Barbados

Corporate - Tax credits and incentives

Last reviewed - 29 January 2021

Foreign tax credit

Barbados allows a credit for foreign taxes (taxes paid in jurisdictions outside Barbados). However, the total credit to be allowed cannot reduce the total tax payable by the person for that income to less than 1%.

Exempt Insurance Act, Cap. 308A

The Exempt Insurance Act is applicable to companies in Barbados that insure risks and earn premiums outside the island and for companies that own or manage the former. Under the Act, all three types of companies are exempt from exchange control regulations.

In lieu of standard CIT rates, exempt insurance companies are subject to tax at the rate of 0% for the first 15 years; thereafter, the rate is 8% on the first BBD 250,000 of taxable income and 0% on taxable income in excess of BBD 250,000. No WHT is levied on remittances of dividends or interest.

Exempt insurance companies are subject to an annual licence fee of BBD 20,000 for the first 15 years.

This Act was repealed on 1 January 2019. However, certain entities holding a valid licence issued prior to 17 October 2017 are grandfathered and will continue to receive its benefits until 30 June 2021.

Employment tax credit

Where a person carries on business in an income year and during that income year or any of the following two consecutive income years:

  • there is an increase in profits directly attributable to the business
  • there is an increase in the number of employees who are employed directly in the operations of the business by an amount of at least 10% of the total workforce employed during the previous year, and
  • the increase in the number of employees referred to is maintained for a period of three years,

that person is entitled to a tax credit of 10% of the actual amount of the expenditure incurred in respect of wages for the increase in employees.

The credit is applied in the year in which persons meet the above-mentioned criteria. Any unused credit can be carried forward for three years from the end of the income year in which the credit was obtained, and no cash refund shall be allowed.

Productivity and innovation tax credit

Entities incurring expenditure that is innovative in nature and leading to the development of a new manufacturing process, product, service, or organisational procedure will be granted a tax credit of 25% of the amount expended in that income year. The credit will only be granted if the innovation was successfully introduced to the market as evidenced by increases in sales, productivity, or organisational efficiency.

Any unused tax credit shall be carried forward for a maximum of three years from the end of the income year in which the credit was obtained, but no cash refund will be allowed. Certification from the Executive Director of the National Productivity Council is required.

Renewable energy

A number of tax concessions have been enacted with respect to the conservation of energy. These measures include a 150% deduction of actual expenditure, not exceeding BBD 25,000, for each year for five years in respect of the following:

  • Energy audits.
  • 50% of the cost of retrofitting premises or installing systems to produce electricity from sources other than fossil fuels.

The business must be current in the payment of its CIT, VAT, land tax, and National Insurance contributions, or, where not current, has entered into an agreement with the respective authorities to settle outstanding arrears.

Further tax concessions have been enacted with respect to the generation and sale of electricity from renewable energy sources and installation and sale of renewable energy electricity systems or energy efficient products, including:

  • An income tax holiday of ten years granted on the certificate of the Minister Responsible for Energy to a developer, manufacturer, or installer of renewable energy systems and energy efficient products.
  • 150% deduction of interest on a loan in respect of the construction of a new or the upgrading of an existing property to generate, supply, or sell electricity from renewable energy or for the installation or supply of renewable energy systems or energy efficient products.
  • 150% deduction for a period of ten years commencing from income year 2012 of the amount expended on staff training relating to generation and sale of electricity from a renewable energy source or installation and servicing of renewable energy electricity systems or energy efficient products.
  • 150% deduction of expenditure on the marketing of products for the generation and sale of electricity from a renewable energy source or products related to the installation and servicing of renewable energy electricity systems or energy efficient products.
  • 150% deduction of expenditure on product development and research related to the generation and sale of electricity from a renewable energy source or the installation and servicing of renewable energy electricity systems or energy efficient products.
  • Exemption from the payment of CIT by a venture capital fund invested in the renewable energy and energy efficient sectors for a period of ten years commencing from income year 2012.
  • Deduction of contributions to a venture capital fund invested in the renewable energy and energy efficient sectors for a period of ten years commencing from income year 2012.
  • Exemption from the payment of WHT on dividends earned by shareholders of companies solely engaged in the installation or supply of renewable energy electricity systems or energy efficient products for a period of ten years commencing from income year 2012.
  • Exemption from the payment of tax on interest earned by financial institutions for financing the development, manufacturing, and installation of renewable energy systems and energy efficient products for a period of ten years commencing from income year 2012.

