Barbados’ tax regime is compliant according to a recent assessment conducted by the Organisation for Economic Cooperation and Development’s (OECD) Forum on Harmful Tax Practices (FHTP). The Forum concluded that the tax laws of Barbados and 10 other jurisdictions are not harmful to other countries.
Zero or low tax countries that do not meet the ‘substantial activities requirement’ (SAR) will be considered harmful tax regimes. The SAR seeks to realign the taxation of profits with the core activities that generate them. For certain highly mobile business activity other than IP, the main income generating activities must be performed by qualified employees, reflect an adequate amount of operating expenditure in the domicile and the country’s ability to identify and enforce noncompliance. Generally, such activities include headquarters, distribution centres, service centres, financing, leasing, fund management, banking, insurance, shipping, holding companies and provision of intangibles. With regards to IP, the requirement is for compliance to the agreed-to “nexus” rules that relate to the “right to tax.”
The FHTP, which monitors progress and conducts reviews and assessments on countries offering preferential tax regimes, will from 2020 commence monitoring of zero or low tax jurisdictions to ensure that these countries also remain compliant with the SAR.
At the beginning of 2019, Barbados revised its tax regime, including converging its domestic and international tax rates and became compliant with the OECD’s Base Erosion and Profit Shifting initiatives.