Barbados

Corporate tax reform

Barbados has implemented significant reforms to its corporate tax regime through the enactment of the Income Tax (Amendment and Validation) Act, 2024-15 and the Corporation Top-Up Tax Act, 2024-16. Key features of these statutes include increased corporation tax rates and the imposition of a Qualified Domestic Minimum Top-Up Tax (QDMTT) on qualifying resident companies that are members of a multinational enterprise (MNE) group with annual consolidated revenue of 750 million euros (EUR) or more, to achieve the global minimum effective tax rate of 15%.

Corporate income tax (CIT) rates

* Effective 1 January 2024

Reliefs from domestic top-up tax

A top-up tax of 15% has been introduced effective 1 January 2024. The aim of the top-up tax is to establish a minimum tax rate of 15% for certain qualifying MNE groups. There are transitional reliefs available for MNE groups where:

• the MNE group is deemed to be in an initial phase of international activity, or
• for the first fiscal year commencing on or after 1 January 2024, the income of an MNE group is not subject to an Income Inclusion Rule (IRR) or Under Taxed Profits Rule (UTPR) in another jurisdiction.

A de minimis exclusion election is also available and would operate to reduce the top-up tax to zero where:

• the average qualifying revenue of the MNE group is less than EUR 10 million, and
• the average qualifying income of the MNE group is a loss or less than EUR 1 million.

Transitional Country-by-Country Report (CbCR) safe harbour

The filing entity of a Domestic Minimum Top-Up Tax (DMTT) group may make a transitional safe harbour election for a fiscal year. Where such an election is made, all qualifying entities of a DMTT group will be deemed as not having top-up tax liability if a qualifying CbCR has been prepared in relation to Barbados for the fiscal year and at least one of the three tests on revenue threshold, simplified effect tax rate, or routine profits levels are met.

Qualified refundable tax credits

The following qualified refundable tax credits have been introduced:

• Jobs credits: A jobs credit may be claimed by the company or permanent establishment (PE) carrying on business in specified sectors and incurring eligible payroll expenditure after 1 January 2024. The jobs credit will be determined on the basis of a sliding scale of 25% - 100% of eligible payroll expenditure.
• Research and development (R&D) credit: An R&D credit of 50% of eligible expenditure will be made available to any entity in Barbados that carries on qualifying R&D activities.

These credits may be set-off against any other tax liability for a period of four years.

Patent box regime

Barbados has introduced a new patent box regime whereby, on election, income derived from qualifying IP may be subject to tax at a rate of 4.5%.  The categories of IP that qualify under the regime include rights to software copyright, rights to patents, and other similar legally protected rights.

Group relief and change to tax loss carry forward period

The provisions for group relief will enable the current trading losses of a surrendering resident company to be set-off, by way of relief from CIT, against the profits of a claimant company, whether in whole or in part. Group relief is available under the following conditions:

• a surrendering company and a claimant company are members of the same group
• the companies are subject to tax at 9%
• the companies meet the 75% subsidiary test
• every company seeking group relief is resident in Barbados, and
• the relief sought must not exceed 50% of the amount of tax that would have been payable had the relief not been granted.

Group relief will apply from income year 2024 with respect to all entities that have trading losses from income years prior to income year 2024 in excess of 50 million United States dollars (USD). For all other companies, group relief will apply from income year 2025.

With effect from income year 2025, tax losses will only be available to be carried forward for five income years following the income year in which the loss was incurred.

CIT prepayments

Companies are now required to prepay CIT monthly in an amount equal to one-twelfth of the tax payable on the taxable income for the income year before the preceding income year. Prepayments must be paid no later than the 15th day of each calendar month. Exemptions from monthly prepayments may apply for income year 2024 only if any one of the following criteria is satisfied:

• the company is not a member of an MNE group with annual consolidated revenue of EUR 750 million or more, or
• the company is a member of an MNE group with annual consolidated revenue of EUR 750 million or more whose ultimate parent company (or intermediary parent companies) is located in a jurisdiction that has not enacted top-up tax legislation.

Treaties

The Norwegian government terminated its tax treaty with Barbados effective 1 January 2024.