Barbados: International Tax Planning Entities

Barbados International Business Companies (IBCs)

The IBC status is conferred on companies that are carrying on the business of international trade and commerce. It provides tax reductions, exemptions and various other benefits for a range of activities.

Requirements To Qualify As An IBC

It must be incorporated in Barbados or be a local branch of a foreign corporation.

It must not trade in goods or services in Barbados.

It may not carry on any business under other offshore incentive legislation.

It must obtain a license from the Minister of Finance. The annual fee for the license is US$250.00.

Summary Of Barbados IBC Legislation Incentives

Profits exempt from tax if the company’s shares are all owned by an Offshore Trust, the company is managed by an international financial institution and its activities are restricted to buying, selling, holding or managing securities

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A 2.5% maximum corporate tax rate on net profits.

An IBC incorporated outside of Barbados will be taxed in Barbados only on the profits earned from its Barbados operations.

Taxes paid to a foreign country may be credited against tax payable in Barbados.

The credit cannot reduce the tax payable to less than one percent (1%) of the taxable income for the particular income year.

Capital gains are not subject to tax in Barbados.

The Government of Barbados is prepared to guarantee the existing International Business Company benefits for at least fifteen (15) years.

There are no withholding taxes on dividends, royalties, management fees, interest payments and other fees paid by an international business company to non-residents of Barbados or to another IBC.

Provision for pre-incorporation contracts and telephone directors' meetings.

Exemption from public filing of financial statements.

No investment restrictions.

Single shareholder companies permitted.

A company may buy back its shares or reduce stated capital subject to solvency tests.

Barbados is certified as a "North American Area" and therefore business convention expenses incurred in Barbados by US corporations and organizations are automatically deductible in the US against US taxes.

Profits of an IBC whose shares are wholly owned by a trust which is managed by a licensed offshore bank are exempt from tax.

No minimum capital requirements.

Ease of incorporation.

An IBC is exempt from exchange control restrictions and may keep its records and financial statements in a foreign currency.

Expatriate staff, who may readily obtain work permits, can be exempted from income tax and exchange control on up to 35% of their remuneration from an IBC.

An IBC may import, free from all customs duties, equipment, machinery or materials for use in its business.

Formation of Barbados IBCs.

Barbados companies are formed under the Companies Act Cap 308. Under the International Business Companies Act these companies can apply for and obtain an IBC license allowing the company to operate as an IBC under the legislation of that act.