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Upcoming changes to the Barbados corporate tax regime

December 2023

As part of continued efforts by the Government of Barbados to embrace global standards and competitiveness, important tax updates have recently been announced which will impact corporate entities domiciled in the jurisdiction.

On 7 November 2023 a ministerial statement delivered by the Honorable Mia Mottley, Prime Minister of Barbados, set out the long-awaited proposals to implement Pillar 2 of the OECD’s Global Anti-Base Erosion (GloBE) rules (Pillar 2). The GloBE rules will ensure that foreign income will be taxed at an effective tax rate (ETR) of at least 15%, which will create a level playing field and eliminate the need for countries to offer very low tax rates in order to compete for inbound investment.

It is expected that draft legislation will be published shortly, and will require multinational enterprises (MNEs) with consolidated revenues above €750 million pay a minimum 15% tax in each jurisdiction in which they operate.

The proposed new rules, anticipated to take effect from 1 January 2024 for the Income Year 2024, will affect all MNEs headquartered in Barbados. However, the group that will primarily be impacted will be the Barbadian constituent entities of foreign-based MNEs, as the GloBE rules contain a qualified domestic minimum top-up tax (QDMTT) which will also be introduced for in-scope companies with an Ultimate Parent Entity in a jurisdiction that has introduced an Income Inclusion Rule (IIR) or an Undertaxed Profit Rule (UTPR).

Furthermore, it is expected that a top up tax of 6% will be introduced for in-scope MNEs as there is a clear intention for Barbados to be wholly compliant with the GloBE rules. However, there will be an exception for companies in countries not enacting Pillar 2 in 2024 – these companies will continue to benefit from the current sliding tax scale next year.

Another incoming change, which will take effect on 1 January 2024, is the introduction of a 9% corporate income tax flat rate, to replace the current sliding scale of 5.5% to 1%. The new flat rate will apply to all corporate entities other than those who are specifically excluded under the GloBE rules.

The exceptions to this are detailed as follows:

Business type
Definition and applicable tax rate
Small businesses
A business with a gross revenue of BBD 2million or below shall be subject to a preferential corporation tax rate of 5.5%.
International shipping businesses
For the Income Year 2024, international shipping business will continue to be taxed under the current tax regime. The shipping industry is currently out-of-scope for the GloBE rules, but may be subject to change in future.
Insurance businesses
The existing corporate tax rates of 0% for Class 1 insurance business and 2% for Class 2 and Class 3 insurance business will remain unchanged.
Business type
Small businesses
Definition and applicable tax rate
A business with a gross revenue of BBD 2million or below shall be subject to a preferential corporation tax rate of 5.5%.
Business type
International shipping businesses
Definition and applicable tax rate
For the Income Year 2024, international shipping business will continue to be taxed under the current tax regime. The shipping industry is currently out-of-scope for the GloBE rules, but may be subject to change in future.
Business type
Insurance businesses
Definition and applicable tax rate
The existing corporate tax rates of 0% for Class 1 insurance business and 2% for Class 2 and Class 3 insurance business will remain unchanged.

As experts in entity life cycle management, Citco Corporate Solutions companies pragmatically support clients in Barbados and around the world.

To discuss your options and requirements in relation to your Barbados-domiciled entity, please get in touch.

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