A Balanced Barbados: Responding To Global Regulatory Challenges

Taxes And Credits

At the legislative level, the jurisdiction has passed, amended or repealed 13 pieces of legislation:

• International Business Companies Act (Repeal) Bill.
• Business Companies Economic Substance Bill.
• Companies (Amendment) Bill.
• Corporate Trust and Service Providers Bill.
• Foreign Currency Permit Bill.
• Property Transfer Tax (Amendment) Bill.
• Shipping Corporations (Amendment) Bill.
• Societies with Restricted Liability (Amendment) Bill.
• Stamp Duty (Amendment) Bill.
• Trust (Miscellaneous Provisions) Bill.
• Value Added Tax (Amendment) Bill.
• Financial Institutions (Amendment) Bill.
• Insurance (Amendment) Bill.

With these legislative steps, the focus is on incentives to foster income generation, business encouragement and business facilitation. Not surprisingly, the corollary to tax imposition has resulted in the introduction of Tax Credits to companies taxed at the nine per cent rate, as well as to those that fall under the Qualified Domestic Minimum Top-Up Tax; the latter are now taxed in line with the 15 per cent rate in accordance with the international GLoBE rules.

The new tax credits are in the areas of research and development, as well as in qualified jobs. In the former, a credit of 50 per cent of qualifying expenses incurred is available for research and development activities in the sectors of medicine, science and technology, finance, information technology including artificial intelligence, distillery and refinery, as well as the other industries which may be added by Order of the Minister. Government is on record to introduce a wide-ranging national development credit that would cover areas such as public medical facilities, low-income housing, historic buildings, and public education facilities.

Notarisation Simplified

Barbados continues to look both outwards and within to strengthen its international posture, which was developed so carefully and strategically in the decade of the nineties and at the turn of the century.  Looking within, it has recently revised the legislation relating to the appointment and regulation of Notaries Public.

In the first place, it has expanded the persons who may be appointed as a Notary Public, such that the categories include an attorney-at-law practicing law in Barbados for at least 15 years who is in good standing with the Barbados Bar Association; a certified public or chartered accountant who has been practicing in Barbados for at least 15 years and who is in good standing with a recognised accounting body; a person who possesses at least 15 years professional or business experience in Barbados and is of good character. Such a professional or businessperson, as well as the accountant, are both required to complete a course of training prescribed by the Attorney General. Only the attorney-at-law is exempt from attending the prescribed course.

On the surface, this new piece of legislation may appear merely instrumental, but on the contrary, it fills an important gap in the jurisdiction with its dynamic international business sector, because there is an increasing need for the notarisation of documents and signatures to satisfy the overseas business and governmental formalities which are increasing exponentially.

Foreign Currency Liberalisation

Barbados has a long history of the Central Bank of Barbados keeping a close scrutiny of foreign currency inflows and outflows. Acting through its Exchange Control Department, it has efficiently regulated currency flows and kept the financial system in an uninterrupted state of stability. Although the international business legislation has always functioned free of exchange controls, sometimes international business users have faced the impact of exchange controls in circumstances where inconvenience has resulted with little or no economic or financial benefit. With the abolition of the international business companies' legislation and the standardisation of taxation circa 2018, there arose an accommodation to favourably recognise the presence of foreign currency producing entities and their financially beneficial interventions.

The Foreign Currency Permits Act 2018 gave legislative voice to this changed ethos. In 2024, a bill has been laid before the House of Assembly at the time of writing, to make better provision for granting a foreign currency permit to any qualified person that earns 100 per cent of their annual income in foreign currency. Under the Bill, the Director of International Business is impowered to grant a foreign currency permit to a qualified person, which can take the form of a company, external company, a firm, a society, or a trustee in relation to the trust.

In receiving such a permit, the holder is able to enjoy exempt status from certain duties and taxes for machinery and equipment used in the particular business venture. There is a five-year holding period, unless sold to another foreign currency permit holder, or sold after application to the Comptroller of Customs with a certificate of payment of the duties and taxes that were waived at the time of original purchase.

