International Business P - PwC
BARBADOS INTERNATIONAL BUSINESS COMPANIESA Guide for business executives involved in International Business and InvestmentActivitiesPWC
PricewaterhouseCoopers (www.pwc.com) is the largest professional service firm in theworld. We provide industry-focused assurance, tax, advisory and corporate servicesfor private and public clients, helping them to build value, manage risk and improveperformance.Across the Caribbean, the PricewaterhouseCoopers network provides a fully integratedrange of professional services to local, regional and international clients from officeslocated in Antigua, Aruba, the Bahamas, Barbados, the British Virgin Islands, theCayman Islands, Curacao, Grenada, Jamaica, the Dominican Republic, Puerto Rico,St. Lucia, St. Maarten, Trinidad & Tobago, the Turks & Caicos Islands and theU.S. Virgin Islands.
Table of ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2PricewaterhouseCoopers in Barbados and the East Caribbean . . . . . .3Why Barbados? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Establishing an International Business Company . . . . . . . . . . . . . . . . .6Start-up and ongoing operational costs . . . . . . . . . . . . . . . . . . . . . . . . .7THE ISLAND OF BARBADOSnIntegrity and Professionalism . . . . . . . . . . . . . . . . . . . . . . . .9nGeography, Climate and Population . . . . . . . . . . . . . . . . . .10nHistory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12nPolitics, Government and Judiciary . . . . . . . . . . . . . . . . . .13nEconomy, Trade and Industries . . . . . . . . . . . . . . . . . . . . . .14nMoney, Banking and Finance . . . . . . . . . . . . . . . . . . . . . . . 16nTransport and Communication . . . . . . . . . . . . . . . . . . . . . . 17nInfrastructure and Social Environment . . . . . . . . . . . . . . . 18AppendicesI.Key Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22BARBADOS INTERNATIONAL BUSINESS COMPANIESpwc1
IntroductionWith a long history of political and economic stability and commitmentto free enterprise, Barbados has developed into a major domicile forinternational business within the Eastern Caribbean.This guide has been prepared by PricewaterhouseCoopers East Caribbean. It providesbackground information to help business executives evaluate the advantages ofestablishing an International Business Company in Barbados.Executives who are already planning to establish an international business company here,or who wish more detailed information on the process or about specific issues, are urgedto contact one of the following partners with responsibilities for international business:Wayne Fields, Marcus Hatch, Charles Tibbits, Gloria Eduardo or Ashley Clarke.Contact information:PricewaterhouseCoopersThe Financial Services CentreBishop’s Court HillP.O. Box 111St. MichaelBarbados, W.I.E-mail: first name.last name@bb.pwc.comTel: (246) 436-7000 Fax: (246) 436-12752pwcBARBADOS INTERNATIONAL BUSINESS COMPANIES
PricewaterhouseCoopers in Barbadosand the East CaribbeanThrough its legacy firms, PricewaterhouseCoopers has roots inBarbados that go back to the 1860s. Officially known asPricewaterhouseCoopers East Caribbean, the partnership isheadquartered in Barbados with practices in Antigua, St. Luciaand Grenada.Through its Corporate Services Division, which is managed by AbacusManagement Services Ltd., the firm provides a complete range of services toforeign investors seeking to establish an International Business Company inBarbados.These include:nArranging incorporations, registration of external companies andcompany liquidations.nPreparing the application for the IBC licence and attendingdiscussions with the Ministry of Industry and International Businessfor the granting of the licence.nProviding a registered office and a company secretary, andnominating local directors.nMaintaining statutory records, acting as a company registrar anddividend payment agent; filing statutory returns and generallykeeping the company in good standing.BARBADOS INTERNATIONAL BUSINESS COMPANIESpwc3
Why Barbados?Already renowned as one of the premier holidaydestinations in the Caribbean, and recognized by theUnited Nations as among the top developing nations inthe world, Barbados also enjoys a well deservedreputation for integrity as an international business centre.Over the past 30 years, successive governments have painstakingly builta highly attractive environment for foreign investment and internationalbusiness. In addition to offering attractive tax concessions and incentives,the island has established a network of tax treaties with several countriesincluding the USA, Canada, The UK, Switzerland and China.Indeed, Barbados has continually enacted – and refined – legislation thatmakes the country a highly respected domicile not only for InternationalBusiness Companies but also for:nExempt Insurance CompaniesnQualifying Insurance CompaniesnInternational BanksnInternational Societies with Restricted LiabilitynInternational TrustsnMutual FundsBarbados has excellent