Barbados is to scrap its international business company (IBC) regime in response to the OECD labeling the policy as “harmful” to competition, and being in breach of rules governing international taxation.
Last year the OECD included Barbados on its list of jurisdictions with a “harmful” preferential tax regime, and said the Barbados system was in breach of its Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) rules. The BEPS system was designed by the OECD to prevent jurisdictions offering “preferential tax regimes.”
Ronald Toppin, minister of international business and industry, said late last week: “The cabinet of Barbados has fully endorsed proposals which include the adoption of a regime of tax convergence across the corporate landscape. The new rates will be competitive for all businesses and will be attractive to companies of international origin as well as to local companies.”
Once registered under the IBC regime, Barbados-based companies currently pay between 0.25% and 2.5% corporate tax, so long as the firm’s directors are non-resident.
Payments by Barbados-registered IBCs to non-residents and to other IBCs currently benefit from a range of tax exemptions. IBCs are exempt from withholding tax, capital gains taxes, inheritance tax, stamp duty, import taxes and most taxes relating to asset transfers.
The Barbados government initially gave itself a deadline of last month by which new legislation would be introduced. The cabinet is meeting this week to finalise the details of the new legislation, which has been scheduled for implementation by 31 December.
Toppin has confirmed Barbados is on track for OECD compliance by the end of this year. Of the new legislation, Toppin said the government is looking “to a convergence of tax across all business entities.”
Toppin said this new rate of business tax “will remain competitive and ensure that those international businesses which are here will continue to benefit from certain incentives.”
Upon committing to tax reforms, Barbados was removed from the OECD’s initial blacklist of 17 jurisdictions in January this year. There are currently six countries on the official EU blacklist under the EU’s Tax Code of Conduct Group: Trinidad and Tobago, American Samoa, Guam, Namibia, Palau and Samoa.