Barbados

*Updated March 2020*

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• Legal system
• Inheritance and succession
• Estate planning
• Taxation
• Residence and domicile
• Other relevant information

Legal system

Common law and equity.

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Inheritance and succession

Succession

A Barbados trust provides for distributions at any time during the lifetime and upon the death of the settlor. It provides most of the benefits of a will without requirements of probate and court approval for distribution of assets to beneficiaries and vests legal title to the property to the beneficiaries of the trust.

Barbados practices testamentary freedom through the creation of wills.

Family law and defined inheritance rules

Where there was no creation of a will or a trust by the deceased, the Succession Act, Cap 249, sets out in chronological order the class of persons who are to benefit from the estate of the deceased. The group ranges first between spouse and issue of the deceased, followed by parents, siblings and then the children of the siblings of the deceased.

Probate process

A trust that takes effect only upon the death of the settlor must be declared as prescribed by the Succession Act, since it is essentially a will and is therefore subject to probate. The Succession Act allows a person to dispose of all property to which they are beneficially entitled at the time of their death and which on their death devolves on their personal representatives.

Anyone who wishes to make a will must have attained the age of 18 or be married. The Succession Act states that for a will to be valid it must be written, signed by the testator or by a representative of the testator in his presence, and the signing attested to by two or more witnesses.

Mental capacity

The Succession Act stipulates that a will shall not be deemed as valid unless made by a person of sound mind.

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Estate planning

Use of trusts in estate planning

Residents or non-residents may settle assets in a Barbados trust to trustees who hold the assets as legal owner, subject to the trust instrument and laws of Barbados. The trust instrument may specify the trustee’s duties; discretionary powers; control the distribution of the trust fund before or after the settlor’s death; provide for the appointment of a protector to oversee the responsibilities of the trustee; and may confer other powers on the protector.

Trusts are vehicles available to investors to protect their assets based on the high duty of care imposed by law on a trustee and a degree of flexibility inherent in the establishment of a trust and its administration. They provide mobility, enabling settlors and beneficiaries to avoid threats of a military or political nature. Settlors and beneficiaries can obtain additional protection against asset seizures and freezes, restrictive exchange control and tax regulations, and general risks of publicity associated with substantial wealth.

Effective as of 1 January 2019, the International Trusts Act has been repealed and replaced by the Trusts (Miscellaneous Provisions) Act, 2018 (the New Trusts Act). Consequently, all international trusts created under the International Trusts Act shall be deemed to be created under the New Trusts Act.  Trusts are no longer classified as domestic, international or offshore. The Trustee Act remains in existence and is also applicable to trusts set up under the New Trusts Act. It is important to note the amendment to the Trustee Act introduced in 2012, to include reserved powers to settlors, remains unchanged. Further, the New Trusts Act recognises that the outdated provision dealing with investment by trustees in the Trustees Act does not apply to trusts set up under the New Trusts Act.

For trusts created under the New Trusts Act:

• Trustees are required to be licensed under the Financial Institutions Act, Cap. 324A, or the Corporate and Trust Service Providers Act 2015-12.
• There is no restriction on the residence of the settlor or beneficiaries, or types of assets that can be held in trust.
• There is a perpetuity period of 100 years.
• A non-charitable purpose trust can be established.
• Registration is required.
• Regarding asset protection; no proceedings can be commenced later than three years from the date of disposition of assets.

A beneficiary resident in Barbados will pay taxes on distributions made by the trust. Only income derived from Barbados will be taxable when distributions are being made to non-resident beneficiaries. A trust created under the New Trusts Act that is both resident and domiciled in Barbados is subject to tax on its worldwide income. A trust that is resident but not domiciled in Barbados is taxed on its worldwide income to the extent that it is remitted to Barbados. The trust income will be taxed at current taxation rate in Barbados. Taxation may be alleviated by exploring the benefits of Barbados’ extensive network of double taxation treaties.

