In January 2024, Barbados began implementing legislative changes to adjust its corporation tax rates, with the objective to create a more competitive tax environment, stimulate innovation, and support business growth. Officially enacted on May 21st, 2024, and retrospectively effective from January 1st, 2024, these legislative changes include new incentives, such as group relief and the introduction of a "Patent Box" regime.
Here, we share an overview of the latest legislative changes regarding corporation tax and new incentives in Barbados for 2024:
1. Updated Tax Legislation and Rates
New Legislation
Two key pieces of legislation have been approved by the House of Assembly and Senate, and are now effective:
- Income Tax (Amendment and Validation) Act, 2024
- Corporation Top-Up Tax Act, 2024
The main update following the enactment of these laws is the corporation tax rate now being set at 9%. However, there are some key exceptions to the rule:
- Approved small businesses: 5.5% tax rate (gross income ≤ USD1M)
- Companies earning income from international shipping: 5.5% tax rate (down to a minimum of 1% based on the existing sliding scale)
- Licensed insurance companies: 0% or 2% tax rate (based on their class of insurance)
- Companies that are part of an "in-scope MNE group": 5.5% tax rate (down to a minimum of 1% based on the existing sliding scale and if the parent entity is in a non-top-up tax jurisdiction).
Qualified Minimum Top-Up Tax (QDMTT)
Barbados also implemented a QDMTT to ensure an effective tax rate of 15% for qualifying companies (of certain in-scope groups), starting in fiscal years commencing on or after January 1st, 2024.
2. New Incentives: IP Patent Box and Tax Credits
New IP Patent Box Regime
This initiative aims to encourage research, development, and innovation, and now means that income from qualifying intellectual property will be taxed at 4.5% (subject to an election made by the company). Qualifying intellectual property includes copyrighted software, rights to invention patents, rights from the registration of industrial designs, and integrated circuit topography among others.
Introduction of New Tax Credits
The introduction of Qualified Refundable Tax Credits allows companies to seek refundable credit once they meet certain requirements. Credits available include:
- Jobs Credit: Available for companies in financial technology and wholesale distribution sectors, with credits ranging from 25% to 100% of eligible payroll expenditure, depending on the number of employees.
- Research and Development Credit: 50% credit for eligible R&D expenditure carried out mainly in Barbados. Activities must involve innovation and technical risk, and aim to acquire new knowledge, develop intellectual property assets, or improve materials, products, or services.
- 3. Group Relief and Monthly Tax Prepayments
- Re-Introduction of Group Relief
This allows trading losses from one company to be offset, by way of corporation tax relief, against profits of another company if they are within the same group. For the income year 2024, it applies with respect to companies carrying forward losses exceeding USD50M and applicable to companies subject to the new 9% tax rate.
Monthly Tax Prepayments
Companies are now required to prepay corporation tax monthly rather than on a bi-annual basis. This applies as follows:
- From income year 2024, monthly prepayments apply to in-scope MNE Groups.
- From income year 2025, all companies will switch to monthly prepayments, which are due by the 15th of each calendar month.
This change aims to streamline tax payments and improve cash flow management for companies.
Barbados is one of today's leading global financial services centres, and with deep insights into local tax, legal and business issues, Centralis continues to provide proactive and responsive service solutions to meet our clients' business, corporate secretarial, economic substance, management, and accounting needs.
If you would like to know more about the recent legislative changes in Barbados, and how our team can help you, please read the full article or reach out to Jamar Arthur-Selman, General Manager of Centralis (Barbados) Ltd.