Business in Barbados 2010

SPECIAL REPORT 2010

Business in

Barbados

Regulating for Growth

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Trading with Foresight

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MarketTalk: Incentives to Invest

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INTRODUCTION Leading the Caribbean from the early days of sugar through the tourism boom and into the offshore business arena, Barbados has developed a distinctive structure of services and facilities. Located directly between the Americas and Europe, Barbados

is a well-respected, well-regulated international business jurisdiction with investor friendly features that include a stable political, social, and economic environment, appropriate regulation, good infrastructure, an educated workforce and cost competitive support services. Therefore, it comes as no surprise that the island’s economy is stable, making it a leading attraction for international business and investors. These factors, together with its expanding tax and bilateral investment treaty networks, attractive business incentives, and relatively low rates of domestic inflation, all add to the appeal. With recent changes in international tax structure, especially in the UK, it cannot be denied that companies utilising a reputable and well-regulated low tax financial centre like Barbados, shall inevitably be more competitive than those who do not, and will ultimately be more successful, with the wealth saved from bureaucratic agents of waste responsible for creating a substantial competitive advantage. Private banks and wealth managers are advising high earners to act now to protect their income and avoid the potentially ghastly impact of the new top rate income tax that requires people earning over £150,000 to be subjected to an incredible income tax rate of 50%, while the upper rate for dividends has also increased by a further 10% to 42.5%.

Barbados also known as “Little England” by its neighbours is the most easterly Caribbean Island, and is the leading Caribbean tourist destination for repeat visitors. Often referred to as “The Rock” by its natives, Barbados has always been a hard place softened by the ingenuity of its inhabitants. You may be wondering: what else has helped to make Barbados continuously appealing?

While the melodious sound of crystal clear waters that reflect every imaginable shade of blue crashing upon white, sandy beaches doesn’t hurt, many consider its booming property market and further development of luxurious accommodation and residential communities to be the key. Visitors and corporate investors keep coming back for a wide range of reasons, including: world class fine dining, a diverse, high quality shopping experience in locally owned stores featuring indigenous arts and crafts, set alongside international boutiques, with the added benefit of an established tax-free policy.

Building on those advantages, and focusing its efforts on attracting foreign direct investment in the most productive sectors of the economy, the government of Barbados is committed to continuous improvement in the level of service provided by each of the regulatory agencies in Barbados. The Barbados International Business Association, arguably the loudest industry voice linking the government and business community, further seeks to be the catalyst for creating and maintaining the commitment of the private and

T: +44 (0)20 7125 0579 F: +44 (0)20 7183 8393 info@globalinvestmenti.com www.globalinvestmenti.com

public sector to a unity of purpose in the efforts to expand the attraction of Barbados to investors.

The Association has played a key role in helping Barbados become the preferred low tax destination for International Business, particularly in the areas of information technology, intellectual property, manufacturing and financial services. These businesses have found the legal, financial and accounting services offered by local Barbadian companies to be of the highest accord. In recent years, the Barbados government, in cooperation with the Association, has focused heavily on improving the investment climate of Barbados and on enhancing the infrastructure to support increasing business activity.

Measures taken include improvements to the Corporate Registry, and the expansion of its bilateral and tax treaty network with 18 countries from China to the US, all reasons Barbados will continue to attract and sustain international investment.

If thinking of establishing a business in Barbados, utilisation of the services of Invest Barbados is a good place to begin. Invest Barbados opens windows to the procedures necessary to the set up process. In close cooperation with all government ministries, IB provides smooth access to administrative information including laws, standards, regulations, incentives and business conditions around the nation. Their pre-investment facilitation includes services such as: provision of social, political and economic information, guidance on registration requirements and provision of relevant legislation. After the decision to set up is made, they will provide guidance on: identification of service providers offering international tax planning, auditing, corporate secretarial and management services, applications for the relevant corporate/international company licenses, and registrations with the Central Bank, Inland Revenue Department, work permit applications, banking arrangements and many more.

