Barbados

Business Environment
Barbados was identified by the OECD as one of the 35 jurisdictions considered to be a tax haven but was taken off the list in January 2002. The OECD said that Barbados' long standing tax exchange treaties with other jurisdictions were sufficient for the country to be excluded from the list. Barbados was not on the Financial Action Task list of 15 countries deemed ‘unco-operative’ in the fight against money laundering. The country was classified by the G-7’s Financial Stability Forum as a ‘group two’ jurisdiction that needed to make changes to improve the financial supervision of its offshore sector.

Barbados is a member of the Caribbean Community (Caricom). The development of the international business and financial services sector began around 1977 and now contributes significantly to foreign exchange earnings. The offshore sector is legally separated from the onshore sector. The legislation allows international business companies, segregated cell companies, international banks, exempt insurance and management companies, societies with restricted liability and ship registration.

The International Business Companies Act 1991 defines companies that carries on business in manufacturing, international trade and commerce from within Barbados. All companies wishing to operate as IBCs must obtain a license from the Ministry of Economic Development. Onshore insurance companies are regulated by the Insurance Act 1996 while offshore insurers are regulated by the Exempt Insurance Act. Insurance comapnies apply for licensing with the Office of the Supervisor of Insurance. Local insurance companies involved in International insurance can register under domestic insurance legislation as qualifying insurance companies (QIC). Unlike exempt insurance companies, a QIC can be owned by residents of Barbados and can insure a specified amount of local risk.

Offshore banks apply to the Central Bank of Barbados for registration under the International Financial Services Act, which came into effect on 10 June 2002. Onshore banks are regulated through the Financial Institutions Act. Entities formed under the Societies with Restricted Liability Act 1995 can be treated as a corporation, a partnership or a disregarded entity for US tax purposes. A SRL can be formed either as an exempt society or a non-exempt society. Exempt SRLs are prohibited from acquiring or holding land leased for business purposes. International trusts are governed under the Barbados Trustee Act and the International Trusts Act 1995. The Shipping Act and the Shipping Incentives Act allow the registration of ships under the Barbados flag, and provide for their management and maintenance including ship building. To qualify for registration, a ship must apply to Maritime Affairs. Barbados Ship's Registry.

The Securities Exchange of Barbados (SEB) was established in June 1987 and operates under the Securities Exchange Act and other by-laws and rules. A Securities and Exchange Commission has regulatory responsibility for the SEB.

In the onshore sector Barbados had seven commercial banks, 14 non-bank financial institutions, 41 credit unions, nine life insurers and 10 general insurance companies operating in 2001. While precise figures are not available, the IMF estimates that the offshore sector employs about 3,000 people and generates US$110 million annually in foreign exchange. The offshore sector makes up about 40% of government’s corporate tax revenue, with international business companies as the main contributors. In 2001 Barbados had 4,065 international business companies, 2,975 foreign sales corporations, 180 exempt insurance companies, 30 exempt insurance management companies, 166 societies with restricted liabilities and 56 offshore banks. At the end of 2001 offshore banks managed 800 trusts and had 298 employees. An IMF analysis noted that some of the entities may not be active.

Anti-money laundering prevention is done through the Money Laundering (Prevention and Control) Act as amended in 2002, the Anti-Terrorism Act, and the Mutual Assistance in Criminal Matters Act. The Anti-Money Laundering Control Authority is responsible for ensuring compliance with the various acts.

Taxes
Barbados offers tax holidays and other incentives for manufacturing industries, tax concessions and other incentives for information service companies. Capital gains are not subject to tax in Barbados. International business companies are tax on income on a sliding scale, from a maximum of 2.5% to a minimum of 1%. Exemption from all withholding taxes. 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 international business company. Offshore entities are exempt from exchange control restrictions and may keep its records and financial statements in a foreign currency. Expatriate staff can be exempted from income tax and exchange control on up to 35% of their remuneration from an international business company. An international company may import, free from all customs duties, equipment, machinery or materials for use in its business. There are exemptions from taxes on transfers of shares and other assets.

