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 companies and international societies.
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%), effective July 1, 2018, among other changes.
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.
However, until June 30, 2021, provisions under both of these Acts will continue to apply to IP assets that were held by a company or society as at October 17, 2017 for:
IP assets generated from October 17, 2017 may also benefit from Barbados' grandfathering provisions if the research and development that created the IP was carried out by the company or society.
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
Barbados' published its economic recovery and transformation plan on June 11, 2018. The plan includes changes to the corporate income tax rate, relief in the form of tax amnesty, and VAT changes, as follows:
Increase in corporate income tax rate
Barbados announced it will increase the corporate income tax rate to 30% (from 25%), effective July 1, 2018. As a result, entities that claim the maximum foreign currency earnings allowance will 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.
Barbados proposes to subject online purchases of goods and services to the value-added tax (VAT), effective October 1, 2018. Barbados also proposes to increase the VAT on the supply of room accommodation to 15% (from 7.5%), effective January 1, 2020.
These tax system changes are part of the first phase in a three-phase Economic Recovery and Transformation Plan.
For more information, contact your KPMG adviser.
Information is current to July 17, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500
© 2018 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.