COMPANIES IN BARBADOS
Barbados has built up a reputation as a strong domicile for conducting international insurance business, which is why so many insurance companies come here.
Barbados attracts insurance companies from all over the world, but primarily from the USA and Canada. For Canadian captives, dividends paid to a Canadian company out of income earned from active insurance business in Barbados may be considered as exempt surplus for Canadian tax purposes and are therefore not subject to tax in Canada, when expatriated. For US captives, under the Barbados/USA tax treaty, a company controlled by US investors may be able to carry out prescribed activities in the United States without being deemed to have a taxable presence there.
All insurance entities are now licensed under the Insurance Act and are categorised into one of three classes with a single tax regime as follows:
|Class 1||Companies underwriting related-party insurance business||0%|
|Class 2||Companies underwriting third party business||2%|
|Class 3||Insurance intermediaries such as brokers, agents and salesmen, holding and management companies, loss adjusters and assessors||2%|
The annual requirements for insurance entities are as follows:
- Annual licence fee to be paid by January 31
- Audited financial statements to be filed six months after the financial year-end of the company (under review)
- Annual returns to be filed by January 31 of each year
- Annual general meeting of shareholders is required within 18 months of incorporation and after that, within 15 months of the previous annual general meeting.
Foreign Currency Permit
All entities that earn 100 percent of their income in foreign currency, from January 1, 2019, are entitled to receive an FCP. Find out more about foreign currency permits.
Economic Substance Requirements
The Business Companies Economic Substance Act took effect on January 1, 2019. This Act requires companies to satisfy the economic substance test in relation to any relevant activity carried on in Barbados by the company. The test involves an assessment related to the following:
- The extent to which the company is being directed, managed and controlled in Barbados
- Adequate number of physically present employees in Barbados relating to the activity, whether or not employed by the resident company or by another entity, whether on a temporary or long term contract
- Adequate expenditure incurred in Barbados
- Adequate physical assets in Barbados
- Conduct of core income-generating activities in Barbados i.e. predicting and calculating risk, insuring and reinsuring and providing insurance business services.
Other Insurance Structures
Segregated Cell Companies
A Segregated Cell Company (SCC) is an entity containing assets and liabilities legally segregated from the company’s general account and those of the other segregated cell accounts. An existing Barbados company may be converted to an SCC and an external company may be registered as an SCC or continued as an SCC in Barbados. An SCC must maintain records for the preparation of financial statements.
Advantages of SCCs:
- Legally protected from the adverse experiences of other cells, and the individual cell benefits accrue only to it
- May be transferred to another segregated cell company or to an incorporated cell company (ICC)
- Enjoy the benefits of a captive insurance company without having to form their own captive.
Companies with Separate Accounts
Companies with Separate Accounts are legal entities comprising separate accounts that are segregated from the insurer’s accounts and other segregated cell accounts.
A company with separate accounts differs from an SCC in the following ways:
- There are no multi-shareholder requirements
- It does not place the core capital at risk like the SCC does
- It is cost-effective but less versatile.
Incorporated Cell Companies
An incorporated cell company (ICC) comprises incorporated cells as part of its legal corporate structure. Each cell of the ICC is a separate legal entity with its own directors who may be different from those of the ICC. As separate entities, the cells within an ICC can transact business with each other and can sue and be sued. However, incorporated cells must have the same registered office as their ICC but may not own shares of the ICC.
Formation of an ICC:
- An external company may be registered as an ICC or continued as an ICC in Barbados
- An existing Barbados company can be converted into an ICC
- ICCs must submit annual returns for each of their incorporated cells
- An incorporated cell may be transferred to another ICC or to an SCC. The latter can also transfer cells to an ICC.
Advantages of an ICC:
- Using a common framework and central management can result in savings
- Assets/liabilities can be segregated according to class and risk
- Provision of more robust segregation of assets than the SCC and the company with separate accounts.
Read more about establishing and conducting international insurance business in Barbados, including tax exemptions and incentives, from the Financial Services Commission.