisdiction)
Other basis of taxation are possible, and, if applicable, they are noted.
  • World income for resident Barbados domestic company.
  • Barbados source income of Barbados office, branch or agency of a non-resident external company.
  • Non-Barbados/offshore international source income of international business companies and office, branch or agency of licensed non-resident external company.
Where non-resident corporation carries on business in a country, business profits may be subject to corporate tax. In addition, a branch profits tax may apply in lieu of dividend withholding tax. This branch profits tax applies to the after tax profits, typically at a fixed percentage. An international tax treaty may reduce the rate of branch profits tax, typically to the rate provided for dividend withholding.
10% withholding tax on annual trade or business profits of a Barbados office, branch or agency of a non-resident external company.
The common forms of business entity are noted. In addition, the entities which are flow through entities for U.S. tax purposes are indicated.
Resident Domestic Company (RBC), Licensed International Business Company (IBC), Society with Restricted Liabilities (Domestic Society - SRL/Licensed International Business Society - ISRL)*, Segregated Cell Company (SCC), Incorporated Cell Company (ICC), Partnership of Corporations, Business Trust.

*Flow-through for U.S. tax purposes.
Capital gains may be fully taxed, partially taxed or not at all. In certain countries, an exemption, called the participation exemption, will apply to exempt from tax a capital gain from disposition of a substantial holding of shares of a subsidiary. Where a participation exemption is applicable, it is noted together with a summary of the main conditions.
No taxation of capital gains per se (only stamp duties and property transfer taxes levied on gross value of transaction, as covered further below under #24).
Certain countries allow group taxation, otherwise known as consolidated tax filing. Here the tax returns of a group of corporations in the country may be combined together, which can be useful. If group taxation is permitted, it is noted along with the main conditions.
No provision for filing group consolidated income tax returns. Group relief re: group sharing of tax losses is no longer available since 2015.
Countries offer various kinds of special exemptions and incentives. Examples are a reduced tax rate, a tax holiday, a tax credit on the purchase of equipment, special accelerated deductions for deprecation, incentives for R&D, and various others. Here the major items are noted.
8.75% - 23.25% corporate tax credit allowances re: foreign currency earnings based on graduated percentages of various business profits.

