The international regulatory debate, discussion and eventual dispensation in the strictures of the Common Reporting Standards (CRS), the Base Erosion and Profit Sharing (BEPS) and the earlier Foreign Account Tax Compliance Act (FACTA) have all coalesced into a consolidation of Barbados' ever evolving international business policy. Unlike most of the new international financial centres, Barbados has always been at the vortex of international trade and commerce. Its aggressive 18th and 19th century presence in the transatlantic rum and sugar trade conspired to create shared business interests and lobbies within Barbados and in London which were not dissimilar to the oil lobbies of the late 20th century. One of Barbados' early piece of incentive legislation, namely its International Business Companies Act (IBCA) was established in 1965 as a statutory attempt to give meaning to its legacy of trade and investment with Britain and the prospects for an ongoing and better future.
Currently, Barbados has readily responded to the international regulatory concerns; and it has acted with the certainty which comes readily and easily with its legacy of international commerce. On November 20, 2018, the Prime Minister and Minister of Finance, the Honourable Mia Mottley, introduced to Parliament a revised corporate tax regime with which she has boldly and fundamentally changed the jurisdiction's tax landscape.
Having signed on to the Inclusive Framework on Base Erosion and Profit Shifting (BEPS), the Government of Barbados committed to the Organisation for Economic Cooperation and Development (OECD) and the EU to amend or abolish elements of its international business sector framework by the end of 2018. Regimes attractive to international clients, including international business companies (IBCs) and international societies with restricted liability (ISRLs), were deemed potentially harmful and therefore not in line with the OECD's BEPS agenda.
After consultation with relevant stakeholders, the Prime Minister made the decision to proceed with tax convergence. Corporate tax rates will now be converged so that domestic and international businesses will be subject to the same rates, effectively dealing with the OECD's concerns on ring fencing of the current so-called preferential regimes. Barbados has dealt with the issue decisively by offering one corporate tax regime to all taxpayers, excluding those carrying on insurance business, effective from January 1, 2019. The new rates of corporate tax follow a regressive path so that higher levels of taxable income are subject to lower rates of tax. With respect to entities involved in the insurance business, the Insurance Act will be amended to provide for three classes of licences as follows: (1) entities insuring related party risks - 0%; (2) entities insuring or reinsuring third party risks - 2% and (3) Brokers and managers - 2%.
It is expected that the international clientele will react positively to the changes. Although there has been an increase in the existing rates, the new rates still represent one of the most competitive corporate tax regimes in the world. The OECD announced, earlier in November 2018, a new crackdown on jurisdictions which offer no or nominal tax rates. Those jurisdictions will no doubt come under greater scrutiny in due course, but Barbados will remain steady and secure; bold in its actions, and true to its legacy of the transparency of its double tax history.
Sir Trevor Carmichael QC
Sir Trevor Carmichael, KA,LVO,QC. was born in Barbados and educated at Harrison College and the University of the West Indies, Mona, Jamaica.
After pursuing post graduate studies in the United States, he was called to the United Kingdom Bar as a member of the Middle Temple in London and the Barbados Bar in December of 1977. He is a member of the International Bar Association, the Inter-American Bar Association and a Committee Member of the Inter-American Bar Foundation as well as an associate member of the Canadian Bar Association. He holds membership in the International Tax Planning Association, the International Fiscal Association and was one of the parties responsible for establishing a Barbados Chapter of the International Fiscal Association of which he is Charter President.
He is the Barbados Country Chairman of the International Litigation Committee on Business Law of the International Bar Association and a former Deputy Secretary General of the International Bar Association. He is a Life Fellow of the Institute for Advanced Legal Studies in the United Kingdom, a Life Member of the Commonwealth Magistrates and Judges Association and a member of the International Law Association.