This proposed legislation gives greater flexibility to the ease of doing business, and also provides an incentive for the contemplation of future business ventures.

New Banking Hub

As a means of advancing further business development, in 2024, Barbados has welcomed the establishment of the African Export-Import Bank (Afreximbank). This Pan-African multilateral financial institution is mandated to finance and promote intra- and extra-African trade. Over the past thirty years, the Bank has as a stated policy been deploying structures to deliver financing solutions that support the transformation of the structure of Africa's trade, accelerate industrialisation and intra-regional trade, and as a result, boost economic expansion in Africa. It supports the African Continental Free Trade Agreement (AfCFTA) and has launched a Pan-African Payment and Settlement System (PAPSS), which has been adopted by the African Union (AU) as the payment and settlement platform to underpin the implementation of the AfCFTA.

Working with the AfCFTA Secretariat and the AU, the Bank is setting up a US$10 billion Adjustment Fund to support countries to effectively participate in the AfCFTA. At the end of 2022, Afreximbank's total assets and guarantees stood at over US$31 billion, and its shareholder funds amounted to US$5.2 billion. The Bank has disbursed more than US$86 billion between 2016 and 2022.  Afreximbank has investment grade ratings assigned by GCR (international scale) (A), Moody's (Baa1), Japan Credit Rating Agency (JCR) (A-) and Fitch (BBB). Afreximbank has evolved into a group entity comprising the Bank, its impact fund subsidiary called the Fund for Export Development Africa (FEDA), and its insurance management subsidiary, Afrexlnsure.

As the new Caribbean hub for the Afreximbank's CARICOM Office, Barbados is in a critical position as the genial host to the Bank and "sub-host" to its fellow members in CARICOM. Already, the Bank has made a significant loan to Barbados in connection with upgrading sports facilities related to the recently concluded Cricket World Cup 2024.

Maintaining The Balance

During the 1990s, the global financial architecture changed dramatically with the publication of the OECD Harmful Tax Initiative Treaties. Barbados as a low tax hybrid jurisdiction – even more so than the strict zero tax jurisdictions – had a choice of conforming or, in the seminal words of its first Prime Minister in another context, a "parting of the ways". It took a measured compromise of working from within to build a financial services architecture that was not merely fit for purpose, but also structured for its peculiar circumstances. Since that decade, successive governments have performed a balancing act, but with certainty of intention and purpose. A critical feature of the decades of globally imposed regulation and supervision has been the Barbados Government's consultation with the private sector stakeholders and the professionals as foot soldiers who meet the messengers, experience the shocks, and live the full experience. It is this collaboration which helps Barbados to maintain social balance and financial stability in its international business dealings, and which helps to maintain an ongoing national conformity to the words of Franklyn D. Roosevelt: "It is the purpose of the government to see that not only the legitimate interests of the few are protected, but that the welfare and rights of the many are conserved".

Sir Trevor Carmichael KC
Sir Trevor Carmichael, KA,LVO,KC. was born in Barbados and educated at Harrison College and the University of the West Indies, Mona, Jamaica. After pursuing post graduate studies in the United States, he was called to the United Kingdom Bar as a member of the Middle Temple in London and the Barbados Bar in December of 1977. He is a member of the International Bar Association, the Inter-American Bar Association and a Committee Member of the Inter-American Bar Foundation as well as an associate member of the Canadian Bar Association. He holds membership in the International Tax Planning Association, the International Fiscal Association and was one of the parties responsible for establishing a Barbados Chapter of the International Fiscal Association of which he is Charter President. He is the Barbados Country Chairman of the International Litigation Committee on Business Law of the International Bar Association and a former Deputy Secretary General of the International Bar Association. He is a Life Fellow of the Institute for Advanced Legal Studies in the United Kingdom, a Life Member of the Commonwealth Magistrates and Judges Association and a member of the International Law Association.