Various statutory tax exemptions and incentive concessions granted for small business development, tourism development, approved manufactured products, designated special development areas, renewable energy systems and energy-efficient products.
Many countries have thin capitalization rules which limit or deny the deduction of interest expense in certain circumstances. For example, if debt exceeds three times equity, a proportionate amount of interest expense may not be deductible. Limitations take various forms, restricting the interest expense deduction to a percentage of profit, deeming the debt to be equity and the interest to be a payment of dividends, and various other rules which may blend of these principles. Where a country has thin capitalization rules, they are briefly described.
No thin capitalization rules re: limitations on debt interest deductibility.
Many countries have transfer pricing rules. They very often follow the OECD guidelines and the arms length principle. Some countries have specific rules which apply in certain cases. In addition, some countries allow for a selection of the most appropriate transfer pricing methodology in the circumstances, while other countries follow a hierarchy of methods, with the CUP method (comparable uncontrolled price) often ranking first. The transfer pricing rules are briefly explained.
No transfer pricing rules (other than artificial transaction prohibitions).
Many countries tax passive income earned in controlled foreign corporations (CFC’s) on an imputation basis while active income is not taxed. Such CFC rules are usually complex and vary significantly in what is considered passive income, and how foreign tax paid is taken into account. Some countries approach CFC rules on the basis of whether or not the foreign corporation is resident in a low tax jurisdiction or a tax haven. This may be done through a black list of countries.
The general overview of CFC rules is described in simple terms.
No controlled foreign corporation (CFC) taxation rules.
Profits repatriated by way of dividends from a subsidiary to a parent company are typically taxed in one of three ways:
  • The dividends are exempt of tax.
  • The dividends are deductible from taxable income, but not fully (90%, for example, of the dividend is deductible).
  • The dividend is taxable, grossed up to the pre-tax amount, and a foreign tax credit claimed for foreign taxes paid.
The applicable method is noted.
  • Tax-free dividends paid between taxable Barbados resident domestic and international business entities.
  • Tax-free foreign non-resident company dividends received by a Barbados company that owns 10% or more of the share capital of the foreign non-resident company that is not held as a portfolio investment.
  • 0% withholding tax on dividends paid to a non-resident shareholder out of foreign source income.
  • 15% dividend withholding tax on dividends paid to a non-resident shareholder out of domestic sources of income.
  • 25% dividend withholding tax on dividends paid to a non-resident shareholder paid out of exempt income or untaxed profits.
  • 12.5% dividend withholding tax on dividends paid to a Barbados resident individual shareholder out of pre-July 1, 1992 sources of income; except on shares issued in lieu of dividends and retained for five (5) years or more.
Most countries allow a foreign tax credit based on a formula, typically net foreign income over the net income times taxes payable. This limits the foreign tax credit to roughly the domestic tax otherwise applicable to the foreign income. There are numerous variations and technical rules in the details of foreign tax credit calculations. Where a foreign tax credit is allowed, the general principles are described.
FTC allowed since 2005 in respect of foreign taxes payable on foreign source profits, income or gains taxable in Barbados. Also, FTC allowed to the extent of underlying foreign income taxes payable by a non-resident foreign company on profits out of which it paid dividends to a Barbados resident company that holds directly at least 10% of that foreign company’s capital stock. Unused foreign tax credits of an income year cannot be carried back nor carried forward against income taxes of other years.
14. Losses
Losses typically can be carried forwards for a period of years, and sometimes can be carried back. Losses may be segregated into capital losses and non capital losses.
Losses from an income source in a year are deductible against assessable income from all other domestic and foreign sources of income in the year. Unused losses carried forward (no carryback) as deductions against assessable income of each following successive nine (9) years for pre-2015 year losses and seven (7) years for 2015 and subsequent year losses.
It is not practical to list all of the tax treaties which a country has in a simple guide like this. Accordingly, a link is provided in each case to the tax treaties.
Some countries have entered into Tax Information Exchange Agreements (TIEA).
Treaties are more and more containing provisions that limit benefits (LOB provisions).
  • Double Taxation Agreements (DTAs): 35
  • Bilateral Investment Treaties (BITs): 11
  • Tax Information Exchange Agreements (TIEAs): 5
  • Limitation of benefits provisions (LOBs) in certain recent treaties (e.g., USA, Mexico, Netherlands), most do not have LOB provisions.
Withholding tax rates vary considerably from treaty to treaty, and countries may have domestic exemptions applicable in certain circumstances (for example copyright royalties, interest paid to arm’s length persons, etc.). A table shows the typical rates but cannot adequately summarize all of the details. The applicable treaty should be consulted.
TREATYNON-TREATY
Interest0% - 15%15%
Dividends-Taxed Profits0% - 15%15%
Dividends–Untaxed Profits0% - 15%25%
Rentsno reduction25%
Royalties0% - 15%15%
Management & Technical Services Fees0% - 15%15%
Some countries allow for the selection of year-end while other countries specify a particular year-end which all business entities must have. Normally the taxation year cannot exceed 12 months. Where it can exceed 12 months, this is noted.
Any taxation income year not exceeding a fiscal period of 53 weeks is available by choice. Once selected, the income year-end may be changed upon making an advance written application subject to the concurrence of the Commissioner of the Barbados Revenue Authority.
This is the due date for filing a tax return. Where extensions are available, this is noted.
  • Filings for January 1 - September 30 corporate income year-ends due by March 15 of following year.
  • Filings for October 1 - December 31 corporate income year-ends due by June 15 of following year.
  • No provisions for filing extensions (except automatic statutory extension to next business day following a filing due date falling on a weekend date or national holiday).
The typical tax instalment requirements are noted.
50% tax instalment based on previous year’s tax liability for January 1 - September 30, income year-ends payable by September 15 of following year and for October 1 - December 31 income year ends by December 15 of following year.
This is the date when the corporate tax owing for the year must be paid. It may be different from the tax return filing due date.
Balance of corporate income tax year is payable with filing of that year’s corporate tax return due in the following year.
This is the period after which the tax department cannot in normal circumstances reassess a taxation year. It is sometimes referenced to the end of the taxation year and sometimes to the date of the first assessment of that taxation year.
  • No time limitation period for original assessments.
  • 9-year reassessment limitation period, unless taxpayer has made misrepresentations or failed to disclose any material fact in filing a tax return, or supplying required information.
  • 5-year retention period for keeping adequate records including supporting documents and vouchers, unless the Commissioner of Barbados Revenue Authority otherwise directs before the disposal of such records (e.g., normal to submit in advance a written request for permission to dispose of such records).