Use of foundations in estate planning

The Foundations Act, 2013-2 makes provision for the establishment of foundations in Barbados and allows persons to disburse assets into foundations but reserve certain powers and dictate the manner in which the foundation assets are to be managed. Foundations facilitate the protection of personal and corporate wealth, enable estate and wealth management and benefit from asset protection laws in Barbados.

Private Trust Companies

Types of entities

Barbados provides various types of entities that are attractive both locally and internationally, since they provide financial incentives. These entities are governed by the Companies Act, Cap 308, and include the following:

i) Domestic Barbados companies

• Incorporated by filing articles of incorporation at the Registry of Corporate Affairs.
• A minimum of one director who need not be a resident of Barbados.
• Shareholders may or may not be residents of Barbados. A foreign shareholder must apply to the Exchange Control authorities to hold shares in a Barbados domestic company.
• No minimum capital requirements.
• Annual audit required if assets and/or gross revenue exceed USD2 million.
• Must file annual tax returns.
• Must file annual return with Registry of Corporate Affairs.

ii) International business company (IBC)

• Must have at least one director, who need not be resident of Barbados.
• Shares may be issued to residents of Barbados or foreign entities.
• No minimum capital requirement.
• Shares can be issued in various classes and are not issued at par value.
• Taxed at rates ranging from a low of 0.25 per cent to a maximum of 2.5 per cent on profit.
• Restricted from carrying on business with residents of Barbados.
• Exempt from exchange control requirements, withholding taxes on payment of dividends, interest, royalties, management fees, and other fees to non-residents.
• Annual licence fee.
• Annual audit required if assets and/or gross revenue exceed USD2 million.
• Must file annual tax returns.

Corporations licensed as an IBC prior to 17 October 2017 can elect to be grandfathered until 30 June 2021. After this date, a corporation can apply for a foreign currency permit and receive similar benefits as an IBC. The International Business Companies Act has been repealed.

iii) Society with restricted liability (SRL)

An SRL is designed to take advantage of benefits that can be gained in the US through the use of hybrid entities, characterised in the local jurisdiction as corporations but treated as partnerships for US tax purposes. An SRL can be engaged in any legal business activity and is governed by the Societies with Restricted Liability Act, 1995-7, as amended (the SRL Act). SRLs:

• Must have at least one manager, who need not be resident in Barbados, and one member. 
• Have no minimum capital requirement. Can be organised as an international society or a regular domestic society.
• International SRLs (ISRLs) are restricted from carrying on business with residents of Barbados.
• ISRLs are similar to IBCs and taxed at rates ranging from 0.25 per cent to a maximum of 2.5 per cent on profits.
• ISRLs are exempt from exchange controls and withholding taxes on distributions to non-residents.
• Annual audit required if assets and/or gross revenue exceed USD2 million.
• International SRLs must pay annual licence fees.
• Must file annual tax returns.

Entities licensed as an ISRL prior to 17 October 2017 can elect to be grandfathered until 30 June 2021.  After this date 2021, an SRL can apply for a Foreign Currency Permit and receive similar benefits as the IBC.

iv) Exempt insurance company (EIC)

• Must be incorporated and licensed under the Exempt Insurance Act, Cap 308A, in Barbados with a minimum capital of USD125,000.
• Must have at least two directors, who need not be residents of Barbados.
• Taxed at the rate of 0 per cent for the first 15 years with an annual licence fee.
• Exempt from exchange controls and withholding tax being levied on remittances to non-residents.
• Must meet reasonable solvency tests.

Corporations licensed as EICs prior to 17 October 2017 can elect to be grandfathered until 30 June 2021.

v) Qualifying insurance company (QIC)

A company licensed under the nsurance Act, Cap 310, may apply for a certificate of qualification where at least 90 per cent of its premiums and risks originate outside the Caribbean Community (CARICOM). The following is a synopsis of QICs:

• Can benefit from a low effective rate of tax of 1.75 per cent after deduction of a foreign currency earnings tax credit (applicable to general insurance business).
• Tax rate for life insurance business can be lowered to 0.35 per cent of gross investment income.
• Reasonable solvency requirements.
• Exempt from exchange controls and withholding taxes.
• May be owned by residents of Barbados, who can insure a certain amount of local risk.

