Private client and Tax Law – Global Mobility
Is your jurisdiction developing immigration legislation to deal with ‘digital nomads’ – and if so, how is this set to change in the year ahead?
In response to the Covid-19 Pandemic, and as a means to diversify Barbados’ tourism product, the Remote Employment Act, 2020 was introduced to establish the Welcome Stamp Programme, a 12-month visitor visa which permits individuals to work remotely from Barbados where proof of the following is provided:
- Valid passport.
- Annual income of at least US$50,000 generated outside Barbados.
- Valid health insurance for each individual.
The visa was initially aimed at non-nationals looking to work for their overseas employers while in Barbados. However, due to increased interest, the scope of the programme was expanded to anyone who satisfies the visa conditions and provides proof of sufficient funds to support themselves whilst in Barbados including families, students and retirees.
In 2021, the Remote Employment Act was amended to allow for the renewal of the visa for an additional year upon the payment of the renewal fees.
The Welcome Stamp Programme has since gained further recognition as observed by Savills Plc’s Impact Report 2022 Executive Nomad Index, which ranks Barbados as the fifth destination out of fifteen countries for long-term remote workers. The Index continues to note that Barbados has the fastest internet in the Caribbean, ranking the island number one within the region, surpassing St. Lucia and the Bahamas.
What taxation issues do clients need to be aware of if they are emigrating longterm or exploring temporary remote work visas in your jurisdiction?
A holder of the Welcome Stamp visa is treated as a visitor in Barbados during this 12-month period. A visa holder is therefore restricted from working locally as the main condition of the visa is for the individual to generate income outside of Barbados. For income tax purposes, a visa holder is deemed non-resident in Barbados, and is liable to tax on his Barbados income only, which should be nil. Advice should be sought in the home country to understand if such an individual is still considered tax resident and subject to tax in that country. If the tax residency is challenged, the tax treaty would not apply to assist in determining the actual tax residency of that individual since Barbados does not recognise a Welcome Stamp holder as tax resident.
Where an individual seeks to emigrate long-term to Barbados, he may become tax resident in Barbados, benefit from its tax treaty network and its advantageous resident non-domiciled tax regime where foreign income is taxed only when remitted to Barbados. Options other than the Welcome Stamp must be considered. An individual with a work permit or a Special Entry Permit (SEP) may qualify as tax residents if they meet the criteria discussed below.
Under a work permit, non-nationals are allowed to work in Barbados for a Barbados company.
SEP grants an individual the right to reside in Barbados only. Similar to the Welcome Stamp Programme, a SEP holder is prohibited from working for a Barbados employer. However, unlike the Welcome Stamp, the SEP allows an individual to become tax resident in Barbados. There are two (2) categories of SEPs available:
- High Net Worth Individuals with US$2 million investment in Barbados and a net worth of at least US$5 million.
- Retirees with US$300,000 real estate investment in Barbados.
Barbados also offers a one year SEP which affords an individual time to find and make the required investment in Barbados.
Considering this, an individual with a work permit or SEP should be aware that where one of the following criteria is met, they shall be deemed resident in Barbados and must file personal tax return in Barbados annually:
- Spend an aggregate of more than 182 days in Barbados per year; or
- Be deemed ordinarily resident, that is;
- Have a permanent home available to you at all times; and
- Give notice to the Barbados Revenue Authority (BRA) that you intend to reside in Barbados for at least 2 years.
Are there any challenges related to short-term residency that clients need to be aware of, and how can they overcome them?
Employers of individuals seeking to utilise the Welcome Stamp Programme should have consideration for the potential risk of creating a permanent establishment (PE) in Barbados.
A PE is often defined as a fixed place of business through which the business of an enterprise is wholly or partially carried on: this includes amongst others, a place of management, a branch or an office. The scope of a PE can extend to include a person, acting on behalf of an enterprise, who habitually exercises, in another country, an authority to conclude contracts in the name of the enterprise.
The risk of establishing a PE may result in any income earned from the services provided through the PE to be considered taxable in Barbados. In the event that a PE is established, the administrative burden of the enterprise may increase as there will be a requirement to register the company locally and file corporate documents and tax returns annually. The income of the PE would be subject to corporate tax at the maximum rate is 5.5%.
In light of the potential risk posed by remote work, we recommend that advice be sought by the company prior to allowing employees who exercise a certain level of authority to work remotely from a foreign country. The existence of a Double Taxation Treaty with Barbados may provide PE protection which should be considered. Barbados is party to Treaties with approximately 40 countries, including the United States, the United Kingdom, and Canada.