Barbados is located in the archipelago of Lesser Antilles in the eastern Caribbean. This country falls under the British jurisdiction and it is officially headed by the monarch of Great Britain, and the Governor-General functions on behalf of the monarch. Despite the prevalence of local dialect, English is the official language of the country. In fact, the business activity in Barbados is focused in Bridgetown which is the capital of the country with population of half of natives. In Barbados, tourism is the most developed economic sector along with the sugar industry; recently, finance and information industry have been rapidly developing.
TAX SYSTEM IN BARBADOS
This is the country with the most loyal and comfortable taxation and a wide range of well-thought-out preferences and benefits. Double taxation agreements apply here signed with 16 states, such as Switzerland, the United States, China, Norway, the UK and many others.
Local regulations provide tax preferences for various entities registered in relevant jurisdiction:
- Providing a wide range of different benefits to non-residents
- There is no inheritance tax duty or property tax
- There is no capital yields tax and other indirect taxes
- It is possible to import raw materials, goods, equipment and plants without fees and duties
THE ENTIRE ACTIVITY OF THE COMPANY IS REGULATED BY THE SPECIAL LAW ON COMPANIES UNDER THIS JURISDICTION.
In Barabados, only such companies are alllowed to function following this law:
- Guaranteed protection of all process owners in terms of legislation
- Stable performance of authorities
- Negligible corruption
- Extensive tax incentives
- There is no regulation of foreign and exchange transactions
- Developed and highly protected legal area
- Acknowledgment of common reliability of jurisdiction by the Organisation for Economic Co-operation and Development, OECD
- Enforcement and promotion of many different types of investment mechanisms
- In the island, various types of business activity are allowed, such as mutual funds, limited liability companies, international commercial companies and trusts.
PECULIARITIES OF INTERNATIONAL COMMERCIAL COMPANY (IBC)
IBC type business is normally sought after to achieve most offshore tasks, since such corporate business form type is referred to be special form in compliance with the legislation of the international commercial companies of Barbados.
In achieve this status, the registered company shall be licensed and take measures for its renewal each year. Moreover, a corporation may be engaged in any operations not prohibited by local legislation. At the same time, commercial transactions are not allowed with local residents as well as impossibility to own any real estate in the territory of the country.
By the time when the shared capital of the company is created and formed, there are no mandatory obligations are in force in terms of shares issued. Individuals and legal persons residing in any country are allowed to be the IBC directors and shareholders. A sole shareholder is obligatory, apart from the Director and the Secretary.
DIFFERENCE BETWEEN POTENTIAL COMPANIES IN BARBADOS
The entire activity of the company is regulated by the special law on companies under this jurisdiction. In Barbados, only such companies are alllowed to function following this law:
- a Securitisation Cell Company (SCC)
- International Commercial Company (IBC)
Additionally, regardless of the business form chosen by the entrepreneur, the following is required in this country to register the corporation:
- To make a decision about the Secretary and Director
- To publish the Memorandum of Association and Charter of the company
- To declare the registration address at the territory of jurisdiction
- To submit a special request to verify and confirm the name at the Register
IBC (INTERNATIONAL COMMERCIAL COMPANY)TAXATION
Certain typical details are planned for corporations that functions under the special IBC status by local legislative act in taxation, including:
Tax exemption of dividends and other types of payments received from non-residents within the borders of the country.
Loyal tax regime provision.
Progressive income tax is applied, the source of which is in Barbados at the rate of 1-2.5%. There is no taxation of sources of dividend payments.
Among others, IBC should annually submit the audited financial report, if its total volume of assets or income exceeds $500 thousand US dollars. Also, if the company’s profit exceeds $1 million US dollars, an accountant from the Barbados Association of Accountants is required to do a balance audit.
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MAIN CHARACTERISTICS OF SCC (SECURITISATION CELL COMPANY (SCC)
SCC is a company that uses special schemes which are most protective for investors. To this end, two basic structures should be established based on assets:
General or reserve assets. Assets divided for “cells” (portfolios).
Reserve assets are formed for warranty granted to shareholders in case the size of their assets makes it impossible to pay for debts that appear.
Assets divided by cells are structurized individually (reserve and share capital, reinvested profit and the remaining) and they absolutely do not depend on those that are in remaining “cells” assets and, definitely, reserve assets. As a result, each cell has its relevant share package formed and relevant dividends are paid out. All obligations to creditors shall be redeemed only by means of particular cell at expense of which they were taken. This scheme will help to have to the most inferior associated costs for construction and, in the meantime, dispose of almost unlimited opportunities to diversify the company profile.
At the same time, all these dedicated cells are not legal entities, and therefore, they may be considered as a whole as a company with separated assets. Most often, SCC is used to put in force:
- Umbrella mutual investment funds.
- Schemes for collective investment.
- Different holding corporations.
- Banking sector.
- Captive insurance companies.
SCC CREATION AND FUNCTIONING (SECURITISATION CELL COMPANY)
Legislative acts of the country provide several options for SCC creation:
Creation of SCC from scratch in this legal field.
Transformation of the established and registered company in the given jurisdiction to SCC.
Transfer of a foreign corporation to Barbados-regulated field with further appropriation of SCC special status.
All SCCs of the countries refer to local tax residents and pay a fee on profit received within the country with interest that varies from 1 to 2.5 %. When the profit of corporation is outside the local legal field, it is not subject to taxation. Any of dedicated cells has its individual accounting and financial documentation.
All companies of this type are allowed to do any activity whether financial or not that is approved by the local Ministry of International Business.