Barbados’s Tax Reform To Conform To Global Standards

• The government of Barbados is making legislative changes to its corporate tax regime to ensure the sovereign conforms to global standards and can take advantage of increased opportunities for local and international investment.
• Leading off debate in the House of Assembly on Tuesday, May 7, on the Corporation Top-up Tax Bill, 2024 and the Income Tax (Amendment) Bill, 2024, Minister in the Ministry of Finance and Economic Affairs Ryan Straughn said the changes give effect to an earlier decision to move away from the sliding scale for corporate taxes introduced in December 2018 to replace it with a new structure.
• Of note, in 2018, the Barbadian government announced a radical tax change, in response to the OECD’s (Organization for Economic Cooperation and Development) criticism that foreign currency-earning companies were being ring-fenced. The convergence of corporate tax rates ( international companies now classified as regular Barbados businesses) resulted in the creation of a new sliding scale structure that reduced the top-tier corporate tax rate from 30% to 5.5% and the lowest rate down to 1% for taxable incomes greater than $30Mn.
• The new tax structure would include a domestic tax rate of 9% for businesses operating in Barbados and would apply to all except those small operations registered under the Small Business Development Act, which will be taxed at 5.5%. However, for companies that make above a US$850Mn threshold the top-up tax rate will be imposed (up to 15% according to the OECD Pillar II Tax Framework).
• According to Straughn, the government has sought over the last six years to move away from a consistent increase in taxes to a more stable regime that would allow for foreign investment, while encouraging local business development to “unlock opportunities” that would ensure Barbados can recover its economic footing in an inclusive manner, build resilience and achieve climate resilience.
• “The pieces of legislation are aligned with what we are trying to achieve in terms of being able to utilise regulations, which are agreed at a global level, to be able to reposition Barbados for inclusive growth. “…As we seek to do the traditional sources of financing, we must be capable of using the tax system to unlock areas of investment that are strategically aligned with the national objectives, particularly as it relates to building capacity for growth and to allow our citizens to be able to invest to be a part of the recovery,” Straughn said.

(Sources: Barbados Today & NCBCM Research)