Barbados Personal Income Tax

Territoriality. An individual resident and domiciled in Barbados for tax purposes is subject to income tax on worldwide income, regardless of whether the income is remitted to Barbados. Resi­dents who are not domiciled in Barbados are taxed on income derived from Barbados and on income remitted to Barbados. Non­residents are taxed on income derived from Barbados only.

Definition of resident. Individuals are considered resident if they are present in Barbados more than 182 days in a calendar year or if they are ordinarily resident in Barbados in a calendar year. Individuals are deemed to be ordinarily resident if they have a permanent home in Barbados and notify the Commissioner of Inland Revenue that they intend to reside in Barbados for a period of two consecutive years, including the current income year. Domicile is not defined in the Income Tax Act and is under­stood as it is used in the United Kingdom. Broadly, it is the jurisdiction that an individual regards as his or her permanent home.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Taxable remuneration from employment includes salaries, commissions, bonuses, directors’ fees, perquisites and pension income. In general, employees may be taxed on any benefit that is not conferred wholly, exclusively and necessarily for the performance of duties relating to their employment. For example, a company car is taxed at 10% of its cost, and the value of a rent-free residence is included in the employee’s taxable income, up to a maximum of BBD48,000 per year.

Amounts paid as a housing allowance are fully taxable.

Educational allowances provided by employers to their employees’ children are fully taxable for income tax and social security purposes.

Self-employment income. Taxable profits generally consist of busi ness profits as disclosed in the business operation’s financial statements, subject to various tax adjustments. Income tax is impos ed on net business income.

Investment income. A resident’s investment income, other than domestic dividends, domestic interest and income from the rental of property, is aggregated with other income and taxed at the rates set forth in Rates.

If a resident company pays an ordinary dividend to a resident indi­vidual shareholder, the dividend is subject to a final 12.5% tax withheld at source. For resident individuals, dividends received from shares held under dividend reinvestment plans are exempt from the 12.5% withholding tax if the shares are held for at least five years. However, this exemption is limited to 75% of the value of the dividend, up to a maximum of BBD7,500 per year. Interest received by a resident individual, other than a pensioner, from a resident borrower is also subject to a 12.5% final tax withheld at source. Pensioners over 60 years of age are not subject to tax on interest income.

For resident “authors,” 50% of royalties received in Barbados is exempt from tax. Section 2 of the Barbados Copyright Act pro­vides that an “author” in relation to a work is the person who creates it. Section 7 of the act states that a work qualifies for copyright protection if the author was a citizen of or habitually resides in Barbados at the time the work was created. All other royalties received are aggregated with other income and subject to tax at the rates set forth in Rates. Net income from the rental of residential property is taxed at a flat rate of 15%.

Nonresidents are taxed on domestic dividend income, interest, royalties and management fees, which are subject to a final 15% tax withheld at source. Rental income is subject to a 25% with­holding tax, which represents a prepayment of tax. However, if a nonresident individual has habitually filed tax returns with respect to rental income in prior years, no tax is required to be withheld. In addition, if the payer is a company operating in the international business and financial services sector, rental income is not subject to withholding tax. Interest earned by nonresidents on debentures, bonds and stock issued by the government of Barbados is exempt from tax.

Taxation of employer-provided stock options. Employees are taxed on income arising on the purchase of shares acquired under a stock option plan. The taxable amount is equal to the difference between the market price of the stock on the date the option is exercised and the price paid for the stock under the option, sub­ject to a deduction of up to 10% of the employee’s assessable income. The benefit is taxed in the same manner and at the same rates as other employment income. If the shares are disposed of within five years after the option is exercised, the 10% deduction is recaptured in the year the shares are sold. No distinction is made between qualified and non-qualified stock option plans.

Capital gains. Capital gains are not subject to tax, and capital losses are not deductible.

Deductions

Personal deductions and allowances. For 2016, residents are entitled to the deductions and allowances listed in the following table.