Highly ranked worldwide as a premier destination for innumerable reasons, regular holiday makers, businessmen and celebrities alike continue to enjoy the perfect mix for business opportunity, outdoor leisure time, and the many unique luxuries the island offers. Indeed, Barbados certainly offers something for everyone.

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Editor: Robert Rimsky Project Manager: Kuljit Kaler Regional Director: Joseph Bove Design: The Arland Group

Business in Barbados

Regulating for Growth Strategic strides over a rocky road.

The Central Bank of Barbados was established in May of 1972 by the Government of Barbados to advance the pace of economic development in the country. At its inception, the Cen-

tral Bank of Barbados had certain stated objectives. These were: promoting monetary stability, promoting a sound financial structure, fostering development of the money and capital markets, channelling commercial bank credit into productive activities, and fostering credit and exchange conditions conducive to the orderly and sustained economic development of Barbados. The founding of the CBB has been a major key to accelerating the pace of Barbados’ economic development in the post independence era. Since then, the CBB has become the premier financial institution in the country, and its main policy is to formulate, in association with the government, monetary and fiscal policies to assist with the country’s economic development programme.

As witnessed globally over the past three years, the failure of a bank can undermine the stability and integrity of the entire international financial system. If one bank fails, consumer confidence is lost in the entire system, and depositors will want to remove their funds from the banks, resulting in a run on liquidity that shall inevitably cause chaos and an inability to lend. In an effort to avoid such follies, the Bank Supervision Department of the Central Bank of Barbados conducts both onsite and offsite inspections of all licensed financial institutions. Onsite inspections are conducted at the premises of the financial institution by a team of examiners, and are usually done within a two-year cycle. Some institutions may, however, require more frequent visits in an effort to strengthen the quality of their operations.

The government of Barbados is moving swiftly to have the Financial Services Commission, (FSC) in place by June this year. The FSC would regulate the insurance sub-sector, the co-operative sector,

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the Stock Exchange and the non-banking financial sectors. The careful and effective supervision and regulation of international business and financial services activity in Barbados constitutes a critical element of Government’s policy for the development and expansion of this sector.

Consequently, ensuring the adequacy and soundness of its legal basis, either through the revision of existing legislation or the introduction of new ones, is fundamental to the achievement of that objective. It is expected that the establishment of the FSC will, in itself, help to regulate the sector, and certainly increase Barbados’ presence as a financial services domicile of good international repute. Certainly at this particular time in its history, and given the external factors that surround the global financial crisis, business of high volume is welcomed and is necessary in Barbados.

Establishment of the FSC will certainly facilitate that need.

With respect to Barbados’ financial institutions, the Central Bank has many roles.

The CBB determines what proportion of their deposits they should invest in Barbados Government Treasury bills and Debentures, fixes the exchange rate and commission charges by the commercial banks dealing in foreign currencies. The CBB also regulates commercial banks’ lending and the deposit rates of interests, provides banking services to commercial banks, financial institutions, and acts as financial adviser to Government Statutory institutions which are required by law to consult with the Central Bank before entering any credit agreements.

Another factor of major importance to the bank examiner is the strength of the corporate governance within the bank.

This relates to the structures and relationships through which the objectives of the entity are met, and includes a full assessment of the role of the board of directors, the management of the entity and the strategies, policies and practices that they have implemented. Inspections also allow

for an assessment of the internal controls system of the licensee, a factor that is critical for good bank management and for a safe and sound operation. Arising from the assessments undertaken, the examiner can determine areas of deficiencies. A report is prepared detailing the condition of the licensee’s operations, and often makes recommendations for improvement, where necessary. The report is provided to the institutions board of directors at the end of the process, and subsequently acted upon.

The process of inspection cannot simply depend upon the onsite visits, however, but must be a continuous one, looking at all angles so as to ensure market fluidity.

Continuous assessment is therefore undertaken by way of the offsite surveillance process. During this process the examiner undertakes a thorough analysis of the operations of the entity, such as the Barbados Stock Exchange, for instance, and seeks to maintain a liquidity risk management guideline for vested parties using monthly and quarterly detailed information submitted by the institution. The examiner can therefore establish trends in the operations. Negative trends may serve as an early warning device, prompting an onsite inspection. The combination of onsite and offsite inspections is a key international standard for effective banking supervision.

