Income Tax

Barbados Income Tax Income Tax is levied on the income of persons resident or non-resident in Barbados. There is no tax on capital. The system of taxation is based on self-assessment.

Corporations

Barbados Income Tax is levied on the income of persons resident or non-resident in Barbados. There is no tax on capital gains. The system of taxation is based on self-assessment.

  • Corporation Tax is levied on the profits of a company earned in a fiscal period that should not exceed 53 weeks.
  • Income Tax is levied on the profits of a trade or business earned by an individual in a fiscal year; and the income earned by any other individual in a calendar year.

 

Liability for Income Tax

A Resident is a corporation managed and controlled in Barbados; or a non-national individual who is present in Barbados for more than 182 days in a calendar year. A resident corporation is subject to tax on its world income. A resident and domicile individual is subject to tax on his world income. The resident but not domiciled individual is subject to tax on his income derived in Barbados and on his income from foreign sources remitted to Barbados, or from which a benefit is derived in Barbados. 

A Non-resident is a corporation whose place of management and control is outside Barbados; or a non-national individual who is present in Barbados for less than 183 days in a calendar year. A non-resident is subject to tax only on income derived in Barbados.

 

Calculation of Assessable Income

Deductions are allowed in respect of sums incurred for purposes of acquiring the income, including:

  1. Interest on borrowed capital.
  2. Expenditure on repairs of premises, plant and machinery.
  3. Bad debts (any recoveries being treated as income when received).
  4. Taxes on property.
  5. Insurance premiums.
  6. Travelling expenses.
  7. Payments by employers under pension schemes approved by the Commissioner.
  8. Payments made under settlement with registered benevolent organizations.
  9. Losses sustained in previous years, not exceeding nine years, may be deducted.

Allowances include:

  1. Annual Allowances (i.e., depreciation allowances on the straight-line method) at prescribed rates are deductible in respect of plant and machinery used in the trade. Initial Allowances at 20% of the cost are deductible for the year of purchase. Balancing Allowances and Charges (to ensure that total allowances equal but do not exceed cost) are made on the sale or obsolescence of machinery and plant.(Refer to the tprovisions of Parts 4 and 5 of the Income Tax  Regulations, 1969)
  2. Instead of the initial allowance, Prescribed Basic Industries are entitled to an Investment Allowance on plant or machinery which was new or which was imported into Barbados for the first time.
    The investment allowance is not deducted like the initial allowance in determining the diminished value of the asset. The rate is 40% in the case of the manufacture and refining of sugar and the manufacture of products from clay or limestone. In any other case, the rate is 20%. A person entitled to claim an Export Allowance could also qualify for an investment allowance at the rate of 40%.(Refer to the provisions of Parts 4 and 5 of the Income Tax  Regulations, 1969)
  3. Capital Expenditure on Industrial Buildings and Structures may be written off by an initial allowance of 40% of the cost and an annual allowance of 4%. (Refer to the tprovisions of Parts 4 and 5 of the Income Tax  Regulations, 1969)
  4. Agricultural Businesses (other than those engaged in the refining or manufacture of sugar) can claim a Cash Rebate on capital expenditure incurred on agricultural machinery or plant which was new or which was imported into Barbados for the first time. The rates are 10%, 15% or 18% depending on the type of machinery or plant.
  5. Commercial buildings qualify for a building allowance equal to 10% of the improved value where the property is registered with the National Trust, and 1% of the improved value where it is not so registered.
  6. Where a building, other than a commercial building or a building enjoying the benefits under the Hotel Aids Act, has been converted by the owner to provide units for rental to residents, 40% of the capital expenditure incurred on the conversion may be claimed as an initial allowance in the year the expenditure was made and 4% o as an annual allowance.
  7. Persons engaged in the business of export to countries outside Caricom may claim a research and development allowance of 150% of qualifying expenditure on the research and development undertaken for the purpose of promoting the export sales of the business.
  8. A market development allowance of 150% of the specific expenditure incurred for the purpose of encouraging tourists to visit Barbados may be claimed by persons engaged in the tourist industry.
  9. A Person other than a company enjoying benefits under the Fiscal Incentives Act, 1974, that exports sugar to countries outside Caricom, is entitled to an export allowance at prescribed rates.
  10. An export allowance may also be set off against the tax payable on the income derived from the reinvestment of profits earned in Barbados from enclave enterprises owned by persons other than Barbadian citizens, which produce goods exclusively for export outside of Caricom.
  11. A foreign currency earnings allowance calculated as set out in the Fourth Schedule or Fifth Schedule, in the Income Tax Act is available to a person carrying on business in Barbados and whose assessable income is derived from the undertaking of qualifying overseas construction projects, or the supplying of qualifying overseas professional services, has the payment due, either by transfer of foreign currency to Barbados through the Barbados banking system or by payment in Barbados currency from funds held in Barbados which would be legally remitted from Barbados.
  12. If a capital expenditure is made in relation to water storage facility on any commercial building, an allowance up to a maximum of $3,500 may be claimed for each commercial building.
  13. Persons contributing an amount of money to the Tourism Development Corporation, that person can deduct an amount equal to: - 150% of the actual amount contributed, or 150% of 3% of his pre-tax profits from the preceding year, whichever is the lesser.
  14. A company investing an amount in the Barbados Agency for Micro Enterprise Development Ltd. can deduct an amount equal to 120% of the actual amount invested up to a maximum of one million dollars.
  15. A company, which has contributed an amount of money to the Regional Negotiating Fund, can deduct an amount equal to 150% of the actual amount contributed in calculating the assessable income.
  16. Where a company has in an income year listed its shares on the Securities Exchange of Barbados, then in calculating the assessable income of that company for that income year, there shall be deducted an amount equal to 120% of any cost incurred in that income year by the company in listing its shares on the Securities Exchange of Barbados.
  17. A company contributing an amount of money in the Arts and Sports Promotion Fund, established by the Arts and Sports Promotion Act, 2004 may claim as a deduction an amount equal to 150% of the actual amount invested.