Type Maximum Deductible Amount
Basic allowance BBD25,000
Basic allowance for pensioners BBD40,000
Dependent spouse allowance BBD3,000
Dependent allowance BBD1,000*
150% of the cost of conducting energy audits and 150% of 50% of the cost of retrofitting premises or installing systems to produce electricity from sources other than fossil fuels. Up to BBD10,000
Amounts donated to exempt charities Allowed in full
Amounts of BBD1 million or less paid to registered charities 10% of assessable income
Amounts in excess of BBD1 million paid to registered charities 50% of assessable income

* This allowance is available for each dependent up to a maximum of two depen­dents.

Nonresidents may not claim the above deductions and allow ances.

Specially qualified individuals working in the inter national busi­ness and financial services sector may qualify for tax exemptions equal to percentages of their remuneration, including salary, fees or any other emoluments, if they hold a valid work permit for at least three years. The following are the tax exemptions.

Income Percentage exemption
Income not exceeding BBD150,000 35%
Income exceeding BBD150,000 but not exceeding BBD500,000 50%
Income in excess of BBD500,000 60%

If a resident individual earns income from sources outside Barbados and transfers this income to Barbados through the banking sys­tem, the individual may claim a foreign currency earnings credit as set out in the following table.

Foreign earnings as a percentage of total earnings Rebate of income tax (expressed as a percentage of income tax on foreign earnings)
20% and under 35%
Over 20% but under 41% 45%
At least 41% but under 61% 64%
At least 61% but under 81% 79%
81% and over 93%


Business deductions
. Any expenses incurred wholly and exclu­sively for the purpose of producing taxable income are deductible.

Reserves or provisions of a general nature are not allowable. Write-offs of specific amounts or balances generally are allowed if the Inland Revenue is satisfied that they are not recoverable.

In computing taxable income, depreciation and amortization for financial statements’ purposes are replaced by capital allowances for tax purposes. Annual allowances from 5% to 33.33%, calcu­lated on a straight-line basis, are granted on the original cost of fixed assets. In general, an initial allowance of 20% is granted on the cost of plant and machinery purchased in an income year.

In addition, an investment allowance of 20% is granted on the cost of capital expenditure on new plant and machinery to be used in a basic industry. The allowance is 40% for new plant and machinery to be used in manufacturing and refining sugar and in manufacturing products from clay and limestone. Persons who export outside the Caribbean Common Market also qualify for an investment allowance of 40% of the cost of new plant and machinery purchased during the tax year. The investment allow­ance is not deducted from the cost of the asset in determining the annual allowance.

Industrial buildings qualify for an initial allowance of 40% and an annual allowance of 4% of the cost of the building.

An allowance of 1% is allowed on the improved value of com­mercial buildings.

Rates. The following tax rates apply to taxable income for 2016.

Taxable income BBD Tax rate % Tax due BBD Cumulative tax due BBD
First 35,000 16 5,600 5,600
Over 35,000 33.5

Nonresidents are taxed at the same rates as residents except on domestic dividend income, interest, royalties and management fees (see Investment income).

Consolidation tax. A consolidation tax is imposed on the gross income of individuals earning more than BBD50,000 per year.

The following consolidation tax rates apply to gross income for 2016 (see next paragraph).

Band of gross income Rate
BBD %
50,001 to 75,000 0.5
75,001 to 100,000 1
100,001 to 200,000 2
Over 200,000 3

However, effective from 31 March 2016, consolidation tax on the gross income of individuals earning more than BBD50,000 ceased. Any consolidation tax payable for the 2016 income year must be paid on or before 30 April 2017.

Relief for losses. Business losses may be carried forward seven years and offset against income arising in those years. Losses may not be carried back. However, losses incurred from the rental of residential property can be offset only against taxable income derived from the rental of residential property. These losses may also be carried forward seven years.

Other taxes

Property transfer tax. Property transfer tax is levied on all trans­fers of real estate, certain leasehold interests and shares, except shares traded on the Barbados securities exchange and shares of companies whose assets consist of foreign assets and securities and whose income is derived solely from sources outside Barbados.