Looking toward 2010 and beyond, the CBB expects the continued thrust toward economic diversification of the Island to allow for an evasion of the widely seen global meltdown of recent years. Because of the fact that the Barbadian economy is not as tourism-based as other Caribbean locales, the GDP has remained steady in the face of tough economic times. This fact, coupled with a large inflow of long-stay arrivals, principal among which are the business and family ties that exist between the UK and Barbados as a legacy of the Island’s colonial past, has investors looking toward bright, profitable days to come. l

Business in Barbados

Trading with Foresight Prudent investment in volatile times.

Founded in 1987, the Barbados Stock Exchange is a privately owned electronic stock exchange made up of loosely affiliated stockbrokers and dealers. On July

4, 2001 the BSE switched from the manual, open auction outcry method of trading, to electronic trading using the order routing method, which has made it very easy for customers and entrepreneurs to take advantage of new technologies. Headquartered in Bridgetown, Barbados, the market can be accessed from all over the world. Most items traded on this stock exchange are commodities and financial instruments, and have historically held stable prices. In general, the time to watch this exchange for huge, profit producing swings is during hurricane season, when large nasty storms can blow commodity values all over the board. The financial sector of the Barbados Stock Exchange includes not only local companies, but also international ones, and the overall value has shown a steady increase since its inception.

counterparts. All Caribbean nations have faced their challenges in the last year, and thankfully, due to its forward thinking and fiscally conservative nature, Barbados continues to be a place where people from other countries want to own homes, visit on holidays and do business.

The Barbados Stock Exchange is among the four major Caribbean stock exchanges, with the other three being the exchanges of Jamaica, the Eastern Caribbean and Trinidad and Tobago. Because of Barbados’s relatively open financial system and strong economy, it is probably the most financially secure and stable. The BSE is the third largest stock exchange in the Caribbean region. The BSE, along with officials from Jamaica and Trinidad and Tobago, are working to integrate these stock exchanges into a single unit known as the Caribbean Exchange Network.

Barbados has both a domestic and international (offshore) financial sector. Several of the largest and most well known Canadian banks, including Royal Bank, CIBC and Scotiabank have international offices in Barbados offering portfolio and wealth management solutions to a range of international clients. In addition, Barbados also has a number of local regional banks and financial service companies which have developed world-class investment products and services, including mutual and pension funds, segregated investment accounts, trusts and insurance policies which cater specifically to the needs of individual and corporate international clients. Some of the better-known names include Sagicor, Butterfield, BNB, Cidel, DGM, G&T and Fortress.

Barbados and the Caribbean, like the rest of the world, felt their economic reality sway in the wake of the 2008/09 global financial catastrophes. Real estate markets held relatively strong in Barbados, but still, as with the rest of the world, there were adjustments to be made. Local Barbadian businesses tend to be conservatively capitalised, and so they have been able to adjust to the slower economy. Regional equity markets have stood significantly sturdier when compared with their global

There is a complete range of banking, investment and insurance products available in Barbados, and over time, economists expect to see growth in both the regional and offshore fund management areas to mirror the growth of the Barbados Stock Exchange. Barbados and other Caribbean equity markets have been among the very few in the world not to enjoy a significant rally in 2009. As a result, there are a number of very well run regional companies available on BSE at very attrac-

tive valuations. Regional mutual funds like Fortress Caribbean Growth Fund are an easy way to gain access to these niche markets. In global terms, UK investors can make use of a presence in Barbados to reduce tax while still having access to high quality global investment management services. This presence can range from insurance policies, a pension plan, trusts and International Business Corporations all the way to taking up residence in Barbados directly. Barbados has no capital gains tax and no inheritance tax which makes it all the more attractive.