international telecommunications links and iseasily accessible by frequent scheduled flights from the United States,Canada, Britain and Europe. In addition, the island is home to a welleducated and skilled population and enjoys a well-developedinfrastructure and a sophisticated level of services.Underlying legislation for International BusinessCompaniesA company incorporated or registered in Barbados may be licensed as anInternational Business Company in Barbados under the InternationalBusiness Companies Act, Cap. 77.Key IncentivesHere is some of the key tax and other incentives offered under theInternational Business Companies Act, Cap. 77:4nTax on income on a sliding scale, from a maximum of 2.5% toa minimum of 1%.nA tax credit in respect of taxes paid outside of Barbados, butonly insofar as it reduces the tax payable in Barbados to aminimum of 1%.nExemption from all withholding taxes on payments to personsnot resident in Barbados.pwcBARBADOS INTERNATIONAL BUSINESS COMPANIES
nNo capital gains tax or estate duty.nFreedom from exchange control regulations.nBooks and records may be kept in a foreign currency.nGuarantee of benefits and exemptions for a period of 15 years.nNo minimum capital or “thin capitalisation” required.nProvisions for inward and outward re-domiciliation.nAccess to the country’s tax treaty network.nConvention expenses allowed by US tax authorities.nModern and flexible corporate legal framework.nBranch operations may benefit from IBC status.nIncome tax concessions for specially qualified employees.nThe sale of foreign real estate or investments, and the transferof equity in an IBC are not subject to local transfer taxes andstamp duty.nAn IBC may import, free from all customs duties, machinery ormaterials for use in its business. A zero tax rate applies toIBCs that are wholly owned by a trust established andmanaged in accordance with the International FinancialServices Act, 2002.Principal internationaltax planningconsiderationsnCanada – As a result ofBarbados being a “designatedtreaty country”, an “active”international business inBarbados may remit dividendsto Canada out of its exemptsurplus. These dividends areexcluded from the taxation of aCanadian corporate investor.Popular intra-group uses of anIBC in this regard include atrader of Canadianmanufactured goods, a holdingcompany to “trap” foreigndividends offshore for aCanadian parent company, andsupplying funds for certain intragroup financing arrangements.(For this purpose, passiveincome may also berecharacterised as “active”.)nUnited States – The tax treatyRestrictions/RequirementsnAudited financial statements, where required, must be filed withthe Ministry of Industry and International Business on an annualbasis instead of the Registrar of Companies.nBearer shares are not permitted.nA company licensed as an IBC cannot provide goods orservices to residents of Barbados.nA company licensed as an IBC must maintain a local registeredoffice in Barbados.nA company licensed as an IBC must file a corporate tax returnannually.with the US contains aLimitation on Benefits (LOB)provision that is now standard inall of the tax treaties to whichthe US is party. The purpose ofa LOB provision is to prohibit anon-treaty taxpayer frombenefiting from the favourableaspects of the treaty.Notwithstanding this limitation,planning opportunities still existfor achieving economic benefitson outbound investments.nSwitzerland – The 1954UK/Swiss treaty still applies toBarbados by way of extension.A Swiss branch of a BarbadosIBC is not subject to Swisswithholding tax on certainactivities.BARBADOS INTERNATIONAL BUSINESS COMPANIESpwc5
Establishing an International Business CompanyAn International Business Company (IBC) is defined as acorporation that:nIs resident in Barbados.nCarries on a trade of buying or selling goods and services that existoutside of, and do not originate in, Barbados.nCarries on a trade of selling services to non-Barbados residents.nCarries on a trade of manufacturing products exclusively for exportoutside of Barbados.nIs licensed under the International Business Companies Act, Cap. 77.Any person or business seeking to establish an IBC in Barbados must firstincorporate a company under the Companies Act, Cap. 308 (See Appendix I)and then obtain permission from the Minister of Industry and InternationalBusiness in the form of a licence, to carry on an international business.Among other requirements, an application for the issue of a licence must statethe general nature of the international business the company proposes toconduct, and it must be accompanied by a declaration that the requirements ofthe International Business Companies Act, Cap. 77 have been satisfied. Inaddition, full details of shareholders and directors, including the resumes ofdirectors, must be supplied to the Minister.6pwcBARBADOS INTERNATIONAL BUSINESS COMPANIES