The basic corporate tax for local companies falls by 2.5% to 37.5% with effect from the income year 2002. The rate will be reduced further to 25% by 2006. This change in the corporate tax rate will be accompanied by changes in rates, bands and allowances applicable to individuals. Details and schedules for these reductions, which will commence in 2003, have not been provided at this stage. Double taxation is generally avoided if a double taxation treaty is in force, which allows a credit against Barbados tax for foreign tax paid on overseas income. Dividends from one local company to another are tax-exempt.

Offshore banks are subject to tax rates on banking profits on a sliding scale, from a maximum of 2.5% to a minimum of 1%. There are no other direct tax or capital gains tax on the profits or gains of the bank, no taxation on distribution to a non-resident person or another licensee. No taxation is levied on a licensee, its shareholders or transferees on the transfer of its assets or securities. There are no estate, inheritance or similar taxes on any shares, securities or assets of a licensee owned by a non-resident person.

Non-resident insurance companies are taxed between 3% and 6% on premium income. A company registered under the Insurance Act may be entitled to tax concessions where at least 90% of its premiums originate outside and at least 90% of its risks insured are located outside Caricom. A maximum tax credit of 93% is available where premiums originate outside of Caricom. A qualifying insurance company (see above) is entitled to the benefit of a low effective rate of tax (generally 2.8% after deduction of a foreign currency earnings allowance, and exemptions from withholding taxes and exchange control. Other offshore entities pay taxes ranging from 1% to 2.5% on profits. An international trust is taxed at 40% on its profits earned in, or remitted to Barbados but there are no withholding taxes or payments to non-resident beneficiaries. Effective from the income year 2002, a deduction will be available for 50% of the amount expended on investment in, and creation of intellectual property over a ten-year period.

Barbados has double taxation agreements with Caribbean Community members, Canada, China, Cuba, Finland, Malta, Norway, Sweden, Switzerland, the United Kingdom, the United States, and Venezuela. Barbados' double taxation treaty with Canada allows dividends paid out of the business income of a Barbados-based foreign affiliate to be fully tax deductible by the recipient Canadian-based corporation. Barbados has bilateral investment treaties with Canada, China, Cuba, Germany, Italy, Switzerland, the United Kingdom, and Venezuela. Copies of the tax treaties are available by clicking here.

Individuals pay income tax of 25% on the first B$24,200 of taxable income and 40% thereafter. There is a personal allowance of B$15,000 for residents.

Business information is available at:
US Commercial Service: Barbados Commercial Guide FY2002.

Contacts
International Business and Financial Services Division
Ministry of Industry and International Business
Director of International Business
Upton, St. Michael
Barbados
Tel: (246) 430-2200
Fax: (246) 228-6167
E-mail: info@barbadosbusiness.gov.bb
Internet: Ministry of Economic Development

Barbados Investment and Development Corporation (BIDC)
PO Box 1250 ‘Pelican House’
Princess Alice Highway
Bridgetown, Barbados,
West Indies
Tel. (246) 427 5350
Fax: (246) 426 7802
E-mail: bidc@bidc.org
Internet: www.bidc.com

Central Bank Of Barbados
PO Box 1016,
Bridgetown,
Barbados
Tel: (246) 436-6870
Fax: (246) 427-9559
E-mail: cbb.libr@caribsurf.com
Internet: www.centralbank.org.bb

Office of the Supervisor of Insurance
Ministry of Finance and Economic Affairs
Nicholas House, Broad Street, Bridgetown Barbados
Tel: (246) 426-3815
Fax: (246) 436-2699
sofi@caribsurf.com

The Securities Exchange of Barbados
5th Floor Tom Adams Financial Center
Church Village
Bridgetown, Barbados
Tel: (246)436-9871/2 Fax: (246) 429-8942
E-mail: sebd@caribsurf.com
Internet: www.seb.com.bb

Population (2001)
268,300

Capital
Bridgetown

Currency
Barbados dollar. Pegged at US$1 = BD$2 Barbados dollar.

Legal system
Based on the British common law system with variations. Barbados has magistrate courts, and a Supreme Court consisting of the high court and the court of appeals. Final appeal rests with the UK Privy Council in London.

