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Barbados

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Limited Company

Barbados has long held a prominent position as a destination for international business formation, particularly favored by Canadian investors due to the benefits available under the Canada–Barbados Double Taxation Agreement (DTA). However, in recent years, the jurisdiction has undergone significant legislative reforms in response to international pressures, notably from the OECD and the European Union, to eliminate what were deemed harmful preferential tax regimes. These reforms have reshaped Barbados’s corporate landscape, aligning it more closely with global transparency and fair taxation standards.

One of the most substantial changes was the repeal of the International Business Companies (IBC) Act, which previously governed entities that primarily served non-resident clients with preferential tax rates. Similarly, the Societies with Restricted Liability Act was amended to eliminate advantages granted to International Societies with Restricted Liability (ISRLs). As of October 17, 2017, newly licensed IBCs and ISRLs have been treated as regular Barbados companies under the Comapnies Act, subject to the domestic corporate tax regime. Entities that were incorporated before this date were granted a grandfathering period until June 30, 2021, after which they too were required to transition into the Companies Act.

In line with its modernization efforts, Barbados introduced the Foreign Currency Permits Act, 2018, offering companies that earn 100% of their income in foreign currency the option to apply for a Foreign Currency Permit (FCP). This designation allows qualifying entities to operate outside the constraints of the Exchange Control Act, offering greater operational flexibility in foreign investment and cross-border transactions.

Companies in Barbados are now established under the provisions of the Companies Act, which serves as the primary legal framework for corporate formation and governance. The most common type of entity is a limited company, characterized by its share-based structure. Ownership in such companies is divided among shareholders according to the shares they subscribe to, which also determine their voting power and entitlement to profits, subject to the rights attached to each class of shares.

Barbados limited companies are administered in accordance with their Articles of Incorporation and corporate Bylaws, which outline the internal rules and governance structure. These companies are overseen by a Board of Directors, appointed by the shareholders. Directors may be individuals or corporate entities, and they hold the authority to represent and legally bind the company in contractual matters.

Incorporation is flexible and accessible: a Barbados company may be formed with just one shareholder and one director, and there are no residency requirements for either. Foreign nationals can fully own and manage a Barbados company without holding a local visa or needing to physically travel to the country. This makes Barbados a favorable jurisdiction for international entrepreneurs and investors seeking an efficient and business-friendly corporate setup.

From a capital standpoint, Barbados does not impose a minimum share capital requirement. A company may be established by issuing a single share, either with a par value (e.g., USD 1) or no par value, at any agreed subscription price. Importantly, the subscribed capital is not required to be deposited into a bank account at the time of incorporation, offering further simplicity and flexibility during the setup process.

The tax regime has also been substantially overhauled. As of January 1, 2019, all companies in Barbados (excluding those under the grandfathering provision) are subject to a unified corporate tax system, which applies a sliding scale based on income: 5.5% for taxable income under BBD 1 million, reducing progressively to 1% for taxable income exceeding BBD 30 million. This replaces the former regime where IBCs and ISRLs benefited from rates as low as 0.25%, while domestic companies were taxed at a flat 25%. The new structure levels the playing field and complies with global tax fairness initiatives.

Lastly, Barbados has implemented economic substance requirements through the Business Companies (Economic Substance) Act, 2018. Entities engaged in relevant activities—including financial and insurance services, fund management, intellectual property holding, shipping, and headquarters operations—must now demonstrate actual economic presence in Barbados. This includes conducting core income-generating activities locally, maintaining adequate staff and premises, incurring operational expenses within the jurisdiction, and ensuring effective control and management is exercised from within Barbados.

Despite these comprehensive reforms, Barbados remains a strategic and attractive jurisdiction for international businesses. Its companies are frequently used for export-oriented operations, such as manufacturing, packaging, brokering, and providing services to non-residents. With a stable political environment, an extensive treaty network, and a transparent yet competitive tax regime, Barbados continues to offer a viable and compliant platform for cross-border investment and global business structuring.

The incorporation process for a company in Barbados typically spans approximately 2 to 3 weeks from start to finish. The first step involves securing approval for the proposed company name, which usually takes about five business days from the Companies Registrar. Once the name is approved, the Articles of Incorporation are drafted and submitted—along with accompanying organizational documents such as corporate bylaws, shareholder and director resolutions, and statutory registers—a process that can be completed within 1 to 2 days.

