As blockchain technology and cryptocurrencies continue to gain increased acceptance as a transformative technology and asset class, Barbados, like much of the Caribbean, is rapidly embracing the opportunities that this borderless entrepreneurial industry brings. Across the region, global entrepreneurs and investors are seeking to launch a wide array of fascinating, futuristic and disruptive projects. Whether it is a venture capital group setting up a fund structure or crypto-entrepreneurs launching an initial coin offering (ICO), setting up an exchange, creating platforms for issuing non-fungible tokens or incorporating a holding company for a crypto-mining operation, this has been a buoyant space in the market regionally and is projected to remain so.
This industry, akin to the growth of the internet in the nineties, has grown organically in the Caribbean -such growth in part being a reaction to regulatory postures adopted in G20 countries. To further contextualise this development, seismic shifts have reverberated around the world in relation to global tax policy. Led by a progressive government, Barbados has continued to maintain relevance in the context of structuring and providing a home for international companies in traditional spheres – as well as emergent areas relating to technology.
Barbados: Appropriately Regulated, Progressive And Digital
Barbados enjoys its share of blockchain technology related projects, although it has not, as yet, implemented virtual asset service provider legislation. The question of whether and to what extent regulatory oversight is applicable to a particular project will be determined on a case by case basis by reference to the existing legal and regulatory framework. In, for example, the case of capital to be raised through an ICO, the question of whether the offering falls to be regulated under the securities law framework will turn significantly on whether the coin or token being offered constitutes a “security”. This will be a heavily fact based analysis conducted by reference to the legislation, as elucidated by relevant case law. In this context, the regulatory authorities, if needed, adopt a collaborative approach with entrepreneurs, and transparent engagement with the regulators is welcomed.
In addition, it is useful to note that where, for example, ambiguity exists as to the appropriate regulatory regime applicable to a project, Barbados offers a regulatory sandbox as a space for the live testing of innovative financial products, services, and delivery mechanisms. The regulatory sandbox is crafted to be a temporary testing transition phase, and not a permanent space which a company occupies for a protracted period during which regulatory frameworks are suspended.
On a separate but related note, Barbados has committed itself to a digital transformation strategy and against that backdrop has implemented various changes at a legislative and infrastructural level to support this focus. One facet of this strategy includes a recognition of the necessity of efficiently delivering government services in a digitally-enabled environment and is in the process of digitalising core governmental agencies which are central to economic growth, including the Corporate Affairs and Intellectual Property Office which is currently undergoing a significant and enhanced digitalisation of its systems and procedures.
As a corollary, there is a clear recognition that a verifiable digital identity is a key enabler for modernising public services particularly in relation to payments, certifications, and licenses by permitting remote online authentication. Digital signatures help identify and authenticate signatories and are a crucial part of a digitalised economy. With this end in mind, Barbados has implemented certain legislation to enable digital government, including the Data Protection Act, 2021 and the Identity Management Act, 2021. The Identity Management Act, 2021 (which has been passed but not proclaimed and is therefore not yet in force) provides, amongst other things, for the establishment, maintenance and regulation of a national identity management system that facilitates the enrollment and re-registration of citizens of Barbados and persons resident in Barbados for a period of 6 months or more. In addition, it facilitates the compilation and maintenance of a database of such persons and creates a mandatory obligation to register. Notably, it provides for the issue and maintenance of a (i) certificate for electronic identification and a (ii) certificate for electronic signature embedded in the national identity credential and contemplates the use of including codes or private cryptographic keys, to be used by the signatory in creating an electronic signature.
The recently enacted Data Protection Act, 2021 establishes an expanded legal framework to regulate the collection, keeping, processing, use and dissemination of personal data; and protects the privacy of individuals in relation to their personal data. The current act is wider in scope than previous draft iterations and applies to (i) the processing of personal data in the context of the activities of a data controller or a data processor established in Barbados; (ii) the processing of personal data of data subjects in Barbados by a data controller or a data processor not established in Barbados, where the processing activities are related to the offering of goods or services to data subjects in Barbados. Further, it establishes the applicable data processing principles, which are essentially that personal data must be:
Barbados: An Attractive Corporate Environment For Crypto And Tech Companies
As a result of certain changes effected on 1 January 2019, Barbados now offers a unified converged tax model with attractive tax rates for all Barbados companies, thereby dispensing with aspects of its regime formerly considered to be preferential. The overall Barbados corporate tax rate applicable to all companies in Barbados is levied progressively at a rate of between 1 per cent to 5.5 per cent. With an extensive double taxation treaty network with approximately 40 countries[i] and 10 bilateral investment treaties[ii], multiple planning opportunities abound.
The double taxation treaty which Barbados shares with Canada has been particularly useful for enabling cross fertilisation between vibrant technology communities in Toronto and Barbados and incubating crypto entrepreneurial activity in Barbados. As a result, Barbados is home to a number of companies which are affiliated with many of the leading global blockchain technology companies underscoring the jurisdiction’s relevance.
An economic substance regime applies in Barbados which broadly requires, in a manner similar to that of other international financial services centres, that a company which is deemed to be resident in Barbados satisfies an economic substance act in relation to any relevant activity carried on by it. Relevant activities include banking business; insurance business; fund management business; finance and leasing business; headquarters business; shipping business; holding company business; intellectual property holding business; and distribution and service centre business. Key elements of the test refer to demonstration of the presence of mind and management in Barbados; adequacy as to employees, physical assets and expenditure in Barbados; and conduct of the core income generating activities in Barbados. For companies seeking to locate to Barbados, it is a cost effective place to do business with access to a highly educated and conscientious local workforce to provide substance to operations.
