Focus on Barbados Budget

Budget commentary cont’d
Comment
The Barbados Income Tax Act provides that where a person, including a company or an individual,
carrying on business in Barbados derives assessable income from fees in respect of qualifying overseas
professional services, in computing the tax payable on such income, a FCEC would be applied against
the tax otherwise payable.
In an effort to stimulate the productive sector, it has been proposed that the range of qualifying
overseas professional services eligible for the FCEC be expanded to include exploration, extraction
and other mining, oil and gas activities, licensing and sub-licensing of intellectual property and
shipping services.
Currently, the majority of the double taxation treaties that Barbados has with its major trading
partners, including Canada, the United States and the United Kingdom, contain provisions which
prohibit entities with special incentives, such as IBCs and ISRLs, from taking advantage of either all of
or some of the benefits of these treaties. Therefore, investors seeking to provide the above services
outside the Caricom market can alternatively set up a regular Barbados company to claim treaty
benefits and also take advantage of the FCEC provided under the Barbados Income Tax Act. As a result,
a person may be able to substantially reduce his overall tax liability.
The table below illustrates how the FCEC is calculated for a company.
Profits from FCE as a % of total profits
Rebate of income tax as a % of
income tax on net profits from FCE
Effective Tax Rate
20% and under 35% 16.25%
20% but under 41% 45% 13.75%
41% but under 61% 64% 9.00%
61% but under 81% 79% 5.25%
81% and over 93% 1.75%
<strong>Focus</strong> on Barbados Budget 2012
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