Indeed, if you’re looking for a good stock index to invest in, the Barbados Stock Exchange is worth a look. It has held surprisingly good numbers for a small regional exchange since its inception, and will probably grow in importance over the future. Since the beginning, through frugal, prudent investment, the Barbados Stock Exchange index value has more than doubled—it is expected this trend to continue via its low-risk. Besides its strong numbers, the Barbados Stock Exchange has a major advantage over many established and emerging stock exchanges worldwide: it is in a stable part of the globe, and it appears to hold no interest for terrorists. It is not subject to the volatile oil market, nor is it subject to the current unrest in the world that makes the New York Stock Exchange and other major markets unstable and subject to more movement than one might want. In short, the Barbados Stock Exchange may be a good bet for future index investing. At the very least, it’s worth a look. l

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Business in Barbados

MarketTalk: Incentives to Invest What makes Barbados a solid reputable destination for International Business?

Barbados is a favoured jurisdiction for foreign investors. The reasons are clear— political and economic stability, an excellent infrastructure and legal framework, a skilled workforce and a business friendly environment. Barbados also has daily flights to major cities such as London, Miami and Toronto.

Barbados offers a wide choice of service providers from which to choose including, management companies and attorneys and the “big four” accounting firms.

Barbados takes its regulatory obligations seriously but balances this with efficiency.

The OECD and the FATF were among the international organisations that highlighted the inadequacies of many international financial centres. However, because of its sound but not burdensome legislation, Barbados was able to be placed on the OECD’s “White List” which was published on April 2, 2009. Unlike many of our competitors, this was achieved without the need to sign a commitment letter. All of this shows that Barbados has a reputation as a high-quality jurisdiction through which to provide international business and financial services.

What types of investment vehicles are available?

The corporate vehicles that are frequently used in Barbados are International Business Companies (“IBCs”), International Societies with Restricted Liability (“ISRLs”), International Financial Services Companies (“IFSCs”), Exempt Insurance Companies (“EICs”), Qualifying Insurance Companies (“QICs”) and International Trusts.

The most widely used are the IBCs, the ISRLs and the IFSCs. These corporate vehicles are entities organised under the Barbados Companies Act or the Societies with Restricted Liabilities Act. These entities may then be licensed to do business under the provisions of the relevant legislation. The IBCs and ISRLs are very versatile vehicles which can be used for a variety of business activities, including selling goods or services interna-

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tionally, manufacturing products for sale on the international market, international financing, investment or group holding companies and intellectual property holding companies. Generally, IBCs and ISRLs are restricted from doing business with residents of Barbados.

An IFSC is licensed to carry out international banking business or provide other international financial services from within Barbados under the provisions of the International Financial Services Act (“IFSA”).

IBCs, ISRLs and IFSCs are taxed at the rate of 2.5% down to 1% depending on the level of income. Additionally, generally these entities are not subject to withholding tax, maybe entitled to receive tax credits for tax paid outside of Barbados, are exempt from import duty and VAT on goods required for their business, maybe entitled to income tax concessions for expatriate employees and have freedom from exchange controls just to name a few. These benefits may be guaranteed for 15 years in the case of an IBC and 30 years in the case of an ISRL. The establishment of international, offshore and domestic trusts in Barbados are also very common and historically have been utilised by HNWI. Trusts can be a powerful planning tool in a variety of circumstances including preservation of wealth and estate planning, asset protection, tax planning, confidentiality and avoiding probate.

What Double Tax Treaties does Barbados currently have and how are they used?

The Barbados Government has concluded 18 DTAs as set out below and is committed to expanding its tax treaty netAustria

Finland

Sweden

Botswana

Malta

Switzerland

Canada

Mauritius

The Netherlands

Caricom5

Mexico

United Kingdom

China

Norway

United States

Cuba

Seychelles

Venezuela

The Caricom Tax Treaty is a multilateral tax treaty. The Member States of CARICOM that have ratified the Treaty are Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent, and the Grenadines and Trinidad and Tobago.

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work. The recent focus has been on negotiating DTAs with Latin American.

Barbados’ DTAs offer tax planning mechanisms for a Barbados company trading with a treaty country or for a company in a treaty country investing in or trading with Barbados. These planning mechanisms make Barbados a competitive holding company jurisdiction for investors with international operations.