Following submission, the Registrar generally issues the Certificate of Incorporation within four to five business days, officially recognizing the company as a legal entity under Barbadian law.

In addition, companies planning to operate in foreign currency will need to apply for a Foreign Currency Permit under the relevant legislation. While this permit typically takes 3 to 4 weeks to be processed, the application can be filed concurrently with the bank account opening process, allowing for streamlined setup without unnecessary delays.

Taxes

Tax Residency - Companies are deemed to be resident in Barbados if its management and control is exercised in Barbados.

Basis – Companies are taxed on their worldwide income.

Tax rate – Barbados companies are taxed on their worldwide income (regardless of the source) on a sliding scale from 5.50% (for taxable income below BBD 1 million - USD 500,000) to 1% (for taxable income over BBD 30 million - USD 15 mil):

  • Taxable income up to BBD 1,000,000 (USD 500,000) - 5.5%
  • Taxable income exceeding BBD 1,000,000 (USD 500,000) but not exceeding BBD 20,000,000 (USD 10,000,000) - 3.0%
  • Taxable income exceeding BBD 20,000,000 (USD 10,000,000) but not exceeding BBD 30,000,000 (USD 15,000,000) - 2.5%
  • Taxable income exceeding BBD 30,000,000 (USD 15,000,000) - 1.0%

Capital gains - Capital gains from the sale of securities are not subject to taxation.

Dividends – Dividends received from foreign entities may be tax-exempt, provided that the Barbados company holds at least 10% of the capital of the foreign entity the shares are not held as a portfolio investment.

Interests - Interest income is subject to taxation at standard rates.

Royalties – Royalty income is subject to income tax.

Foreign-source income – Foreign-source income is taxed at standard rates.

Withholding taxes – There are no dividend withholding taxes as long as underlying profits distributed as dividends to nonresident shareholders are earned from sources outside of Barbados (i.e. the activities that have generated the profits have taken place outside of Barbados). For instance, income arising from trading goods that do not enter Barbados are considered income from foreign sources, and therefore dividends paid out of profits arising from such trading activity would not be subject to withholding tax.

If dividends are paid out of profits earned from sources within Barbados, withholding tax is 5%, unless reduced/exempted by an applicable double tax treaty.

Losses – Losses arising from taxable income may be carried forward for 9 years. Carryback of losses is not allowed.

Inventory - Inventory valuations are generally stated at the lower of cost and net realizable value. First in first out method (FIFO) or average values may be used for book and tax purposes. Last in first out (LIFO) is not allowed for tax purposes.

Anti-avoidance rules – Barbados has not enacted transfer pricing regulations, although revenue authorities may amend assessable income of a company where they deem that the main purpose of a non-arm's length transaction is to artificially reduce its assessable income.

There are no controlled foreign company rules.

Interest payable on outstanding debts due to non-resident related parties, owning more than 10% of the company, will be deductible to the extent that the total amount of debt does not exceed more than one and a half times the equity of the company. Any portion of interest exceeding the above ratio is not deductible.

Labor taxes – Employers and resident employees are required to make contributions to the National Insurance fund at 11.25% and 10.25 on employees’ monthly income, respectively, up to a maximum of insurable earnings of BBD 4,360 per month or BBD 1,006 per week.

Tax credits and incentives – A tax credit for taxes paid outside Barbados is usually available, provided that this does not reduce the company's corporate income tax rate in Barbados to less than 0.25%.

Barbados companies earning 100% of their income in foreign currency would be able to apply for a Foreign Currency Permit under the Foreign Currency Permits Act, 2018, to avoid capital controls under the Exchange Controls Act.

Personal income tax – An individual is tax resident in Barbados if spends more than 182 in Barbados in a tax year. Residents are taxed on their worldwide income, while non-residents pay taxes on their Barbados-source income.

The income tax rate is 16% on the first BBD 35,000 and 33.5% on the excess. Capital gains are not subject to taxation.

Other taxes – V.A.T. standard rate in Barbados is 17.5%. A rate of 8.75% is applied to hotel accommodation. An increased 22% applies to mobile phone services. There are several goods and services tax-exempt.

Real property tax is levied on building and lands on their property value. Tax rate ranges from 0.1% to 0.75%, being the first BBD 150,000 zero-rated. Certain transactions are subject to stamp duty. For transfer of real property is levied a 1% stamp duty.

There are no inheritance and wealth taxes in Barbados.