Government
An independent parliamentary democracy with the British monarch as head of state and represented by the governor-general. Barbados is a member of the Commonwealth. The bicameral parliament is made up of the lower House of Assembly, with 28 directly-elected members, and the Senate, with 21 members appointed by the governor-general in consultation with government and the opposition. Members of both houses serve five-year terms. Executive power is exercised by the prime minister, cabinet, and other appointed ministers.

Governor general: Sir Clifford Husbands
Prime minister, finance, economic affairs and civil service: Owen Arthur

Cabinet
Deputy prime minister, attorney general, home affairs: Mia Mottley
Foreign affairs and trade: Billie Miller
Labour and social security: Rawle Eastmond
Commerce, consumer affairs and business development: Ronald Toppin
Minister of housing, lands, and environment: Elizabeth Thompson
Education, youth affairs and sport: Reginald Farley
Public works: Gline Clarke
Agriculture and rural development: Erskine Griffith
Tourism and international transport: Noel Lynch
Health: Jerome Walcott
Industry and international business: Dale Marshall
Social transformation: Hamilton Lashley
Energy and public utilities: Anthony Wood
Minister of state in the ministry of education, youth affairs, and sport: Cynthia Forde
Minister of state in the prime minister's office: John Williams
Minister of state in the ministry of foreign affairs and foreign trade: Kerrie Symmonds

Elections
The Barbados Labour Party (BLP) was returned to a third term in office in elections held on 21 May 2003. The BLP won 23 of 30 seats, down from the 26 seats it took in the 1999 elections. The opposition Democratic Labour Party, led by Clyde Mascoll, won seven seats.

Political parties
Barbados Labour Party (leader, Owen Arthur)
Democratic Labour Party (leader, Clyde Mascoll)
National Democratic Party (leader, Richard Haynes)

Economic overview (2001)
The main sectors of the economy are tourism, financial services, informatics, sugar production, light manufacturing, and component assembly exports. Real gross domestic product (GDP) is projected by the central bank to have contracted by 2.3% in 2001, compared to 3.1% growth in 2000, with major declines in the traded sectors and slower growth in the non-traded sectors. Real value-added in tourism declined by an estimated 5.9% in 2001 after an increase of 7.7% in 2000. The number of long-stay visitors fell 6.9% in 2001 to 507,078 visitors compared to the previous year. The number of cruise ship passengers fell by 1.1% during 2001. Sectorial GDP: wholesale and retail trade 15.3%; financial and business services 18.9%; government services 18%; other services 16.1%; tourism 11.2%. manufacturing 6.1%; construction 5.8%; agriculture 4.7%; utilities 3.5%; mining and quarrying 0.7%.

Gross domestic product (2002)
Decline of 0.6% in real terms compared to a contraction of about 2.3% in 2001. Nominal GDP: US$2,549 million.

Balance of Payments (2001)
Deficit on current account balance: US$93.9 million. Merchandise exports: US$271.2 million. Merchandise imports: US$952.3 million. Net balance on services: US$586.7 million. Overall trade balance (including capital and financial account): US$226.6 million.

Inflation rate (CPI) (March 2003)
0.2%

Labour force (September 2002)
Total labour force: about 140,000. Unemployment rate: 10.3%.

Government accounts (2001-2002)
Total revenue and grants: US$1,024.8 million. Current and capital expenditure: US$1,124.5 million of which US$172.9 million is capital spending. Government financial year April-March.

Public debt (projected 2002)
US$749.8 million

Net international reserves (31 December 2002)
US$665.5 million, representing about 5.5 months of imports of goods and services.

Public holidays (2004)
New Year (1 January); 21 January (Errol Barrow day); 9 April (Good Friday); 12 April (Easter Monday); 28 April (Heroes' Day); 1 May (Labour Day); 31 May (Whit Monday); 1 August (Emancipation Day); 2 August (Kadooment Day); 7 October (United Nations day), 30 November (Independence Day); 25 December (Christmas); 26 December (Boxing Day).

Time
GMT -4. There is no summer time clock change.

Sources
Government of Barbados
Barbados International Insurance Association
Barbados Investment and Development Corporation
Ministry of Economic Development
Central Bank of Barbados
Tourism Barbados
International Monetary Fund
US State Department