What kinds of incentives are offered to High Net Worth Individuals relocating to Barbados?

Ordinarily, an individual who is resident and domiciled in Barbados is taxed on his worldwide income. Where the individual is resident but not domiciled in Barbados, he is taxed on his income derived from Barbados and income from foreign sources remitted to Barbados. The rate of taxation is 20% on the first US$12,100 and 35% on the excess.

However, Barbados tax law has been recently amended to reduce the effective rate of Barbados income tax that a resident but non-domiciled individual pays on his foreign income by providing certain tax credits.

The Property Tax Act and Stamp Duty Act have also been amended to allow a resident or non-resident individual, who own shares in a Barbados company, to transfer such shares to a non-resident of Barbados without the payment of these taxes. To qualify for these exemptions, the Barbados company must consist wholly of foreign securities and other foreign assets and whose income is derived solely from sources outside of Barbados.

Barbados does not impose capital gains tax or inheritance tax. Therefore, an expatriate who wishes to become resident and domiciled in Barbados for tax purposes would not be subject to capital gains tax or inheritance tax on the disposition of his property. l

Ernst & Young Dominique Pepin, Director, Tax Services Maria Robinson, Director, Tax Services

Business in Barbados

Inside Perspective:

International Business

By Peter N. Boos FCA Chairman Emeritus, Ernst & Young Caribbean Co-Founder of BusinessBarbados.com

Barbados has always been involved in ‘international business’ in some form.

Its sugar and rum and its attraction as an exotic tropical tourism and lifestyle destination are global brands. Barbadians have for decades also exported their talents by emigrating. In particular, the UK, USA and Canada have reaped the benefits of Barbadian prudence, traditional values, hard work and passion for education. The motto “Pride and Industry” is inscribed on the Barbados Coat of Arms with good reason.

The Barbadian Diaspora continues to play an important and expanding role in keeping Barbados engaged in global business.

In a rapidly expanding global economy many skilled Barbadians are bringing those skills home as entrepreneurs, investors and retirees. As Barbados carves out its global business brand, ‘Bajans’ living overseas are playing key roles in helping to identify and promote Barbados as a secure and competitive International Business Centre.

Since becoming independent on 30 November 1966, Barbados has made steady and consistent progress. In the early 1970s the Government of Barbados began an economic diversification programme and looked to Manufacturing, International Business and Financial Services as potential growth areas. In Export Manufacturing the focus is on quality niche products where high value (skilled workforce) can be added. Indigenous products such as Premium Sugar and Rum are in high demand. The earning of foreign exchange is essential. Most of what is consumed locally is imported. Sugar’s role has declined, at least temporarily. There is much op-

portunity for innovation in this industry.

Tourism is the backbone of the economy and Barbados now boasts a very sophisticated tourism product. In the past decade major high quality infrastructure (sea and air ports, telecoms, roads etc.) has been added and Barbados has become a prime second-home market offering attractive living and fiscal conditions for non-domiciled individuals, international entrepreneurs, and High Net Wealth Individuals. More and more the attractiveness of Barbados as a retirement destination or as a connected sophisticated business location is being discovered. As the global economic village has evolved the value of Barbados real estate blossomed and demand soared. An impressive stock of high quality housing to suit all budgets exists.

Another major and important development has been the growth and expansion of Barbados as an important competitor in the world of International Financial Services and Private Wealth Management. The vision and strategy to develop this important sector have been transparency, openness and substance. Confidentiality of legitimate business transactions is the ethos. Secrecy is frowned on. To that end Barbados has pursued the negotiation of several Double Taxation Treaties and other forms of crossborder Investment and Trade Treaties with both the developed and developing world, some in partnership with CARICOM. Additionally an ambitious programme of international business legislation has been pursued and is being implemented. “The good news for Barbados is that the two areas in which we have differentiated ourselves over the years, transparency and substance, look set to be the future focus for the G20.

