Corporate Taxes in Barbados | Malacon Business Services

Understanding the tax framework in Barbados is essential for both local entrepreneurs and international investors.

Whether you’re preparing financial statements for your small business or planning to open a corporate bank account, Barbados’ tax landscape can significantly impact your bottom line.

Overview of the Barbados Tax System
Corporate Tax in Barbados
Determination of Trading Income
Capital Allowances and Depreciation Rules
Losses and Group Relief
Special Tax Provisions for Small Businesses
International Business and Offshore Entities
Tax Rates in Barbados
How to File Taxes in Barbados
Expert Help for Financial Planning and Tax Compliance

1. Overview of the Barbados Tax System

Barbados operates a residency-based taxation system. This means that companies and individuals who are considered residents or domiciled in Barbados are taxed on their worldwide income. Non-resident entities are only taxed on income derived from sources within Barbados.

Companies are considered resident if their central management and control are exercised in Barbados. This is particularly important for foreign business owners and small business incorporation. Assisting with opening business bank accounts can determine the perceived control location.

2. Corporate Tax in Barbados

Corporate tax in Barbados applies to income earned by companies registered or doing business in the country. Resident companies are taxed on global income, while non-residents are only taxed on local income.

The Barbados Income Tax Act outlines that:

Dividends from a resident company to another resident company may be tax-exempt.
Non-resident subsidiary dividends may be tax-exempt if the Barbados-based parent owns over 10% of the subsidiary.

Understanding these rules is crucial for small businesses to prepare accurate financial statements. It ensures that you are tax compliant and in control of your business’s tax obligations.

3. Determination of Trading Income

Trading income is generally calculated according to International Financial Reporting Standards (IFRS). Working with a qualified Accountant can ensure that you adhere to IFRS in Barbados.

Companies must consistently apply accepted inventory valuation methods such as:

FIFO (First-In, First-Out)
Weighted Average Cost

Business owners are encouraged to maintain proper documentation to support income and inventory records. AFB Consulting Services offers bookkeeping for small businesses to ensure compliance. This comes in very handy if your business in Barbados experiences a tax audit.

4. Capital Allowances and Depreciation Rules

Barbados does not allow depreciation as a tax-deductible expense. Instead, companies may claim capital allowances, which offer deductions for investments in equipment, machinery, and buildings.

Some examples include:

Initial allowances of 20% or 40% for qualifying industrial buildings.
Annual allowances of 5% to 33.3%, depending on the asset type.
Special allowances for capital expenditure on intellectual property.

For example, a business investing in solar panels may benefit from special tax incentives. If you aren’t aware of these tax incentives, you could be leaving a considerable amount of funds on the table.

5. Losses and Group Relief

Tax losses can be carried forward for up to nine years but not backward. Businesses can offset these losses against future taxable income, which can significantly reduce their corporate tax liability.

Group relief allows companies within the same group to share tax losses under specific conditions. This is especially useful for businesses expanding across the Caribbean.

Important conditions include:

75% ownership rule
Common fiscal year
Use of capital allowances

6. Special Tax Provisions for Small Businesses

Barbados offers various tax provisions designed to support small business growth:

Lower audit thresholds for SMEs – consider being registered and going through the process of becoming a Small Business in Barbados
Simplified tax returns for micro businesses
Access to government-backed loan guarantees with tax advantages

If you’re working on preparing a business plan for a small business, including a tax strategy is essential. A sound financial plan should take advantage of all available allowances and credits. Ensuring that your business plan is solid can open up doors for financing opportunities and lead to considerable growth at an affordable price. Too many time we see declines in requests because the business plan is not properly completed to address key factors.

7. International Business and Offshore Entities

Barbados abolished its international business company (IBC) regime in 2019 in compliance with OECD standards. However, the country still offers:

Competitive tax rates for all companies
Extensive double taxation agreements (DTAs)
No capital gains tax

This makes Barbados attractive for foreign investors seeking financial advisory services. It’s also a solid jurisdiction for regional headquarters or digital businesses.

8. Tax Rates in Barbados

The general corporate tax rate in Barbados is 9% effective from January 1, 2024. With the exception below:

5.5% on profits up to BBD $2 million and registered under the Small Business Development Act

Other applicable rates:

Life insurance business: 0% to 2%, depending on the classification
General insurance: 25%
International shipping: This type of company may still use tiered rates (5.5% to 1%), but this is for specific pre-existing arrangements.
QDMTT (Top-up Tax): Under OECD rules, a minimum 15% tax applies to large multinational corporations earning EUR 750 M+.

Reference: Barbados Revenue Authority

9. How to File Taxes in Barbados

Businesses must file an annual corporation tax return and pay taxes in quarterly installments. You must register for a Taxpayer Identification Number (TIN) and file online through the Barbados Tax Administration System (TAMIS).

Key deadlines:

March 15: Annual tax return for the December year-end
June 15, September 15, December 15: Estimated quarterly payments

Failure to comply may result in interest charges and penalties. Malacon Business Services Consulting can assist with tax filing and compliance support.

10. Expert Help for Financial Planning and Tax Compliance

Navigating the tax system in Barbados can be overwhelming, especially for entrepreneurs and foreign investors. Working with a certified tax consultant like Malacon Business Services ensures compliance and tax efficiency.

We offer:

Financial advisory for debt restructuring
Business loan and grant application assistance
Small business financial training

We also publish updates on tax regulations and Barbados real estate market trends, which are ideal for property investors.

Final Thoughts

Barbados continues to be a tax-efficient and investor-friendly jurisdiction. From local entrepreneurs seeking capital allowances to international companies evaluating group relief, a strong understanding of the tax environment is essential.

If you’re starting a business in Barbados or just need guidance, book a consultation today.

External Resources for Further Reading:

Internal Resources for additional information

Let Malacon Business Services Consulting Services be your partner in tax planning and business growth in Barbados.

Understanding Corporate Taxes in Barbados

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