QUESTION ONE – What are the most common structures used when international clients want to form a company in your jurisdiction? Any examples?
The most common structures used by clients are companies and trusts. Trusts in Barbados are governed by English common law and by the Trustees Act Cap 250 as amended, which deals with the powers of trustees. An appeal is to the Privy Council. There is no registration requirement or stamp duty; trustees can be non-resident as long as one is resident. A resident corporation acting as trustee must be licensed under the Financial Services Act or the Corporate and Trust Services Act 2015 of the Laws of Barbados.
There are many types of companies in Barbados, the most popular used by international clients are Barbados companies with a Foreign Currency Permit (formerly International Business Companies). Holding a Foreign Currency Permit (allowed for companies only doing business outside of Barbados) affords them certain exemption benefits including withholding taxes, stamp duty, property transfer tax, value-added tax and the filing of annual returns.
QUESTION TWO – Please detail some of the favourable and unfavourable legislation that businesses considering establishing a presence in your jurisdiction should be aware of? How can you help them to streamline the process?
Shares in Barbados companies are to be issued without nominal or par value and no company may issue bearer shares or bearer share certificates. However, there exist no general minimum capitalisation requirements or restrictions.
Shares may not be issued until fully paid in money; or in property or past service that is the fair equivalent of the money that the company would have received if the share had been issued for money.
In determining whether property or past service is the fair equivalent of a money consideration, the directors may take into account reasonable charges and expenses of organisation and reorganisation, and payments for property and past services reasonably expected to benefit the Company. It must also be noted that “property” does not include a promissory note or a promise to pay.
Shares of a company may be transferred by a written instrument of transfer signed by the transferor and naming the transferee and where an instrument is prescribed in the by-laws of the Company then that instrument must be used to transfer the shares.
The instrument of transfer must be presented to the Registrar of Companies within 30 days of its execution for the assessment and payment of property transfer tax and/or stamp duty in accordance with the laws of Barbados.
Under the Companies Act, Cap. 308 of Barbados (the ‘Act’) it is mandatory for the company to call an annual meeting of the shareholders within 18 months after incorporation and thereafter to hold annual meetings not later than 15 months after holding the last preceding annual meeting. Special meetings of the shareholders may otherwise be called at any time.
Meetings may be held at any place in Barbados as provided in the By-Laws of the Company and were not specified may otherwise be determined by the board of Directors. However, meetings may be held outside of Barbados if all the shareholders entitled to vote at the meeting so agree.
Taxation and reporting obligations rates and allowances
Effective January 1, 2019, the new rates of corporate tax for all companies are as follows:
- Less than B$1,000,000 – 5.5 per cent
- More than B$1,000,000 but less than B$20,000,000 – 3.0 per cent
- More than B$20,000,000 but less than B$30,000,000 – 2.5 per cent
- More than B$30,000,000 – 1.0 per cent
A Barbados Company may elect to take a credit in respect of taxes paid to a country other than Barbados provided that such an election does not reduce the tax payable in Barbados to a rate less than 1 per cent of the profits and gains of the Company in any given year.
Dividends and other payments
Any dividends, interest, royalties, fees or management fees paid or deemed to be paid by the Company to another International Business Company or to a person not resident in Barbados are exempted from income tax.
In addition, the Barbados Income Tax Act allows for dividends (excluding preference dividends) received by a resident Barbados company from a non-resident company to be excluded from taxation if the Barbados company is a shareholder owning at least 10 per cent of the capital of the non-resident company other than for the sole purpose of portfolio investments. Dividends (excluding preference dividends) paid by one resident Barbados company to another are also excluded.
Furthermore, a transfer of securities or assets of the Company to a non-resident or to another International Business Company other than a transfer of taxable assets is likewise exempted from the payment of taxes or duties or another impost by the Company, its shareholders or the intended transferees.
Special tax concessions
The Minister responsible for finance may grant tax concessions in respect of those people resident outside of the CARICOM region.
The tax concession would allow a certain percentage of an employee’s or contractor’s salary, fees or other emoluments to be exempt from income tax in Barbados. It could also be paid in a foreign currency inside or outside of Barbados in some prescribed manner to those said individuals who must also hold a valid work permit for employment in Barbados for a period of at least three years.
QUESTION THREE – What due diligence is required to be undertaken by company formations agents under anti-money laundering laws in your jurisdiction?
The required document checklist for new relationships established with Barbados Service Providers, includes certified copies of government-issued identification, with a clear photo, bearing date of birth, a unique identifier and a signature.
There is also the requirement for written reference (preferably addressed to Axebridge) with the client’s name & address from a financial institution confirming a relationship of at least 2 years.
For corporate clients, original or certified copies of organisational charts, audited/ unaudited financial statements, certificate of incorporation, memorandum/articles of association and by-laws are required.