    Treaties may contain shorter periods.
If a country has exchange controls, this is noted, together with the main requirements.
All foreign currencies (non-Barbados dollars) are subject to currency exchange controls in Barbados, except for companies carrying on licensed international business or, if unlicensed, as approved by the Exchange Control Authority of the Central Bank of Barbados.
23. VAT
A VAT tax system typically provides that the supply of goods and services is classified as taxable, tax exempt, or zero rated. Where a business is engaged in an activity which is taxable, it must charge VAT on its revenue, and can claim a refund of VAT on its expenditures. Where the activity is exempt, it does not charge VAT on its revenue, and cannot claim back VAT paid. Where the entity is engaged in activities which are zero rated (typically agriculture, food services and exports), then it can claim back VAT which it has paid on its expenditures, and does not charge VAT on its revenue.
If a country has a typical VAT system, this is noted. If a country has no VAT system but a sales tax system, this is indicated. Some countries may have a mixture, and taxes may apply at different levels (federal and state for example).
17.5% national value added tax (VAT), less input tax credits for VAT paid on supplies. Reduced 7.5% VAT on hotel accommodation and tourism supplies, and 0% VAT on basic food items.
Stamp duty, or land transfer tax, can apply on such things as the transfer of shares, land, or the issuance of bonds or debentures. This is described together with the applicable rates.
  • No stamp duties and property transfer tax on sale of company shares to non-residents where the company’s assets are comprised of foreign assets (including investments in shares and securities of foreign companies) and where the company’s income is derived solely from foreign sources outside of Barbados.
  • Otherwise, stamp duty of 1% generally applies on taxable transfer value of real property and related company shares and 3/5 of 1% on transfer relating to any property situated in Barbados or to any matter or thing done or to be done in Barbados.
  • Property transfer tax of 2.5% applies on transfers of real property valued over BBD $150,000 (USD $75,000) and related company shares valued over BBD $50,000 (USD $25,000). No tax-free property tax threshold on the sale of land only.
If capital tax is payable, this is described. Capital tax may apply in specialized industries, such as banking and insurance, even if a country does not generally apply a capital tax to corporations.
No tax on corporate capital per se.
Where significant, other taxes are noted.
National Insurance System (NIS) contributions on an employee’s monthly insurable earnings up to BBD $4,360 (USD $2,180) payable:
  • 11.25% by employer
  • 10.10% by employee
Excise taxes of 46.95% - 120% (in addition to VAT) on imported value of vehicles.
Anti-Avoidance Rules take many forms, the most common ones are a general anti-avoidance rule, treaty shopping limitations, the requirement for economic substance (or a business purpose in carrying out transaction) and specific anti-avoidance rules for particular purposes. A very brief overview of the anti-avoidance rules is described.
No General Anti-Avoidance Rules (GAAR), some specific anti-avoidance rules.

Treaty Shopping:
No expressed anti-treaty shopping rules, but LOB rules in certain more recent tax treaties.

Economic Substance:
No concept of economic substance abuse.

Other:
Limited artificial transaction rules and limitations.
Where a non-resident person holds shares of a corporation established in the country listed, the capital gain which results may be taxable or not taxable depending on the circumstances and, possibly, the existences of an international tax treaty. The general rules are noted.
Sale of Barbados company shares not subject to any capital gains tax. Sales of Barbados business assets are taxable.
Where a corporation is acquired through the purchase of shares, sometimes a step up is allowed so that the cost of its assets can be revalued. The main rules are briefly summarized.
No step transaction doctrine.
In some countries, rulings are commonly used (and sometimes even required). In other countries the system is either unavailable or not commonly used except in special circumstances.
No statutory or administrative provisions for tax rulings. Voluntary tax rulings may be obtained, mainly in special situations.
31. Other
Other important aspects of the tax system are noted.
No reporting requirement for Barbados company’s ownership of foreign subsidiaries or transactions with related non-residents.