With the United States having eased restrictions on the Spanish-speaking Caribbean island, Bruce Zagaris, a prominent American tax attorney who has long-standing working relationship with Barbados, said the island was well poised to act as “an intermediary for foreign investment” in Cuba.
In a new analysis on investing in Cuba, the lawyer said “the potential investors who may want to access Cuba from Barbados will include, especially in the near term, hotels and other businesses engaged in tourism and related activities”.
This included “transportation, as well as enterprises involved in telecommunications, building and construction, financial services, and agriculture”. Importantly, all of these activities “are also all liberalised under the revised US sanctions,” he explained.
Zagaris said much of the potential advantage for foreign investors in Cuba using Barbados as a conduit for such investments “results from the fact that Barbados has both a double tax agreement and a bilateral investment treaty with Cuba, and that the CARICOM and Cuba have a Trade and Economic Cooperation Agreement”.
“As of June 1, 2011, Cuba had income tax treaties with Austria, Barbados, China, Portugal, Qatar, Russia, Spain, Venezuela, and Vietnam. The treaties with China, Portugal and Vietnam only apply to income while the others apply to both income and capital. Of those treaties the one with Barbados is among those potentially useful for planning purposes,” he noted.
“The 1999 Barbados-Cuba Income Tax Treaty applies to personal income tax and tax on profits in Cuba.
“Significantly, the DTA does not have treaty abuse provisions. It means that significant planning opportunities exist if foreign investors want to engage in tax planning through Barbados entities.
Cuba also has a bilateral investment agreement with Barbados and Barbados is also a signatory of the CARICOM-Cuba Trade and Economic Cooperation Agreement.
In terms of Cuba’s overall investment potential, Zagaris said “as the economic liberalisation in Cuba continues, the traditional investors, including Canadians, Europeans and Latin Americans, are likely to deepen their own investments as the income of Cuban people increases and as more non-Cubans start spending time in Cuba for second homes and extended visits”.
“However, given the comparatively low levels of Cuban income, the market for Cuban purchasers of services and products will increase rather slowly. The entry of US banks and credit cards as well as the increased amounts of remittances by the Cuban diaspora and the increased activities of Americans in Cuba is bound to have some multiplier effect,” he added.