Barbados is making several important tax system changes.
IBC and ISRL licenses will no longer be issued by Barbados to companies or international societies engaged in the business of holding or exploiting intellectual property (IP), although licenses that have already been issued under Barbados’ legislation may be subject to certain grandfathering provisions. These licenses offered certain tax benefits to qualifying entities.
Also, as part of the three-phase Economic Recovery and Transformation Plan Barbados delivered last month, the country is proposing to increase its corporate income tax rate to 30% (from 25%), with the commencement period to be determined, among other changes. The budget proposals are subject to further consultation and may change prior to implementation.
The upper band for personal income tax has increased to 40%.
International business licensing changes
Barbados ceased issuing international business licenses to companies and international societies engaged in the business of holding and exploiting IP assets as of July 1, 2018. Previously, such licenses were granted under either the International Business Companies (IBC) Act or the Societies with Restricted Liability (SRL) Act, provided certain conditions were met. Companies and societies licensed under these Acts are entitled to a reduced income tax rate of between 2.5% and 0.25%, among other benefits. Certain grandfathering provisions may apply.
These changes follow the OECD's required timelines for Barbados (and others) to amend certain "preferential IP regimes" identified under Action 5 of the OECD BEPS project.
New tax measures - Barbados' Economic Recovery and Transformation Plan
The new Barbados government published its economic recovery and transformation plan on June 11, 2018. The plan includes the following changes to the corporate income tax rate and relief in the form of tax amnesty, among other proposals.,:
Increase in corporate income tax rate
Barbados proposes to increase the corporate income tax rate to 30% (from 25%), with the commencement date to be confirmed. As a result, entities that claim the maximum foreign currency earnings allowance may see their effective tax rate increase to 2.10% (from 1.75%).
Barbados announced it will write off all taxes owed from tax years 1968 to 2000. Barbados also announced that it will waive all penalties and interest for tax years 2000 to 2017 where outstanding payments are made or a where the taxpayer and the Barbados Revenue Authority agree to a payment plan and arrangements are made between July 1, 2018 and December 31, 2018.
New Room Levy
A Room Levy has been applied to hotel rooms effective July 1, 2018. The Levy will be imposed on tourist accommodation including apartments, condominiums, condominium hotels, guest houses, home accommodation, hotels, timeshare properties and villas. The rates range from BBD5 - BBD20 [approx. USD2.50 – 5] per room per night depending on the classification of the property. The Room Levy is to be reported on the VAT Return and persons who presently fall under the VAT threshold are now required to be registered for VAT in order to comply.
These tax system changes are part of the first phase in a three-phase Economic Recovery and Transformation Plan.