Business expenses that are reasonable and incurred for the purpose of producing assessable income are deductible for tax purposes unless disallowed by a specific provision of the Income Tax Act. Deduction of capital expenditures is specifically prohibited, but special provisions may allow tax depreciation on these expenditures.
Depreciation for tax purposes is computed on a straight-line basis at prescribed rates. The process is accelerated by additional initial allowances in the year of acquisition. Conformity between book and tax depreciation is not required. Gains on sales of depreciable assets are taxable as ordinary income up to the amount of tax depreciation recaptured, and losses on sales below depreciated value are deductible.
|Plant and machinery||Various rates|
|Intellectual property||10% of 50% of the amount expended|
Renewable energy allowance
Companies that have had an energy audit, retrofitted a building, or installed a system to provide electricity from sources other than fossil fuels are granted an additional 50% of the annual allowance claimed in an income year.
For oil and gas companies, depending on certain circumstances, a depletion allowance of 20% or 10% is given in addition to annual depreciation on prescribed types of capital expenditure.
Goodwill is not a depreciating asset, and tax amortisation is not available.
There are no specific provisions in relation to deductions for start-up expenses. However, some of these are treated as costs incurred on account of capital expenditure. Such costs are therefore not allowable deductions for tax purposes.
A Barbados corporation can claim a deduction for interest expenses. However, where interest claimed as a deduction has not been paid within two years of being accrued (one year if on a loan from a related party), it should be added back to assessable income.
Amounts representing debts owed that have been established as bad debts during the income year and have been previously included in calculating assessable income for that income year or a previous income year are deductible in calculating assessable income.
Charitable contributions are generally deductible where they are made to entities that are specifically registered as charities or not-for-profit organisations with the Corporate Affairs and Intellectual Property Office.
Contributions made by companies under registered pension schemes are deductible in calculating assessable income.
Fines and penalties
Fines and penalties imposed are generally not deductible.
Taxes on income are not deductible.
Net operating losses
From income year 2015, losses can generally be carried forward for seven years (previously nine years) after the income year in which they are incurred and may be applied in full against future taxable profits. Notwithstanding this, a tax loss incurred by a person in respect of residential property can only be deducted against assessable income earned by that person in respect of residential property.
From income year 2019, tax losses brought forward available for offset in an income year are restricted to 50% of the taxable income in the year in which the tax loss is utilised instead of 100%.
Losses of general insurance companies can only be carried forward for five years, and losses of life insurance companies cannot be carried forward at all.
No carryback is allowed for CIT losses.
Payments to foreign affiliates
A Barbados corporation can claim a deduction for royalties and interest charges paid to foreign affiliates, provided that payments are no greater than what it would pay to an unrelated party.
Fees or charges for management and/or administrative services provided by a member of a group of companies to other members of the group in Barbados are not deductible for tax purposes.
Restriction on deduction of management fees
Management fees paid or payable to non-residents may not be deducted for tax purposes.
Restriction on deduction of interest
Interest payable on outstanding debts due to a non-resident related party that owns more than 10% of the company is not deductible to the extent that the total debt exceeds one and a half times the equity of the company.