Corporations licensed as a QIC prior to 17 October 2017 can elect to be grandfathered until 30 June 2021.  

Effective 1 January 2019, the Exempt Insurance Act, Cap 308A, was repealed and the Insurance Act, Cap 310, was amended to provide for (among other things) three classes of licences under which all insurance entities will be classified and regulated:

• Class 1 category will include insurance companies that restrict the business they can underwrite to related party insurance business.
• Class 2 category will include insurance companies that underwrite or can underwrite third-party business.
• Class 3 category will include brokers, other intermediaries, insurance management companies, insurance holding companies and similar.

Foreign Currency Permit (FCP):

As of 1 January 2019, all companies earning 100 per cent of their income in foreign currency will be entitled to apply for an FCP granted by the Ministry of International Business. The FCP bestows the following benefits:

• exemption from exchange control;
• exemption from withholding tax on payment of dividends to non-residents;
• exemption from withholding tax on all other payments to non-residents;
• exemption from payment of stamp duty and property transfer tax;
• exemption from payment of VAT and duties on importation of plant, machinery and raw materials;
• income tax concessions for specially qualified individuals for a period of three years; and
• exemption from filing annual returns at the Registry of Corporate Affairs.

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Taxation

Income tax system

Barbadians are taxed on worldwide income.

Personal income tax rates:

• Effective as of 1 July 2019, income of up to BBD50,000 is taxed at 12.5 per cent.
• Effective 1 July 2019, income exceeding BBD50,001 is taxed at 33.5 per cent.
• Effective from 1 January 2020, income exceeding BBD50,001 is taxed at 28.5 per cent.

Corporate income tax rates

Effective 1 January 2019, the corporate tax rates will be converged so that domestic and international business will be subject to the same tax rates. The new rates of corporate tax for all companies will be as follows:

• Less than BBD1 million - 5.5 per cent
• More than BBD1 million but less than BBD20 million - 3 per cent
• More than BBD20 million but less than BBD30 million - 2.5 per cent
• More than BBD30 million - 1 per cent

Capital gains tax

Capital gains are not subject to tax in Barbados.

Non-residents

Non-residents are taxable only on income derived from within Barbados. Income from royalties is deemed to arise in Barbados where the use of or the right to use a right or property occurs in Barbados.

Withholding tax rate (non-treaty)

Dividends, interest and royalties paid by IBCs, SRLs and FCPs to a non-resident are exempt from tax. Otherwise, a 15 per cent withholding tax applies unless the rate is reduced under a tax treaty.

There is also an exemption from withholding tax on dividends paid by a resident Barbados company to non-resident shareholders out of foreign-source income.

Withholding tax rate (treaty)

Barbados has income tax treaties with Austria, Botswana, Canada, CARICOM countries, China, Cuba, Finland, Iceland, Luxembourg, Malta, Mauritius, Mexico, Norway, the Netherlands, Panama, Spain, Sweden, Switzerland, Seychelles, the UK, the US, and Venezuela. Varying reduced withholding taxes between 0 and 15 per cent on dividends and interest are features of these treaties, resulting in the establishment of investment management companies and trusts
in Barbados.

Taxation at death

Inheritance tax, gift tax estate duties and succession duties do not exist in Barbados.

Other taxes

Property transfer tax is payable on the transfer of shares and real estate. It is payable by the vendor at 2.5 per cent.

Tax treaties

For a list of countries Barbados has double taxation treaties with, visit www.investbarbados.org/dtas.php:

Tax information exchange agreements (TIEAs)

Barbados has signed TIEAs with Colombia, Denmark, Greenland and the Faroe Islands, and South Africa. The TIEA provides for an exchange of information relating to specific criminal or civil tax investigation on request.

