The House of Assembly moved to repeal its companies legislation on Tuesday in a bid to protect Barbados’ image as a well-regulated global financial centre and to comply with new global minimum tax standards.
Companies earning more than US$850m or €750m annually in their global operations, no matter where they may be located, will be required to pay a minimum corporate tax of 15 per cent when the Companies (Economic Substance) Repeal Bill becomes law.
Finance and economic affairs minister Ryan Straughn explained that the corporate tax landscape was shifting, and because they were incorporated into global compliance standards such as anti-money laundering and countering of terrorist financing, the island was committed to keeping its name from any of the adverse lists that impact the country’s ability to attract investment and do business.
With the repeal of the economic substance legislation, companies paying the nine per cent corporate tax rate and the top-up six per cent will no longer be required to produce economic substance filings.
“These amendments before the chamber today are part of the government’s continued work to ensure that we restore confidence in the name of Barbados… and part of our thrust is to ensure that we are able to give confidence to the international community about what we were doing in Barbados,” the junior finance minister told the House.
He explained that back in 2018 when the new Mottley administration introduced economic substance legislation and later converged the island’s corporate tax to remove any distinction between international businesses and local business, it was “part of the reporting to demonstrate to the world that we weren’t just having shell businesses… but we [have] a lot of people actually doing substantive activity in Barbados”.
He added: “We introduced this thing called economic substance as a mechanism to allow for our global partners to have information about what was happening in Barbados. And when I say global partners, I mean specifically the competent authority, meaning the entity that is responsible for administering tax in any jurisdiction, that wanted to know what a company that was domiciled or predominantly headquartered in their jurisdiction, what they were doing in Barbados, that our Barbados Revenue Authority, in collaboration with the international business unit here, would present information to that other tax authority in order to show that we were not allowing companies to shift their profits in order to avoid paying taxes in those jurisdictions
Straughn, a minister in the Ministry of Finance and Economic Affairs, said: “It means now that Barbados is no longer deemed to be a low-tax jurisdiction, notwithstanding the fact that we still have a couple sectors… like for example insurance and international shipping, [but] the reality is that the majority of businesses in Barbados have met the standard, with respect to what we have agreed, because of the top-up tax of six percent, which would apply to those… companies that earn more than €750 million annually.” (IMC)
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