The seller pays tax at a rate of 2.5% on amounts in excess of BBD50,000 received for the sale of shares and on amounts in excess of BBD150,000 received for the sale of land on which there is a building. Trans fers of shares involving no change of beneficial ownership are exempt from property transfer tax if the beneficial ownership does not change within five years after the original transfer. The lessor pays tax at a rate of 2.5% on a lease of 25 years or more for residential and commercial property.

Estate and gift tax. Estate and gift tax is not levied in Barbados.

Social security

Contributions. Contributions to the national insurance scheme must be made at the following rates on maximum monthly insur­able earnings of BBD4,360:

  • For employees, 10.1%
  • For employers, 11.25%
  • For self-employed persons, 16.1%

Totalization agreements. Barbados has entered into social secu­rity totalization agreements with Canada, the Caribbean Community and Common Market (CARICOM) and the United Kingdom to provide relief from paying double social security taxes and to assure benefit coverage.

Tax filing and payment procedures

Resident and nonresident individual taxpayers must file income tax returns by 30 April following the income year, which ends 31 December. Self-employed persons must file returns regardless of the amount of their taxable income. They must also prepay income tax quarterly based on the tax payable for the preceding year.

Tax on employees normally is collected through the Pay-As-You­Earn (PAYE) system.

Married persons are taxed separately, not jointly, on all types of income.

Double tax relief and tax treaties

Double tax relief is provided for foreign taxes paid to a British Commonwealth country.

Barbados has entered into double tax treaties with the following jurisdictions.

Austria                         Iceland                             Seychelles

Bahrain                        Luxembourg                    Singapore

Botswana                     Malta                               Spain

Canada                         Mauritius                         Sweden

CARICOM                  Mexico                            Switzerland

China                           Netherlands                     United Kingdom

Cuba                            Norway                           United States

Czech Republic            Panama                            Venezuela

Finland                         San Marino

Gross income received from a non-treaty country is taxed. How­ever, a credit can be claimed for any foreign tax imposed on the income.

Temporary visas

In general, visas are not required to enter Barbados, except for visitors from certain countries, including China, India and the Russian Federation. In certain cases, individuals from these coun­tries are required to have visas only if they are going to be in Barbados longer than 28 days.

Foreign nationals who own property in Barbados may enter on special entry visas or, if other criteria are met, may be granted immigrant status.

Visitor visas, also called temporary visas and extensions of stay, are issued to individuals who want to extend their stays on the island or to cover the waiting period while another type of visa is being processed. Visitor visas are also issued to spouses of work permit holders.

The following documents are required to qualify for an extension of stay:

  • An application on Immigration “Form B”
  • A valid airline ticket back to the country of origin
  • A passport
  • An application fee of USD50 for each 6-month period
  • One passport-size photograph
  • Proof of financial support while in Barbados

Work visas and/or permits

The International Business Companies Act allows foreign nation­als and foreign companies to establish companies in Barbados. Foreign nationals employed by these companies in Barbados must obtain work permits.

Nationals of member countries of CARICOM who are university graduates are not required to have work permits to live and work in Barbados. However, such nationals must obtain a certificate of recognition as a CARICOM Skilled National instead of a work permit. All other foreign nationals who wish to work in Barbados must apply for work permits. Work permits allow individuals to reside and work in Barbados and normally are issued for a period of three years unless otherwise specified.

No quota system exists for issuing work permits; each applica­tion is evaluated on its own merit. To approve a work permit application, the government must be satisfied that no suitable Barbadians can fill the vacancy or that the employer is an International Business Company, an International Society with Restricted Liability or an offshore bank.

Work permits are non-transferable. If a work permit holder leaves the employer, the work permit is canceled. The employer should inform the Immigration and Passport Department that the employee has left the company.

Applicants may not work while their work permit applications are being processed.

