For personal income tax calculation in Barbados, residency status is the most important factor in determining the tax basis for the personal income tax.
For individuals that are residents, as well as domiciled in Barbados, aggregated (or worldwide) income is considered when calculating the tax liability.
For individuals that are residents, but are not domiciled in Barbados, only that income is considered as taxable income that is sourced or earned in Barbados. Additionally, income that is sourced outside Barbados is only used to an extent of the income being remitted in Barbados.
On the other hand, non-resident individuals are only taxed on income that has been earned within Barbados. Non-residents in Barbados are not entitled to any personal deductions that have been drawn against income.
Personal Income Tax Rates
There are two effective rates that are applied on Personal Income Taxation in Barbados. The basic rate on personal income is levied at a rate of 12.5%. Additionally, a higher rate is also levied at a rate of 28.5%. The basic rate is applicable on the first BBD (Barbadian Dollar) 50,000. The higher rate is applicable to the income earned over BBD (Barbadian Dollar) 50,000. This is further summarized as follows:
- For a taxable income between BBD (Barbadian Dollar) 0 to BBD (Barbadian Dollar) 50,000: A Basic Tax rate is levied at a rate of 12.5%
- For a taxable income higher than BBD (Barbadian Dollar) 50,000: A basic tax is levied at a rate of BBD (Barbadian Dollar) 6250. Additionally, a tax of 28.5% is levied on the excess amount.
Other Personal Taxation
- National Insurance Contribution: All employed individuals between the age of 16 and 67 are supposed to be insured under the National Insurance and Social Security Act. The social contributions are calculated as a percentage of earnings up to a maximum of insurable earning BBD (Barbadian Dollar) 4480 per month, or 1,126 per week.
- Consumption Taxes: Consumption Taxes are also levied at a rate of 17.5% on the value of goods and services that are imported (or locally supplied) in the open market by the entities that have registered themselves for VAT.
- Stamp Duty: Barbados has also imposed a stamp duty on various different instruments, which also include different written documents. There are different stamp duties that are applicable to documents that are registered for the transfer of shares, as well as real estate. The relevant stamp duty rates are given below:
- On the sale of shares of companies that are listed on the Barbados Stock Exchange: No stamp duty is applied.
- On sale of real estate, leases as well as shares in private companies, a stamp duty of BBD (Barbadian Dollar) 10 per BBD (Barbadian Dollar) 1000 is levied.
- On mortgages, a stamp duty equivalent to BBD (Barbadian Dollar) 3 on every BBD (Barbadian Dollar) 500 is levied.
Corporate Taxation in Barbados
Corporate Income Taxation in Barbados is contingent on the residency status of the registered entities. As far as resident entities are concerned, it can be seen that they are taxed on their aggregate income (i.e. income sourced from within Barbados, as well as income sourced from outside Barbados). However, the income is also adjusted for expenses that are incurred in calculating income in the relevant fiscal period, to be within the time frame of 53 weeks (or the respective fiscal year).
On the other hand, non-resident companies are levied corporate income tax only on the income that has been sourced within Barbados.
Corporate Income Tax Rates
For corporate income taxation, the following rates are levied:
- For a taxable income up to BBD (Barbadian Dollar) 1,000,000: Corporate Income Taxation is levied at a rate of 5.5%.
- For a taxable income between BBD (Barbadian Dollar) 1,000,000 and BBD (Barbadian Dollar) 20,000,000: Corporate Income is taxed at a rate of 3%.
- For a taxable income between BBD (Barbadian Dollar) 20,000,000 and BBD (Barbadian Dollar) 30,000,000: Corporate Income is taxed at a rate of 2.5%.
- For a taxable income exceeding BBD (Barbadian Dollar) 30,000,000: Corporate Income Taxation is levied at a rate of 1%.
- For international business, companies, banks with restricted liabilities: Corporate Income Taxation is levied at rates varying between 1% and 2.5%.
- For class 1 insurance companies: No Corporate Income Tax is charged.
- For class 2 insurance companies: Corporate Income Taxation is levied at a rate of 2%.
Other Corporate Taxation in Barbados
The following taxation is levied on companies in Barbados:
- Value Added Tax (VAT): A consumption tax in lieu of Value Added Tax is levied at a rate of 17.5%. This is applicable for all entities established under the VAT regime. In this regard, the threshold for VAT registration is set at BBD 200,000.
There are also some supplies which are zero-rated in terms of VAT. Examples include basic food items, as well as prescription drugs and crude oil. In the same manner, there is a reduced rate of 10% that is also applicable on supply of accommodation by hotels, and resorts.
- Custom Duties: Custom Duties are applied on all imported goods at varying rates.
- Excise Taxes: Excise Taxes are applied on five categories that are both, locally manufactured, as well as imported. They include sweetened beverages, motor vehicles, alcoholic beverages, tobacco, and petroleum. They are all subject to a specific tax rate. However, the method of calculation of these taxes is mostly ad valorem.
- Fuel Tax: A fuel tax is also imposed at a rate of BBD 0.4 per liter on gasoline and diesel. Kerosene is levied a fuel tax of BBD 0.5 per liter.
- Tax on Assets: A tax is imposed on assets of credit unions, or insurance companies. It is charged at an amount of 0.35% per annum. It is a prorated tax, and is paid at an interval of every three months.