Believe In Barbados
Barbados is a fabulous island surrounded by coral reefs with picturesque beaches, lush tropical nature and an even, mild climate throughout the year. Its landscape is dominated by plains, but closer to the east coast, the relief becomes more mountainous, writes Rachel Smith.
The island is located at the eastern end of the Lesser Antilles archipelago. Its east coast is washed by the waters of the Atlantic Ocean, and the west - by the Caribbean Sea. Geographically, it is rather close to the South American continent, only 434.5 km northeast of Venezuela. Its closest neighbours are Saint Lucia and Saint Vincent & The Grenadines, both to the west of the island. It has an area of 431 km², with a mostly flat landscape.
Historically, the country is a former colony of Great Britain, where all British traditions are still carefully preserved - so much, in fact, that it is often referred to as Little England. There are also protected places on the island where unique species of tropical plants and animals have been preserved in the wilderness, so it is not surprising that it’s highly sought after by visitors from around the world.
Whilst Barbados may still be called a “developing country”, its specialisation in international services and high standard of living have earned it the standing of the 53rd richest country in the world, in terms of GDP (Gross Domestic Product) per capita. For more than 300 years, the nation’s primary industry has been the cultivation and processing of sugar cane, but in the 1970s, tourism rose to the forefront. Since the 80s and 90s, the attempts to diversify the country’s economy by attracting foreign investment, have paid off and created favourable conditions for developing new business.
Barbados is also on the list of those prestigious havens with low taxation. Though not the classic tax haven per se, one could still call the little Caribbean island a very attractive low tax jurisdiction, in which some types of taxes are absent.
In Barbados, there are no capital gains taxes, nor inheritance or gift taxes. However, these exemptions aren’t true for other sources of revenue; the authorities apply income tax and VAT, which in most cases is 17.5%. This is understandable, for if you want to live in a well-developed country with a modern telephone network, well maintained roads and a transport network, as well as good, free education, you will have to cash out some taxes.
In 2011, that tax rate in Barbados was of 20% for revenues up to 24,200 Bajan dollars (Bds$), and 35% for income over 24,200 Bds$. Pegged to the USD, one US dollar costs two Bajan dollars. Naturally, there is a deduction of 25,000 Bsd$, and for seniors over 60, this deduction goes up to 40,000 Bsd$.
So far, it looks like you will end up paying more or less the same amount of income taxes as in any other developed country, right? So why, then, do some people move to Barbados precisely for tax reasons?
In addition to the fact that in Barbados there is no tax on capital gains or inheritance, as a resident immigrant, you will only pay tax on the foreign income that you will transfer directly to Barbados (to an account at the Bank of Barbados). As a result, immigrants can completely avoid income tax if they keep the bulk of their income outside of Barbados.
Qualified professionals from abroad, who specialise in international business or work in the financial sector can expect a 35% discount, that is -35% of their income is not taxed for the first three years of living in Barbados.
If you want to work in Barbados, you will have to pay national insurance, which again, by the standards of a tax haven, is quite high: 10.1% of it is paid by the employee and 11.25% by the employer. For self-employed professionals, the insurance is of 16.1%. However, this national insurance is paid only by revenues earning up to 4090 Bajan dollars a month. This contribution should otherwise not worry you at all if you intend to live off your investment income or retirement. On the other hand, if you decide to open a business in Barbados, you ought to consider the addition of national insurance to your expenses.
In Barbados, there is also a property transfer tax paid by the person who sells the property on the island’s premises. For amounts that exceed 125,000 Bsd$, this tax is of 2.5% plus a 1% on printed levy. The country also has an annual land tax, which property owners in Barbados must pay. For the first 150,000 Bajan dollars, it is of 0%. Over the next 250,000 - 0.1% Over the next 600,000 - 0.45%. For amounts over one million Barbados dollars - 0.75%
For example, if you own a home in Barbados that costs half a million US dollars or 1 million Bsd$, you will then pay an annual land tax of $1,475. Senior citizens enjoy a 50% discount on this reduction.
By the end of 2019, Barbados had signed 38 international treaties, of which, 34 are double taxation treaties, and 4 are tax information exchange treaties.
Corporate tax in Barbados is also considerable. The basic rate is 25%, and the rate for small businesses is 15%. In order to qualify for a lower tax rate, a business in Barbados should fit the following: 1 million Bajan dollars or less in prepaid capital, a turnover that does not exceed 2,000,000 Bsd$ and less than 25 employees.
CITIZENSHIP AND RESIDENCY
If you have no particular reason for using an offshore company that is registered in Barbados, it is advisable to refrain from registering offshore in Barbados. However, if you do end up having to register an offshore company in Barbados, it is better to choose one in the sphere of international business. If your offshore company is trading (as opposed to investing), then your corporate tax rate may be from 1 to 2.5%.
So, all that considered, you may wonder: who can use Barbados to save on taxes? What would constitute a scenario where taking your business to the island may prove profitable and beneficial? Although the income tax in Barbados is relatively high, you can easily protect your overseas income from the state.
For starters, you become a resident of the country if you remain on the island’s territory for 182 days in a calendar year, which happens to be the same duration as the tax year in Barbados. It is also suitable for those who wish to save on their capital gains taxes. The island has enough double tax treaties that can reduce the input tax in other countries.
Barbados is equally great for its milieu, if you wish to mingle among the rich and famous, and network in the high society. Many celebrities, whether in the world of entertainment or the realm of business, own real estate on the island’s premises, and no less famous guests often come to visit them. Naturally, this makes for a quite affluent social environment.
All in all, the country is a rich island with a well-developed infrastructure. The literacy rate in Barbados is one of the highest in the world at 98%. Here, wealth is put on display, with the most modern, expensive vehicles driving down the streets amidst luxurious villas. The cost of living in Barbados is thus very high. This likely doesn’t apply to you, but Barbados is definitely not the place to relocate to if you don’t have the money. On the bright side, Barbados has a huge selection of luxury real estate, excellent beaches and a low crime rate. In general, Barbados has a very high standard of living, for those who can afford the bill.
If you are thinking about buying a house in Barbados, then real estate is available here without any additional restrictions and you will not need to get a license like in many other tax havens. Property prices in Barbados are higher than in the British Virgin Islands, but not as high as in Bermuda.
BARBADOS REAL ESTATE
If you start with the most expensive real estate in Barbados, then you can choose a beautiful house with four bedrooms, that is located right on the beach for about £2.5 million. However, you can also find fantastic houses, condominiums and apartments with seaside views and pools, all around the island, for amounts ranging anywhere from £400,000 to £1,000,000.
Of course, there is also real estate in Barbados that costs less than £300,000, but it will take quite some effort to find it. A one-room studio apartment in Barbados can be bought for £100,000 pounds. The commission of real estate agents in Barbados is 5% and it is paid by the seller. EG