Barbados: A Gem for High Net Worth Individuals

Barbados has long deservedly enjoyed a reputation as an enclave in paradise for the well heeled. Beyond its pristine beaches, stunning scenery, lushly greened polo fields, golf courses and lavish accommodation to suit the most discerning tastes, Barbados offers, in addition, a superlative lifestyle which is as culturally rich as it is socially stimulating. Prior to now, those privileged enough to enjoy its charms have generally only been able to do so for limited periods of time on visitors' visas or work permits. At last, as a result of recent developments in immigration policy, the lifestyle which has hitherto been a passing indulgence can now be a permanent pursuit, for those who qualify.

New immigration regime for High Net Worth Individuals

Barbados recognises the value of being a hub for the global elite and the recent government announcement in relation to a new Special Entry Permit (SEP) immigration regime for High Net Worth Individuals (HNWIs) and certain other qualifying persons is consistent with that objective.

Under the new regime individuals with a minimum net worth of US$5million may be granted a SEP to reside in Barbados indefinitely whether as a retired person, an employed person or as an entrepreneur. The categories of persons within this class who may apply for this permit are as follows:

1. Persons over 60 years and retired;
2. Persons under 60 years and retired;
3. Persons over 60 years who wish to engage in employment in Barbados; and
4. Persons under 60 years who wish to engage in employment in Barbados or operate a global business from Barbados

Applicants are required to prove their source of wealth and applicants and their spouses and dependents must satisfy the requisite security and background checks and provide evidence of adequate health insurance coverage.

The fees for SEPs are paid once (not annually) and are reasonable in cost ranging from US$3,500-$5,000. Work permit fees must be paid for those who wish to work. For an indefinite work permit the fee is paid once and ranges between US$15,000 and US$20,000. For a permit of a year's duration the fee ranges between US$1,500 and US$2,000.

Changes in status from being retired person to a person engaging in employment in Barbados are permitted. Persons intending to work as a non-executive director would pay an additional work permit fee to cover the period of the directorship.

 

Wealth planning opportunities for High Net Worth Individuals

The changes in the immigration regime not only accommodate lifestyle objectives but create new opportunities for wealth structuring for HNWs as they capitalise on the existing legal framework to provide key benefits to HNWIs. Persons who are resident in Barbados but not domiciled there are only subject to income tax in respect of their income which is derived from Barbados and their income derived from outside of Barbados only if such income is remitted to Barbados. However, such persons are entitled to claim a foreign currency tax credit (FCTC) in relation to income which is foreign sourced if such income is transferred to Barbados through the banking system. Depending on the percentage of foreign currency earned in relation to total earnings, the potential tax credit can amount to 93 per cent of the income tax that would otherwise be payable in Barbados. It is therefore possible for such persons to enjoy an effective tax rate of 2.45 per cent in Barbados in relation to their foreign sourced income which is transferred to Barbados. In addition, in respect of income earned in Barbados directly by the person or through their domestic company, the FCTC would also be available and in situations where all of the income was denominated in foreign currency the credit would bring the effective personal and corporate tax rates down to about 1.4 per cent and 1.8 per cent, respectively.

In addition, Barbados has double taxation treaties with at least 21 countries including Austria, Botswana, China, Cuba, Finland, Luxembourg, Malta, Mauritius, Mexico, Netherlands, Norway, Panama, Seychelles, Spain, Sweden, Switzerland the United Kingdom, the United States of America, Venezuela and the Caribbean countries which constitute CARICOM which provide multiple tax planning opportunities in the context of HNWIs and their business enterprises, particularly where Barbados is used as the global headquarters for such entrepreneurial activity. An extension of the foreign currency tax credit in relation to foreign sourced income has also been proposed in relation to business enterprises engaged in exploration, extraction and other mining, oil and gas activities, licensing and sub-licensing of intellectual property and shipping services. This extension would be strategic addition to the existing extensive list of business enterprises or services which now enjoy the foreign currency tax credit in respect of foreign sourced income, which list at present includes e-commerce, information technology, investment management, management consultancy, engineering, architectural, construction, accountancy, legal, trust and corporate secretarial, cultural, entertainment, medical, and sports. The majority of double taxation treaties which Barbados has entered into with other countries exclude the use of international business companies and other similar entities and require the use of domestic companies. Where a domestic Barbados entity is used for the conduct of the activities and services which qualify for the foreign currency tax credit, the effective tax rate of the domestic Barbados entity would be substantially lowered but still be able to access the variety of benefits offered by the relevant double taxation treaty, such as the tax free repatriation of profits to holding companies.

Barbados has no restrictions on the ownership of real estate by foreign nationals and there is no requirement for a permit or licence to be obtained in relation to the acquisition and holding of real estate by foreign nationals. There is no capital gains tax, inheritance or other estate tax and no wealth tax. HNWIs are therefore free to acquire such real estate as they desire in Barbados. The Barbados real estate sector offers plentiful options for quality residential and commercial real estate, so that living and office space can be readily obtained. In addition, the sector has consistently proved to be a solid investment and has fared well in the global economic crises. In the context of estate planning, HNWIs need not be concerned that such property will be subject to inheritance or other estate taxes in Barbados. They are also free to enjoy their wealth in Barbados without the burdens of a wealth tax.

Other noteworthy developments in Barbados relevant to in the international business sector include the proposed staged reduction of tax rates for international business companies and international societies with restricted liability to 0.5 per cent on all profits and gains in excess of US$15 million in 2012 and 0.25 per cent on all profits and gains in excess of US$15 million in 2013.

 

Human resources and infrastructure

Barbados is an appropriately regulated jurisdiction which is well regarded internationally and perceived to be cooperative and transparent. It is politically stable and with an established infrastructure and benefits from a cadre of highly qualified and experience professionals, many of whom are members of firms with regional or global reach. In addition, there is a well –educated skilled labour pool available to work in office administration, information and communications technology, professional advisory and management roles where needed. This obviates the need to seek such employees from overseas and therefore reduces expenditure of time and resources on relocation and immigration logistics.

Barbados’ business infrastructure features modern telecommunications and IT with related disaster contingency capability, as well as reliable local utilities providing service at relatively reasonable rates. Generally, local operating costs (human capital and infrastructure) compare favorably with such costs in other territories in the region and in various other international financial centres.

The banking system is sound, with the Barbados dollar having been tagged to the US dollar at 2:1 for over four decades. There are a number of global investment and retail banks, as well as established private banks operating in the jurisdiction.

Barbados is well located for access to North and Latin America and all the territories in the Caribbean basin. International travel to and from the island is well facilitated by a modern airport, with daily or multiple daily flights to and from London, Manchester, New York, Toronto, Miami and several Caribbean islands. Europe is not far away, especially in the winter season when as many as four direct flights daily are operated between Barbados and England. A recent welcome addition given the island's strategic importance as a gateway to Latin America is its weekly direct flight to Sao Paolo. In addition all major cities in Central and South America can be reached via either Trinidad or Miami (respectively, 35 minutes and three and a half hours flight from Barbados).

For any advisor to HNWIs or any HNWI seriously considering locations to be their long-term paradise, Barbados offers a wealth of sound financial planning and business advantages as well as an unparalleled quality of life on the veritable "Gem of the Caribbean Sea".