Bilateral Investment Treaties

Barbados signed bilateral investment treaties (BITs) with Belgium (awaiting ratification) Canada, China, Cuba, Ghana (awaiting ratification), Germany, Italy, Luxembourg (awaiting ratification), Mauritius, Switzerland, Venezuela and the UK. BITs afford protection of investment in these countries for resident individuals and entities of Barbados.

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Residence and domicile

Special rules on becoming resident

The Citizenship Act, Cap 186, provides that, apart from birth and descent, an individual may apply to be resident through registration and naturalisation. A non-Barbadian who is married to a Barbadian citizen may apply to become a citizen in Barbados through registration.

Special rules on ceasing residence

A resident can tender an application for a renunciation of citizenship. The status may be revoked where the individual engages in activities within and outside Barbados which are deemed to be prejudicial to the safety of Barbados or to the maintenance of law and public order in Barbados.

Domicile concept for gifts and inheritance

No inheritance or gift tax; however, there is a 2.5 per cent property transfer tax payable on the transfer of land on the sum exceeding BBD150,000 and the transfer of shares of domestic companies.

Taxation of holdings by non-residents on death and of gifts

• Gifts: as stated above, gifts may be subject to property transfer tax.
• Death: none.

Reporting/auditing requirements

Non-resident individuals are not required to be audited in Barbados.

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Other relevant information

Asset protection laws

The Trusts (Miscellaneous Provisions) Act, 2018-49 offers asset protection.

Disposition of property made with intention to defraud a creditor, or which is transferred for less than its value, may become ineffectual if an affected creditor pursues an action.

Creditors have a legal requirement to prove their case, which must be brought within three years of the property disposition.

Foreign currency restrictions

Under the Exchange Control Act, Cap 71, only authorised dealers can sell or lend foreign currency. Where the equivalent of BBD10,000 is being brought out of Barbados by both residents and non-residents in any currency, it must be declared to the customs department. 

Foreign ownership restrictions

There are no restrictions on direct investment in Barbados but a non-resident investor should register their foreign currency with the Exchange Control Authority (ECA) in order to repatriate same in the future.

Non-national investors or corporations controlled by non-nationals are required to finance their operations from sources external to Barbados. Where a significant project is being undertaken in Barbados that will create employment and foreign exchange earnings, the ECA may vary the general requirement.

Special tax regime entities can transfer and deal with their international assets and transact their international business from Barbados free of any exchange controls in Barbados. 

AML/due diligence and other requirements and regulatory procedures for advisors

Duty on financial institutions to investigate and report any suspected acts of money laundering according to the Money Laundering and Financing of Terrorism (Prevention and Control) Act, 2011, Cap 129 (as amended).

• Trusts: proof of identity of all trustees, protector and beneficiaries (where ascertainable), settlor, source of trust funds must be made available to the financial institution which is dealing with the trust. 
• Personal accounts: financial institutions are required to implement various measures such as increased due diligence on individuals through the implementation of know-your-customer initiatives. The true identity of all persons desirous of transacting business with financial institutions is to be ascertained. 
• Companies: financial institutions are required to receive certificates of incorporation and good standing. The name, address, occupation and nationality and other evidence that may be required of all directors and shareholders should be presented to the financial institution.

Key resources for further information

PUBLICATIONS

• Kodilinye, G and Carmichael, TA, Commonwealth Caribbean Trusts Laws, 2nd ed (London: Cavendish, 2002)

WEBSITES

• Barbados International Business Association: www.biba.bb
• Corporate Affairs and Intellectual Property Office: www.caipo.gov.bb
• InvestBarbados: www.investbarbados.org
• Ministry of Industry and International Business: www.barbadosbusiness.gov.bb

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STEP branches in Barbados

There is one STEP branch in Barbados, which forms part of STEP's Caribbean and Latin America region.

• STEP Barbados

Firms in Barbados

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Members in Barbados

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