This article looks at how to establish tax residence in Barbados along with information on the different taxes in Barbados and how they are levied.
It’s important to note that, in Barbados, the rate of corporate income and personal income tax you pay will largely depend on what your exact status is.
As a Common Law jurisdiction, Barbados’ domiciliation laws are similar to that of the UK. So your residency and domiciliation status will notably affect your taxable income.
Although this article covers the topic of domiciliation in more detail, if you want to get direct advice on tax planning get in touch with our team and we can advise you directly.
Why Barbados?
Barbados is a low-tax Caribbean country that doesn’t always garner the same attention as some of its neighbors, such as the Bahamas or the Cayman Islands.
That said, it does offer the same lifestyle advantages plus a fairly decent passport which grants visa-free access to the UK and Europe. Barbados also allows for dual citizenship.
It’s an English-speaking country, and the official currency, the Barbadian Dollar, is pegged 2:1 to USD. So no need for confusing, on-the-fly calculations, you just need to divide by two to get prices in US dollars.
Tax Residence In Barbados
As per standard tax residence rules, you automatically become a tax resident in Barbados if you spend more than 183 days in the country within a single calendar year.
Alternatively, you will be considered a tax resident if you become ordinarily resident in Barbados within a given fiscal year.
To become ordinarily resident in Barbados, you will need to maintain a permanent abode in Barbados and also inform the tax authorities of your decision to live in the country for a minimum of two consecutive years.
Barbados tax residence is just one part of the equation, however. You must also factor in your domiciliation status to ensure you are not paying taxes unnecessarily.
Barbados Tax Residency & Domiciliation
As with many other Commonwealth countries, Barbados is a Common Law jurisdiction that retains many legal concepts inherited from Britain.
This includes the concept of domiciliation. So, in addition to being a tax resident in Barbados, you must also consider whether or not you are domiciled there.
To those who are not familiar with the concept, the question of domiciliation can be a confusing one, though ultimately, it comes down to where you consider your true home to be. And, subsequently, how this can then be demonstrated in practical terms to determine your tax status.
So, for example, if you are resident in Barbados but do not intend to live there permanently and instead plan to return to your home country, then your home country, not Barbados, is your domicile.
If, on the other hand, you wish to move to Barbados permanently, and it can therefore be proven that Barbados is the country you wish to call home, you will be deemed to be domiciled in Barbados.
The distinction makes all the difference because if you are both resident and domiciled in Barbados, you will be taxed on your worldwide income.
But if you are resident only and not domiciled, you will only be taxed on your locally sourced income plus income which you bring directly into Barbados. You will not be taxed on income derived from overseas, provided you don’t bring it into the country.
Non-Dom Taxation
Similar laws exist in the UK, Ireland, Malta, and Cyprus, allowing individuals to claim non-dom status for tax purposes.
So if you wish to live the Nomad Capitalist lifestyle, it’s a good idea to learn the ins and outs of domiciliation law since it can have a significant effect on the amount of income tax you pay.
Being resident but not domiciled in Barbados, therefore, has its advantages, but as with all things tax-related, these rules can seem confusing to the uninitiated.
This is why we always recommend seeking advice from trusted professionals to ensure you know what your true tax liability is to ensure you’re not being taxed unnecessarily.
Finding a trusted tax consultant in a new country can be time-consuming, of course. Plus, you must always keep in mind that local tax consultants always have a vested interest in selling you solutions native to the country they operate in. So although they’re experts in that country they only want to sell you solutions tied to that county and lack that much-needed international perspective.
Is Barbados the right place for you? Or would your specific needs be best served someplace else? An expert who only advises on Barbados taxation won’t tell you. But as a Nomad Capitalist client, we can advise you on a wide range of options to help find an offshore solution that fits you like a glove.
Barbados Income Tax
Barbados’ personal income tax is charged at the following rates:
- The basic rate, which applies to the first 50,000 BBD of taxable income.
- A higher rate of 28.5% which applies to income above 50,000 BBD
As you can see, by default, personal income tax rates in Barbados have a greater impact on higher earners.
Quite understandably, there is some pressure on the government to change those rules, but, at the time of writing, there are no plans to do so. So this two-tier system will remain in place for the foreseeable future.
However, as we’ve seen, your taxable income varies depending on your status. Whether you are taxed on income derived from overseas or not will depend on whether you are resident in Barbados or if you are a non-resident individual, as well as on your domiciliation status.
If you are resident and domiciled in the country, you will be taxed on income derived from overseas and on income earned from inside Barbados.
If, on the other hand, you are tax resident but not domiciled in Barbados, you will be taxed on income earned from inside the country, but you won’t be taxed on income derived from overseas.
The only exception in this case is when income earned overseas is remitted into Barbados from abroad.
Confusing? It can be, which is why we recommend getting assistance from professional tax planners. And if you’re still not sure whether or not Barbados is the right solution for you, get in touch and let us help you create your special Nomad Capitalist Action Plan.
FAQ
No. Although by many common definitions Barbados is often referred to as a tax haven, Barbados is not officially classified as one and was removed from the OECD list in February 2023.
Barbados is a low-tax (rather than a zero tax) jurisdiction and one that has the advantages of having zero capital gains tax and a UK-style non-dom tax system.
The recent Barbados tax changes were a consequence of the pandemic. The Barbados Revenue Authority made temporary changes to tax laws imposing a levy on local-sourced income such as business income, dividends income, rental income and other passive income sources for those earning 6,250 BBD or more per month, running from April 2022 and expiring in March 2023.
Yes, Barbados has double tax treaties with 40 countries, including the US, Canada, the UK, and Switzerland. In addition, Barbados has double taxation treaties with the Caribbean Community (CARICOM) countries.
Taxes in Barbados range from a 17.5% rate for both GST and VAT, to variable rates of stamp duty and corporate income tax. Barbados does not charge capital gains tax.
Sales of shares listed on the Barbados Stock Exchange are exempt from stamp duty.
Otherwise, for shares or real estate, the stamp duty is 10 BBD per 1,000 BBD. Meanwhile mortgages have a stamp duty of 3 BBD per 500 BBD.
Under the National Insurance and Social Security Act, all gainfully employed individuals between the ages of 16 and 67 must be insured and pay social security contributions.
If you are self-employed, you must pay 17.1% each quarter on earnings of up to 4,880 BBD a month.
Self-employed individuals make quarterly national insurance contributions of 17.1% on earnings of up to a maximum of BBD 4,880 per month.
The corporate income tax you pay in Barbados depends on where your corporate income is derived and where your company is registered.
Companies which are registered in Barbados are liable to pay corporate income tax on all sourced income, both local and worldwide corporate income.
Companies that are not resident in Barbados, however, only need to pay corporate income tax on corporate income derived from inside Barbados.
The rate of corporate income tax you pay also varies, depending on how much your company makes in a given fiscal year. As of the time of writing, corporation tax in Barbados is levied at the following rates:
Taxable income between 1-20 million BBD: 5.5%
Taxable income from over 20 to 30 million BBD: 2.5%
Taxable income of over 30 million: 1%
This does not apply to insurance companies, however, and once again, the rate of corporation tax varies.
Class one insurance companies are exempt from tax, while class two and three insurance companies are taxed at a rate of 2%.