  • Offshore Income Tax Exemption
  • Offshore capital gains tax exemption
  • Offshore dividends tax exemption
  • CFC Rules
  • Thin Capitalisation Rules
  • Patent Box
  • Tax Incentives & Credits
  • Property Tax
  • Wealth tax
  • Estate inheritance tax
  • Transfer tax
  • Capital duties
  • 5.5% Offshore Income Tax Rate
  • 5.5% Corporate Tax Rate
  • 0% Capital Gains Tax Rate
  • 0% Dividends Received
  • 0% Dividends Withholding Tax Rate
  • 0% Interests Withholding Tax Rate
  • 0% Royalties Withholding Tax Rate
  • 0 Losses carryback (years)
  • 7 Losses carryforward (years)
  • FIFO Inventory methods permitted
  • 10.10% Social Security Employee
  • 11.25% Social Security Employer
  • 35% Personal Income Tax Rate
  • 17.5% VAT Rate
  • 44 Tax Treaties

Country details

Barbados
BBD
Bridgetown
North America
en-BB
285,653

Barbados is one of the twelve countries that form the Caribbean Antilles. Its capital and the most populated city is Bridgetown.

Located in the Lesser Antilles, it is the most easterly of the islands, lying to the east of Saint Lucia and Saint Vincent and the Grenadines.

Spain conquered the island because that was where Columbus arrived on his first voyage in the 15th century. In the seventeenth century, the English turned the place into a colony of the United Kingdom. This situation remained until 1966, when its town declared independence on the 30 of November. That year he joined the UN and became a Commonwealth realm with Elizabeth II as Queen of Barbados and head of state, who was represented on the island by a governor-general.

On 30 November 2021, Barbados transitioned to a republic within the Commonwealth. The first and current president is Sandra Mason, who previously served as the last governor-general.

Its population exceeds 290,000 inhabitants. The official language is English and its official currency is the East Caribbean Dollar (XCD), which is pegged to the US $ at 2.7: 1 ratio.

Barbados is one of the most developed countries in the Eastern Caribbean and has one of the highest per capita incomes in America.

Although the traditional Barbadian economy was based on the production of sugar, the main export commodity, currently tourism is its main economic activity, with tourists mainly from the United States and Europe.

At present, it has partially diversified its economy with industries such as manufacturing, construction, and mining.

Barbados is a CARICOM member and has concluded trade agreements with several jurisdictions, including the U.S., Canada, and the European Union.

The international business and financial services sector are one of the most important contributors to the economy of Barbados, given its business-friendly legal framework and its low tax regime.

Tax treaties

Country Type Date Signed
Grenada DTC  1994-07-06
Finland DTC  1989-06-15
United States DTC  1984-12-31
Faroe Islands TIEA 2011-11-03
Norway DTC  1990-11-15
Panama DTC  2010-06-21
Belize DTC  1994-07-06
Switzerland DTC  1963-08-26
Greenland TIEA 2011-11-03
Mauritius DTC  2004-09-28
Colombia TIEA 2014-11-25
Iceland DTC  2011-11-03
Bahrain DTC  2012-12-03
Spain DTC  2010-12-01
Ghana DTC  2008-04-22
Austria DTC  2006-02-27
Saint Vincent and the Grenadines DTC  1994-07-06
Saint Lucia DTC  1994-07-06
Mexico DTC  2008-04-07
Rwanda DTC  2014-12-22
Qatar DTC  2012-12-06
Dominica DTC  1994-07-06
Singapore DTC  2013-07-15
Botswana DTC  2005-02-23
Trinidad and Tobago DTC  1994-07-06
Czech Republic DTC  2011-10-26
Venezuela DTC  1998-12-11
Luxembourg DTC  2009-12-01
Antigua and Barbuda DTC  1994-07-06
Cuba DTC  1999-06-17
China DTC  2000-05-15
San Marino DTC  2012-12-14
Guyana DTC  1994-07-06
Saint Kitts and Nevis DTC  1994-07-06
Denmark TIEA 2011-11-03
Sweden DTC  1991-07-01
Portugal DTC  2010-10-22
Jamaica DTC  1994-07-06
Netherlands DTC  2006-11-28
United Kingdom DTC  2012-04-26
Canada DTC  1980-01-22
South Africa TIEA 2013-09-17
Malta DTC  2001-12-05
Seychelles DTC  2007-10-19

Tax treaties Map

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