Housing Incentives Act, Cap. 226A

The Housing Incentives Act provides CIT, import duty, WHT, and other concessions to developers who undertake low income housing projects. Approved developers are subject to CIT at a rate of 15%.

International Business Companies (IBCs) Act, Cap. 77

IBCs resident in Barbados but deriving income solely from sources outside Barbados are taxed at the following rates:

Taxable income (BBD) Rate (%)
Up to 10 million 2.50
10 million to 20 million 2.00
20 million to 30 million 1.50
In excess of 30 million 1.00

IBCs are granted freedom from exchange controls, as well as duty-free concessions on certain imports. No WHT is levied on remittances of dividends, royalties, interest, management fees, fees, or other income paid by IBCs to persons outside Barbados. IBCs may also claim a credit for taxes paid outside Barbados, provided that this does not reduce the company's rate of CIT in Barbados to less than 1%.

IBCs are subject to an annual licence fee of BBD 850.

This Act was repealed on 1 January 2019. However, certain entities holding a valid licence issued prior to 17 October 2017 are grandfathered and will continue to receive their benefits until 30 June 2021. The minimum rate of tax increased from 0.25% to 1% for those entities from income years commencing on or after 1 January 2019.

International Financial Services Act, Cap. 325 (IFSA)

The IFSA provides for the establishment of international banking, trust administration, and other related or ancillary services by eligible companies incorporated in Barbados or branches of qualified foreign banks. An annual licence fee of BBD 100,000 is payable by IFSA licensees who are in the business of receiving foreign money deposits, while IFSA licensees who are not involved in deposit taking financial services are required to pay BBD 50,000.

International financial service entities are exempt from exchange controls and are granted duty-free concessions on certain imports.

Profits and gains are taxed at the same rates as for IBCs. No WHTs are levied on remittances of dividends, interest, or fees. International financial service entities may also claim a credit for taxes paid outside Barbados, provided that this does not reduce the entity's rate of CIT in Barbados to less than 1%.

This Act was repealed on 1 January 2019. However, certain entities holding a valid licence issued prior to 17 October 2017 are grandfathered and will continue to receive its benefits until 30 June 2021. The minimum rate of tax increased from 0.25% to 1.0% for those entities from income years commencing on or after 1 January 2019.

Shipping (Incentives) Act, Cap. 90A

The Shipping (Incentives) Act was enacted to encourage the development of Barbados’ shipping activities by granting CIT, import duty, WHT, and other concessions to approved shipping companies for a period of ten years.

Small Business Development Act, Cap. 318C

Companies incorporated under the Companies Act with at least 75% of their shares owned locally and having share capital of not more than BBD 1 million, annual sales not in excess of BBD 2 million, and not more than 25 employees may obtain approval as a small business. Such companies pay CIT at a reduced rate of 15% and are exempt from the payment of import duties on equipment imported for use in the business and from stamp duty in some instances. In addition, 120% of certain expenditures directly related to the development of the business are deductible for tax purposes. Investors in such businesses are exempt from WHT on interest and dividends earned on their investment.

Societies with Restricted Liability (SRL) Act, Cap. 318B

An SRL is a hybrid entity that can be recognised as a corporation or partnership in certain jurisdictions, depending on the nature of its organisational documents. The entity has limited liability, and membership units are known as quotas. Societies qualifying under this Act may apply for a licence to operate as international SRLs and, as such, are taxed at the same rates as IBCs. No WHT is levied on any distributions, interest, or other income paid by an international SRL to non-residents. International SRLs are granted duty-free concessions on certain imports, and no exchange control requirements are applicable. Entity mobility is also a prominent feature of this legislation. Qualifying societies organised overseas can be continued into Barbados under the Act.

