Barbados

Value-added tax (VAT)

VAT is levied at the rate of 17.5% on the value of a wide range of goods and services imported or supplied in Barbados by VAT-registered persons.

A number of services, including financial services, real estate, medical services, and education, are exempt. Intergroup transactions are taxable.

Persons operating under Barbados’ VAT regime must be registered for VAT. The threshold for VAT registration is BBD 200,000, but voluntary registration is permitted for persons whose annual turnover is less than BBD 200,000.

Certain supplies are zero-rated, including exports, basic food items, prescription drugs, crude oil, and the supply of certain items to the international financial services sector (e.g. legal and accounting fees). Effective 1 January 2020, there is an increase in the concessionary rate of 7.5% to 10%, applicable to the supply of accommodation by guest houses, hotels, inns, or any similar place, including a dwelling house normally let or rented for use as a vacation or holiday home. This rate also applies to supplies of certain goods and services related to tourism, provided that the registrant satisfies certain criteria. The rate imposed on the supply of the mobile services of voice, data, and text messaging is 22%.

Registered persons may deduct input tax from their output tax in calculating the tax payable for that VAT accounting period. Where input tax exceeds output tax, the registrant will be entitled to a refund of VAT.

Effective 1 December 2019, VAT applies on digital services to local consumers on the island by suppliers of digital services. The foreign company must apply, collect, and remit VAT on their digital sales.

The new measure will affect:

• the collection of VAT on goods and services purchased online from a vendor outside Barbados where the goods and services are for consumption in Barbados
• the collection and transmission of VAT on goods and services purchased online from local vendors by consumers in Barbados where the goods and services are for consumption in Barbados and the transaction is processed outside Barbados, and
• the collection and transmission of VAT on goods and services purchased online from local vendors by persons outside Barbados where the goods and services are for consumption in Barbados.

Custom duties

Customs duty is levied on a wide range of imported goods at rates specified in Part 1 of the First Schedule of the Customs Act. Barbados’ Customs Tariff is based on the Common External Tariff of the Caribbean Common Market (CARICOM), with special derogations for certain items (e.g. spirituous beverages). Customs duty is calculated on either an ad valorem basis or at specific quantitative rates. The ad valorem rates for most items vary between 0% and 20%, but certain goods regarded as luxury items are subject to higher rates (e.g. jewellery 60%). In addition, a select group of items that are produced within Barbados and CARICOM (including some agricultural products) are subject to a duty rate of 60% when imported from outside the region.

Manufacturers and agriculturists, including persons involved in fishing and horticulture, are exempt from the payment of duty on inputs (including packaging materials, machinery, equipment, and spares) imported for use in their businesses.

The various departments and institutions, international bodies, and organisations listed in Part II-B of the Customs Tariff are exempt from the payment of customs duty. Specific goods (e.g. computers), also mentioned in Part II-B, are exempt from customs duty.

Excise taxes

Five categories of goods (both locally manufactured, as well as imported) are subject to excise taxes. These are sweetened beverages, motor vehicles, spirituous beverages, tobacco products, and petroleum products. Most excisable goods are subject to the tax at a specific rate, with the exception of motor vehicles and sweetened beverages, which are subject to ad valorem rates.

A few persons and goods are exempt from excise taxes. These include motor vehicles imported by the diplomatic corps and other organisations exempt from customs duty under Part II-B of the Customs Tariff, goods imported for temporary use or for a temporary purpose that will be re-exported within three months, and goods (other than spirits) intended to be used as raw materials for the manufacture or production in Barbados of other taxable goods.

Fuel tax

Effective 1 July 2018, a fuel tax was imposed on importations of gasoline and diesel at a rate of BBD 0.40 per litre and kerosene at a rate of BBD 0.50 per litre.