Start-up and ongoing operational costsEstimated start-up costs for an International Business Company (inUS dollars):Government FeesIncorporationApplication for licence Professional Fees (minimum)Incorporation (inclusive of legal fees)Corporate retainer (first year)Disbursements (estimate) 3902502,8501,5002605,250Independent local resident director – if required(minimum) 1,500 500 502501,5002,300 1,500Estimated recurring costs are as follows (in US dollars):Preparing and filing annual returnsand licence renewalGovernment fee for annual returnsGovernment licence fee for licence renewalRetainer feeLocal director (minimum fee)BARBADOS INTERNATIONAL BUSINESS COMPANIESpwc7
The Island of BarbadosAn ideal environment for international business
Integrity and ProfessionalismFor the past 30 years, successive governments in Barbados havediligently constructed a framework of legislation designed toencourage foreign investment and establish the island as a leadinginternational business centre in the Caribbean.Today, Barbados is a highly respecteddomicile for such entities asInternational Insurance Companies,International Business Companies,International Banks, Societies WithRestricted Liability, InternationalTrusts, and Mutual Funds.Throughout the process of enactingand refining the laws governinginternational business, the countryhas rigorously safeguarded itsreputation for integrity, respondingquickly to such international concernsas money laundering and lack oftransparency.Indeed, while offering a low-taxenvironment to internationalbusinesses, Barbados has, from thevery beginning, chosen to establish ahigh level of transparency and acooperative approach to sharinginformation sharing with taxauthorities in other countries.Professional ServicesThe island provides an excellent rangeof professional services – and highlyskilled professionals – to meet the needsof the international business sector.The legal profession is well establishedin Barbados, with many law firms thatspecialise in corporate and internationalbusiness law.All of the major international accountingfirms are represented through localpartnerships, offering assurance, tax,advisory and corporate services. Thereare several independent managementcompanies on the island that alreadyhandle the business of scores ofInternational Insurance Companies.BARBADOS INTERNATIONAL BUSINESS COMPANIESBarbados has tax treaties with the following countries:nnnnnnnThe United StatesCanadaThe United VenezuelaThe territories thatcomprise the CARICOMSingle Market andEconomyNOTE: To review the entire International Business Companies Act andother laws pertaining to international business, please visit the website ofthe Ministry of Industry and International Business at:www.barbadosbusiness.gov.bbpwc9
Geography, Climate and PopulationGeographyBarbados is the most easterly ofthe Caribbean Islands. Essentiallya “coral” island, with an areaof 166 square miles, it is situatedapproximately 1600 milessoutheast of Miami, Florida.The island is easily accessible byfrequent scheduled flights fromMiami (3.5 hours), New York City(4.5 hours), Toronto (5.5 hours),and London or Brussels (8 hours).ClimateBarbados has a tropical climateand relatively high averagetemperatures and humidity.However, these conditions aremoderated by the cooling effectof strong North East trade windsthat blow over the island.Temperatures during the dayrarely exceed 30C (86F).During November though March,conditions tend to be a fewdegrees cooler, while the monthsof July through October aregenerally more humid and wet.PopulationThe resident population of theisland is approximately 270,000.Approximately 94% of Barbadiansare of African descent, with theremainder being of Europeandescent and other nationalities.When segmented by age, 24%of the population is under 15,with 64% between the ages of 15and 64. The remaining 12% areover 65.10pwcTop: the island’s East Coast is noted for its rugged beauty and Atlantic swells.Bottom: The West Coast is famous for its crystal-clear waters, fine sandbeaches and luxury accommodation.BARBADOS INTERNATIONAL BUSINESS COMPANIES
Barbados is the most easterly of the Caribbean islands, situated about 1600 miles southeast of Miami, Florida.BARBADOS INTERNATIONAL BUSINESS COMPANIESpwc11
HistoryArchaeological evidence shows that the Arawaks, apeople indigenous to the Orinoco River area of Venezuela,inhabited Barbados from around 600BC. They were laterdriven out by the Caribs, who also migrated north from thesame area but who did not settle on the island.The Europeans knew about theexistence of Barbados since the16th century. However, the islandwas not settled until 1627 when agroup of Englishmen established aformal colony and planted tobaccoand cotton for export to England.After 1645, these crops werereplaced by sugar cane, whichfostered the development of theplantation system.From early on, Barbados enjoyedtrading relationships and otherties with the United States andlater Canada. In 1670, Barbadianimmigrants helped to found theState of South Carolina and itscapital city of Charleston.What is more, Barbados bears thedistinction of being the only countryoutside of the United States evervisited by George Washington whocame to the island in 1752.Since the abolition of slavery in1834, the descendants of Africanslaves who were brought toBarbados to underpin theplantation system have developedinto a thriving and industriouspopulation.Carved by aBritish armyofficer stationedon the island, thisstone lion is areminder ofBarbados’colonial past.The Corp ofDrums of theBarbadosDefence Forcewear uniformsthat date backto Victorian times.In 1966, after almost 350 years ofunbroken British colonial status,Barbados became a fullyindependent sovereign nation.The island is English-speaking andhas remained a member of theBritish Commonwealth.12pwcBARBADOS INTERNATIONAL BUSINESS COMPANIES