Work permit holders should renew their work permits three to four months before expiration. Work permit holders who have lived in Barbados for six years or more may apply for non­immigrant visas (see Section H), which eliminate the necessity of applying for work permits. If necessary, an application should be made for a long-term work permit to cover the processing period of the non-immigrant visa.

The following documents must be submitted together with the application for a Barbados work permit:

  • Application fee of BBD300 (USD150).
  • Medical form completed by a medical practitioner (including x-ray report as well as the actual x-ray if done outside of Barbados).
  • Four passport-size photographs.
  • Two character references.
  • A Police Certificate of Character (PCC) based on a fingerprint check from the applicant’s place of residence and from each country in which the applicant has resided since his or her 16th birthday. For UK residents, an affidavit may be accepted instead of the PCC but a certificate based on a nationwide search of the country’s database is also required.
  • Documentary evidence of the applicant’s qualifications (for example, university degree).
  • A cover letter setting out the nature of the business in which the applicant will be engaged.
  • For an applicant hoping to set up a business in Barbados, clear evidence of the amount of his or her investment (for example, bank transfer statements).
  • A copy of the certificate of registration or incorporation of the company as well as the company’s International Business Companies license, if applicable.

A fee is payable upon receipt of the work permit. The amount of the fee is based on the job level, the type of business, the duration of the work permit and the nationality of the applicant. The minimum work permit fees are approximately USD55 per month.

Residence visas and/or permits

Non-immigrant visas are issued to individuals who wish to retire or reside on the island. Applicants must be of sound body and mind and must be capable of supporting themselves. Each application is processed on its own merit. The process is lengthy and can take more than one year.

To approve a residence application, the government must be sat­isfied that the applicant can support himself or herself and will not be a burden to the country. The individual’s qualifications and entitlement are also taken into consideration.

No quota system exists for issuing residence permits; each appli­cation is evaluated on its own merit.

Special entry permits

The Barbados government recently introduced a special entry permit, which is available to a high net-worth individual who wishes to reside in Barbados. To qualify for a special entry per­mit, an individual must meet specific criteria. These criteria depend on the category of permit that the individual wishes to obtain.

The following items must accompany an application for a Barbados Special Entry Permit for the High Net-Worth Individual:

  • A certified statement of assets over USD5 million from an auditor, accountant or banker
  • Evidence of health insurance coverage in excess of USD500,000
  • A police certificate of character from any country that the indi­vidual resided in for more than six months since the age of 18
  • Two character references
  • A completed medical form with x-ray report
  • One passport-size photograph
  • Documentary evidence of the applicant’s qualifications if appli­cable (notarized copies are acceptable)
  • Original birth certificate and a certified copy
  • Application fee of USD150

Family and personal considerations

Family members. Spouses and dependents of working expatriates must obtain their own work permits to be employed in Barbados or must obtain extensions of stay to reside there.

Children who accompany work permit holders, non-immigrant visa holders or those who are in Barbados for the sole purpose of studying must obtain students visas.

Marital property regime. Barbados does not have a community property or similar marital property regime.

Forced heirship. The succession laws of Barbados provide that a surviving spouse is entitled to one-half of the estate of the deceased spouse, unless the surviving spouse elects not to claim this right or chooses instead to take his or her bequest under the will of the deceased spouse. Parents are not required to leave any part of their estate to their children unless the children are minors (under 18 years of age), in which case sufficient provision must be made for the maintenance of the children. These rules apply only to persons who are citizens or permanent residents or are domiciled in Barbados.

Driver’s permits. A foreign national may not drive legally in Bar­bados with his or her home-country driver’s permit, nor does Barbados have driver’s license reciprocity with any other countries.

Holders of work permits who possess valid driver’s licenses in their home countries are excused from taking the written exam and driving test. They must submit the following documents to the Barbados Licensing Authority:

  • Identification card
  • Three passport-size photographs
  • Proof of possession of a work permit

Other applicants for a driver’s license in Barbados must take a moderately difficult written exam and a driving test at the Licens­ing Authority.