Land tax

The following land tax rates are in effect as of tax year 2020/21:

The following concessions have been granted for land taxes:

• For villas, as defined by the Tourism Development Act, a rebate of 25% is granted on production of a certificate from the Barbados Tourism Authority.
• For hotels, as defined by the Tourism Development Act, land tax is calculated and payable on only 50% of the tax demanded.
• For pensioners exclusively occupying their own homes, land tax is calculated and payable on only 40% of the tax demanded.
• A 10% discount is granted if the land tax is paid within 30 days from the date of the tax demand notice or 5% if paid within 60 days. Hotels and restaurants are allowed to pay their land tax bills during January to March without losing access to the discount granted.
• Any person certified by the Minister Responsible for Energy to be engaged in the production of solar energy and/or the manufacture of goods to be used in the production of solar energy will be entitled to a rebate of no more than 50% of the tax demanded for that year. Such persons are required to have settled all outstanding liabilities with the Comptroller of Customs and the Commissioner of Inland Revenue to access the rebates.

Property transfer taxes

Property transfer taxes are levied as set out in the following table:

* Any transfer of shares to a person who is resident outside of Barbados, whether or not the transferor is resident in Barbados, where the assets of the company concerned consists of foreign assets and its income is derived solely from sources outside Barbados, will not be subject to transfer taxes in Barbados. The transfer of shares of an entity holding a foreign currency permit will also not be subject to transfer taxes in Barbados.

Land development duty

Where a person disposes of property situated in a specially designated development area within 15 years of the date specified by statute, duty may be charged. This may be at rates of up to 50% on the excess of the value of the consideration over the improved value at the specified base date, plus certain other expenses and an amount representing capital appreciation of the property.

Stamp duty

Barbados imposes a stamp duty on various instruments, including written documents. The rates imposed vary depending on the document. Stamp duties applicable to documents for the transfer of shares, real estate, and mortgages are set out below:

* Any transfer of shares to a person who is resident outside of Barbados, whether or not the transferor is resident in Barbados, where the assets of the company concerned consists of foreign assets and its income is derived solely from sources outside Barbados, will not be subject to stamp duties in Barbados. The transfer of shares of an entity that holds a foreign currency permit will not be subject to stamp duties in Barbados.

Payroll taxes

Other than employers’ National Insurance contributions (see below), there are no other payroll taxes, the burden of which falls on the employer. Employers are, however, responsible for deducting the employees’ income tax liability at source, through the pay-as-you-earn (PAYE) system.

National Insurance contributions

Every individual between the ages of 16 and 67, who is gainfully employed in Barbados under a contract of service, must be insured under the National Insurance and Social Security Act.

Contributions are determined as a percentage of insurable earnings, up to a maximum of insurable earnings of BBD 5,200 per month and BBD 1,201 per week. Employers must remit National Insurance contributions by the 15th day of the following month. The employee’s share is 11.1%, with the employer paying 12.75%.

Foreign exchange fee

A foreign exchange fee of 2% is charged on the sales of all foreign currencies, but is capped at BBD 100,000 per transaction. This includes all wire transfers, credit card transactions, and over-the-counter sales of foreign currencies.

Tax on assets

A tax is imposed on the assets of:

• a deposit taking licensee under Part III of the Financial Institutions Act, Cap 324A
• a credit union, or
• an insurance company.

It is charged on the average domestic assets at a rate of 0.35% per annum and pro-rated and paid every three months.

Banks tax on assets

A tax is charged on the average domestic assets of a bank at a rate of 0.35% per annum and pro-rated and paid every three months.

Life insurance premium tax

In addition to the CIT computed on the gross investment income of life insurance companies, a life insurance premium tax is levied on gross direct premium income earned by resident and foreign life insurance companies as set out in the following table:

General insurance premium tax

In addition to the CIT computed on the taxable profits of general insurance companies, a general insurance premium tax is levied on gross direct premium income at a rate of 4.75% in respect of property insurance business and 4% for other general insurance business.

Product development levy

The product development levy was introduced from 1 July 2018 at a rate of 2.5% and applies to all direct tourism services. The rate was increased to 3.75% effective 1 April 2019.

Shared economy levy

The shared economy levy was introduced from 1 August 2018 and is applied to the cost of tourist accommodation at a rate of 10%.

Room rate levy

The room rate levy has been in effect from 1 July 2018 and is applied to tourist accommodation at various rates.