The provisions of the SRL Act dealing with International SRLs were repealed effective 1 January 2019. However, certain entities holding a valid licence issued prior to 17 October 2017 are grandfathered and will continue to receive its benefits until 30 June 2021. The minimum rate of tax increased from 0.25% to 1.0% for those entities from income years commencing on or after 1 January 2019.

Special Development Areas Act, Cap. 273A

The Special Development Areas Act provides relief for approved developers constructing or improving a building or structure in certain defined locations in Barbados and to persons financing such work (other than a commercial bank). Persons financing such work are exempt from income tax on interest received. Approved developers are exempt from import duties and VAT on inputs for the construction or renovation of buildings, WHTs on repatriation of interest (for a period of 15 years), land tax, and property transfer tax payable by vendors on the initial purchase of the company. An approved developer pays CIT at the rate of 15% and is granted initial and annual allowances on industrial buildings of 40% and 6%, respectively, and on commercial buildings of 20% and 4%, respectively.

Qualifying insurance companies

Companies registered under the Insurance Act that derive at least 90% of their premiums from sources outside of CARICOM and at least 90% of whose risks originate outside of CARICOM may obtain a certificate of qualification. Such companies are entitled to the same exemptions from WHTs and exchange controls as exempt insurance companies. They are also entitled to the foreign currency earnings credit, which may reduce their CIT rate from 25% to 1.75% for general insurance business. The foreign currency earnings credit can also reduce the rate of tax on gross investment income applicable to life insurers from 5% to 0.35%.

Effective 1 January 2019, the Insurance Act has been amended to remove references to qualifying insurance companies. However, certain entities holding a valid licence issued prior to 17 October 2017 are grandfathered and will be taxed at the rate of 2% of taxable income for income years after 2019 to 30 June 2021 in the case of entities carrying on general insurance business and 0.35% of gross investment for entities carrying on life insurance business.

Tourism Development Act, Cap. 341

The Tourism Development Act provides that a qualifying owner of a tourism project or of a completed tourism product may offset expenditures on construction or the provision of certain amenities against its profits.

A tourism project includes the following:

  • The construction of a new hotel.
  • The alteration or renovation of an existing hotel.
  • The conversion of an existing building or buildings into a hotel by reconstruction, extension, alteration, renovation, or remodelling.
  • The furnishing and equipping of a building to be utilised as a hotel.
  • The provision of tourist recreational facilities and tourism related services.
  • The construction and equipping of a new restaurant.
  • The alteration or renovation of an existing restaurant.
  • The construction of a new attraction or the alteration or renovation of an existing attraction.
  • The restoration, preservation, and conservation of natural sites.
  • The establishment, restoration, preservation, and conservation of monuments, museums, and other historical structures and sites.
  • The construction and furnishing of villas.
  • The construction and furnishing of timeshare properties.
  • The addition to a tourism product of any facilities or services intended to increase or improve the amenities that the tourism product provides.

Concessions extend to the following:

  • The importation of building materials and supplies without payment of customs duty and an exemption from the payment of customs duties on specified supplies to be used for equipping the project.
  • A refund of customs duty (including VAT) where the holder of a permit can satisfy the Comptroller of Customs that the building materials and supplies purchased for a tourism product have been purchased in Barbados, or in the case of importation that the customs duty was paid by the holder of the permit.
  • Income tax concessions with respect to the write-off of interest, accelerated deduction of expenditure, interest rate subsidy, equity financing, training, and marketing.
  • The set off of approved capital expenditures against revenues for a period of 15 years by the owner of a qualifying tourism project (except restaurants), which has a project with a value of up to BBD 200 million. Hotels with capital expenditure over BBD 200 million are allowed one additional year to write off expenditure for each additional BBD 20 million expended, up to a maximum of 20 years.