Barbados is the most easterly of the Caribbean islands, some three hours flying time from Miami by direct flight. The island is 166 square miles in size and has a population of approximately 260,000. Barbados is known for the friendliness of its people and that, together with its beautiful beaches and wonderful climate, have made it one of the most popular tourist destinations in the Caribbean.
In 1966, after nearly 350 years of British rule, Barbados became an independent nation. The political, economic and social stability that were a feature of its colonial past continue today.
The Barbados legal system is based on English common law and has been supplemented by modern legislation. Courts exist on the English model with the final appeal being to the Privy Council in London.
The official language of Barbados is English. Its currency is the Barbados dollar which has a fixed exchange rate of 1.99 “Bajan” dollars to each U. S. dollar. Barbados is a member of Caricom, the Caribbean common market.
Since 1965, when it first enacted enabling legislation for international business companies, Barbados has permitted companies that do not trade locally to establish a presence on the island. The original legislation has undergone periodic amendment and the current statute is the International Business Companies Act (IBC Act) which was enacted in 1991.
International Business Companies (IBCs) or offshore companies benefit from significantly reduced tax rates which can be as low as one percent on profits in excess of U. S. $15 million. (IBCs can negotiate for higher tax rates, with the Ministry of Finance, in circumstance where that would be advantageous).
Interest, rent, management fees or royalties paid by an IBC to another IBC, or person not resident in Barbados are also exempt from withholding tax. No tax or duty is levied upon the transfer of shares of an IBC, by a non-resident person or other IBC, to another non-resident person or IBC.
Duty free importation of plant and equipment for business purposes is also allowed for IBCs. IBCs are exempt from exchange control regulations and books and records can be maintained in any currency. They can also provide services to other IBCs or companies operating under similar “incentive” legislation.
The exemption of withholding tax for dividends makes Barbados IBCs particularly attractive to Canadians as the dividends an “active” IBC pays its Canadian parent company are also not taxed in Canada as they form part of the parent’s exempt surplus. Under Canadian law, the exempt surplus is the active business income of a foreign affiliate carried on in a listed country such as Barbados. U. S. citizens and others can also benefit from the tax treaties that Barbados has with many countries including the United States. More than 3000 offshore companies (IBCs) are registered in Barbados.
To establish an offshore company (IBC), application must be made for an international business company license to the Barbados Ministry of Finance. This application should be made as soon as possible after the incorporation of a company.
To apply for an IBC license the following information must be provided:
- Company name
- Date of incorporation
- Copy of articles of incorporation
- Address of registered office
- Name and address of shareholder(s)
- A profile/resume of each Director and the Shareholder in English (Please note, this information is treated as confidential by the authorities and is not for public consumption)
- Brief description of business to be carried on
- Declaration to the Minister of Finance that the company qualifies to be recognized as an international business company
An offshore company (IBC) must satisfy the following restrictions:
- Local or Caricom resident shareholding must be restricted to 10% or less.
- It must not carry on a trade in buying or selling goods and services in or originating in Barbados .
- Trade in selling of services that originate in Barbados must be for non-Caricom residents.
- Manufactured products must be exclusively for export outside of the Caricom region.
- It must pay an annual license fee.
- Supervising the incorporation of the IBC
- Arranging for the services of a Barbados resident director (if required)
- Application for and renewal of the IBC license
- Arranging for the appointment of a Barbados auditor
- Serving as the registered agent in Barbados
- Holding of shareholder and directors meetings
- Maintenance of the company records
- Filing all required Barbados elections, reports and returns
As part of our normal administration fee we provide for the services of a director. However, in many cases, particularly where the IBC wishes to take advantage of the Canadian exempt surplus rules, an independent Barbados resident, who must be a professional person of good standing, will be appointed as an independent director.
Bruce Stander is the Director of UK based Worldwide Corporate Services, specialists in offshore company formation.