It is important to note that it is no longer possible to establish international business companies (IBCs) and international societies with restricted liability (ISRLs) in Barbados, and the transitional provisions which were in effect for grandfathered IBCs and ISRLs (which did not hold intellectual property and which were licensed as international entities prior to 17 October 2017) which permitted them to continue to enjoy the benefits and exemptions available under the former regime terminated on 30 June 2021.
Entities that were licensed as IBCs or ISRLs after October 17 2017 were transitioned in 2019 into the new regime and became subject to the current corporation tax rates. These entities automatically became Regular Barbados Companies (RBCs) and Societies with Restricted Liability (SRLs) and are able to conduct business within and outside of Barbados. Any RBC or SRL which generates 100 per cent of its income in foreign currency is eligible to apply for a foreign currency permit from the government which will entitle it to enjoy certain benefits, such as exemption from withholding tax on payments of dividends to non-residents; exemption from the exchange control regime; exemption from ad valorem stamp duty and property transfer tax; exemption from valued added tax and certain import duties; and income tax concessions from specially qualified individuals.
Barbados: A Safe Harbour For Digital Nomads, Crypto And Other Tech Entrepreneurs
In an accelerated digitalised environment driven by the COVID-19 pandemic, companies are increasingly recognising and embracing the functionality in remote work forces. Technology companies, by their nature, tend to embrace disruption and have been early adopters in this movement. The advent of lockdowns in a major global cities has increased the attractiveness of the Caribbean for remote workers and digital nomads who flock to the shores of islands such as Barbados to capitalise on programmes designed to cater to these persons. Barbados offers two distinct regimes for these persons (i) the Welcome Stamp Programme and (ii) Special Entry Permit regime, each with distinct tax advantages.
The Welcome Stamp Programme is a remote work initiative which establishes a visa to allow international visitors and professionals an opportunity to work remotely from Barbados for a maximum of 12 months. Eligible persons must be non-national or international visitors who are resident in and employed outside of Barbados by a company registered and operating outside of the country. Applicants must have an annual income of at least US$50,000, plus health insurance, and may apply for spouses and dependants as well. A non-national who has been granted a Barbados Welcome Stamp to work remotely is deemed not to be resident in Barbados for income tax purposes and will therefore, once approved, not be liable to pay income tax in Barbados.
The Special Entry Permit regime enables, amongst others, high net worth persons with a minimum net worth of US$5 million and who, in addition own real estate or an investment in Barbados valued at least at US$2 million (purchased with funds sourced outside of Barbados and not be subject to any mortgage) to obtain permission to reside and work indefinitely in Barbados. Applicants are required to prove their source of wealth and such persons, their spouses and dependants must satisfy the requisite security and background checks and provide evidence of adequate health insurance coverage. Persons who are resident but not domiciled in Barbados are only subject to income tax in respect of their income which is derived from Barbados and their income derived from outside of the jurisdiction only if such income is remitted to Barbados. Such persons are entitled to claim a foreign currency tax credit in relation to income which is foreign sourced - if such income is transferred to Barbados. Depending on the percentage of foreign currency earned in relation to total earnings, potential tax credit can substantially reduce the income tax that would otherwise be payable in Barbados in relation to their foreign sourced income which is transferred to Barbados. To boot, there is no capital gains tax in Barbados.
With an attractive corporate tax rate, the ability to supply an affordable workforce to substantiate substance, a strong commitment to a digital transformation strategy, an ever expanding double tax treaty network, Barbados offers a variety of opportunities and advantages in the context of cross border structuring for crypto and other tech entrepreneurs – not least of which is our reputation as a clean jurisdiction with “right-sized” regulation.
In addition, it is a jurisdiction that enjoys political and economic stability, modern infrastructure and advanced telecommunication systems. With the added value of a cadre of highly skilled professionals and reputable service providers, a pristine natural environment and lifestyle, and an exceptional quality of life for those who live and work on the island or visit on business or pleasure, Barbados is earning a reputation as a growing mecca for technological entrepreneurial activity and is well placed to help tech entrepreneurs transition to existing in the metaverse.
[i] Austria, Bahrain, Botswana, Canada, China, Cuba, Cyprus, Czech Republic, Iceland, Italy, Finland, Ghana, Luxembourg, Malta, Mauritius, Mexico, Netherlands, Norway, Panama, Portugal, Qatar, Rwanda, San Marino, Seychelles, Singapore, Slovak Republic, Spain, Sweden, Switzerland, United Arab Emirates, United Kingdom, United States of America, Venezuela, and the 10 Caribbean countries which constitute CARICOM
[ii] Canada, China, Cuba, Cyprus, Germany, Italy, Mauritius, Switzerland, United Kingdom, and Venezuela
Tara E. Frater, TEP
Tara is Principal and Founder of FT Legal Attorneys-at-law in Barbados, specialising in FinTech, Corporate and Commercial, Finance, Securities Regulation, Trust & Estates, Immigration and Real Estate. Tara has extensive and high quality experience earned over 15 years from leading law firms in Barbados and the British Virgin Islands; and has been recognised in the Citywealth IFC Power Women Top 200 List for multiple years. Tara has contributed a number of articles to the STEP Journal, Barbados International Finance and Business Barbados. She is Director of Caribbean Blockchain Alliance, Former Chairperson of STEP Barbados and Former Director of Barbados International Business Association.