 

Withholding Tax for Payments to Non-Residents

Final Payments
The tax withheld from the following sources of income is a final tax:

  • Gross Earnings of Entertainers. 25%
  • Interest 15%
  • Royalties 15%
  • Dividends from taxed profits 15%
  • Branch profits. 10%


Payment for services

  • Managerial, Technical, Administrative. 15%
  • Other. 25%


Prepayments

Tax withheld from the following sources represents a prepayment of tax:

  • Rents. 40%
  • In respect of income year 2004 – 33%
  • In respect of income year 2005 – 30%
  • In respect of income year 2006 and subsequent years – 25%
  • Payments under settlement or trust 20%
  • Covenants. 20%


Dividends

  • Exempt profits 40%
  • Untaxed profits 40%


Double Taxation Relief

Double Taxation agreements exist with the following countries:
Member States of the Caribbean Community, Botswana, Canada, China, Cuba, Finland, Malta, Mauritius, Norway, Sweden, Switzerland(Extension of United Kingdom Treaty), the United Kingdom, the United States of America, Venezuela.

 

Payment of Tax

Pay As You Earn (P.A.Y.E.) System

Tax on the earnings of employees is under a non-cumulative Pay As You Earn system. An employee is entitled to file with his employer a declaration form claiming the personal allowances to which he is entitled. The employer deducts tax for each pay period with reference to the appropriate tax table and the allowances claimed. Each pay period is treated separately and the cumulative pay and tax deductions are not taken into account. Any remainder of tax owing, as shown on the annual tax return, due by the 30th April of the following year may be paid in two equal instalments on April 30th and September 30th.

 

By Installments

A company whose fiscal period ends at any time during the period:
January 1st to September 30th (both dates inclusive) must pay 50% of tax paid for the previous income year on October 15th. The remainder of tax due as shown on the Corporation Tax Return for that year is to be paid on March 15th.

A company whose fiscal period ends at anytime during the period:
October 1st to December 31st (both dates inclusive) must pay 50% of tax paid for the previous income year on December 15th. 50% on March 15th. Any additional amount due as shown on the Corporation Tax Return for the year is to be paid on filing on or before June 15th.