Politics, Government and JudiciaryPoliticsAn independent country sinceNovember 30, 1966, Barbados isnoted for its high level of political,economic and social stability, aswell as for the integrity of itsinstitutions. The country operatesas a well developed democracywith open elections held every fiveyears. There are two main politicalparties, the Barbados Labour Partyand the Democratic Labour Party.Elections are hotly contested, butare notably free of violence andcorruption.GovernmentBarbados enjoys a parliamentarystyle government, with a House ofRepresentatives and a Senate.The island’s first Parliament wasestablished in 1639, making it thesecond oldest in the WesternHemisphere.The function and powers of theGovernment are vested in Cabinet,presided over by the PrimeMinister. Senators are appointed:12 by the Government, two by theofficial Opposition, and seven“independents” on therecommendation of the GovernorGeneral who is the Queen’srepresentative and Head of State.JudiciaryThe legal system of Barbados isbased on English Common Law asmodified by Statute to meet localrequirements. The members of thejudiciary, in performing their judicialacts, are completely independentof the executive and legislativefunctions of Government.Top: The Parliament Buildings in Bridgetown – home to the second oldestparliament in the Western Hemisphere.Bottom: Mounted police in full ceremonial uniform.BARBADOS INTERNATIONAL BUSINESS COMPANIESpwc13
Economy, Trade and IndustriesBarbados embodies an open, small, free enterpriseeconomy. A Value Added Tax on consumption,implemented in 1997, has enabled the country to reduceits dependence on import tariffs and duties as a source ofrevenue, and also to improve compliance with WTO rules.In 2003, the country’s GrossDomestic Product (excluding netindirect taxes) was approximatelyBDS 4.4 billion. That same year,exports amounted to BDS 500million, while imports totalledBDS 2.39 billion. Domestic exportsconsist mainly of sugar and its byproducts rum and molasses,chemicals, clothing, furniture,electrical components and cement.Consumer goods, mostly food andbeverages, account for the majorityof the island’s imports – BDS 915million in 2003. That same year,intermediate goods and capitalgoods such as machinery for usein agriculture and manufacturing,accounted for BDS 2.26 billion ofthe island’s import bill.Based primarily on sugar until the1970s, the island’s economy nowhas four key productive industries:tourism, agriculture, manufacturingand international business.TourismTourism continues to play a key rolein the economy and has a positive“spin-off” impact on virtually all otherbusiness sectors. Currently, thisindustry accounts for about 11% ofthe employed labour force and is thecountry’s principal foreign exchangeearner. For example, in 2003, thegross annual earnings from tourismwere approximately BDS 1.46billion. The island attractsapproximately one million visitorseach year, with an almost equal splitbetween long stay visitors and cruiseship passengers.14pwcTop: St. Lawrence Gap, on the vibrant South Coast – heart of the island’snightlife.Bottom: This modern distillery produces fine rums for which Barbados isfamous.BARBADOS INTERNATIONAL BUSINESS COMPANIES
on this commodity and toencourage diversification, especiallyin vegetables, poultry, livestockand fishing. The island is virtuallyself-sufficient in pork, poultry, freshmilk and vegetables.International BusinessThis sector, which has steadilydeveloped since 1977, nowcontributes significantly to theisland’s foreign exchange earningsand provides employment forapproximately 3,000 Barbadians.Some unofficial estimates put thesector’s contribution to thecountry’s GDP at about 7.5%.Local crude oil production meets about half the islands domestic requirements.ManufacturingThe manufacturing sector inBarbados accounts forapproximately 7% of the island’semployed labour force and includesfood and beverages (especiall
of the international business sector. The legal profession is well established in Barbados, with many law firms that specialise in corporate and international business law. All of the major international accounting firms are represented through local partnerships, offering assurance, tax, advisory and corporate services. There
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