In fact, some of Barbados’ unique strategies that set us apart from the rest of the world are now being used as the model for other countries,” remarked John Howard, President, Barbados International Business Association. Financial Regulation is important in Barbados. The approach is to be responsible but also competitive and responsive to market demands and niches where we can

Evolution of Barbados as an International Business Centre of Excellence and a vision for its future. offer value. A new Financial Services Commission is planned and an International Institute of Financial Risk and Regulation is to be established at the Barbados campus of the University of the West Indies to train financial professionals in Barbados and the rest of the Caribbean region. The European Commission is to provide funding of BDS $1.2 million and technical assistance for the initiative. The Institute will be an internationally-accredited centre focusing on the areas of anti-money laundering, financial regulation, corporate governance and risk management.

The Global economy is expanding rapidly and with it markets and innovative ways of doing business. The death of distance is real. Technological innovations and the new business culture afford Barbados an outstanding opportunity to carve a unique niche in the International Business arena. It certainly possesses all the required ingredients. Anyone who has visited Barbados understands this only too well. Damian McKinney, CEO of McKinney Rogers, a very busy globe-trotting executive, who recently re-located himself and his HQ to Barbados, said this: “For companies such as McKinney Rogers, I can think of no better choice than Barbados both to headquarter a firm and to coordinate global sales. The strong international community in Barbados makes it function like a microcosm of the global business world. The least obvious advantage of exporting from Barbados is also the biggest—the Barbadians themselves. I have always been impressed by the Barbadian people, their understanding of international business and their keenness to make their mark on global trade. ” l

More in depth information on doing business in Barbados is available on BusinessBarbados.com - Barbados’ premier business and investment resource.

The website is dedicated to providing accurate, up to date and high value business information and contacts to anyone interested in business in Barbados.

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Business in Barbados

Barbados: M ore than just a pretty paradise If I had a fifty pound note for every urbane, well travelled person who envies me Barbados as the place I call home, I would be quite comfortably off. Many

have asked why I ever left this island with its exquisite natural beauty, near-perfect climate, rich cultural heritage and stimulating array of recreational, sporting, entertainment and social experiences. The alacrity with which I left to go to university and start my legal career in England is easily explained—I always knew I could return when the time was right. After years of studying and practicing law in London, Grand Cayman and Trinidad I did indeed return and join my firm’s Barbados office where I built a thriving practice advising global financial institutions, multi national corporations and private wealth clients on high value transactions structured in or through Barbados.

When visitors ask what work I do, they are surprised at the description of my practice.

Their surprise increases when I explain that without fanfare Barbados has developed a modern and well regulated environment which promotes the conduct of lucrative local and international business. When I cite examples such as our tax regime which is attractive when compared to that of many first world countries; or our suite of double tax treaties like the one we have with China, Mexico, or Venezuela (to name a few) the reaction is usually amazement as the listener’s Barbados horizon suddenly expands and they begin to get a sense of the true potential. This is typical because for years Barbados has been renowned as an idyllic holiday destination, but has been little appreciated as an extraordinary place in which to reside and do business in local and global markets.

An exhaustive exposition of the incentives and concessions which benefit business conducted in or from within Barbados is beyond the scope of this article. What follows is an outline of key elements including transparency, the legislative and regulatory environment, business vehicles, tax and infrastructure.

Unlike many offshore financial centres, Barbados’ strategy has always been to attract quality substantive business and to

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subscribe to the highest standards of transparency and exchange of information. Barbados’ credibility in this regard was most recently demonstrated on April 2, 2009 with the publication of the OECD’s revised tax haven list. Barbados emerged as the only English speaking Caribbean island to be included on the revised White List.

Barbados’ legislative and regulatory environment is pragmatic and supportive to commerce. The government is committed to enhancements such as the anticipated Financial Services Commission Act which is expected to streamline and bolster the existing regulatory regime. The companies legislation is modern and flexible. Of particular relevance to anyone considering moving interests to Barbados are provisions for ready corporate mobility into the jurisdiction and for the easy registration of local branches.

Barbados’ international business laws provide for a range of corporate vehicles including international business companies, societies and banks and exempt or qualifying insurance companies (collectively “IBVs”). These IBVs may conduct business in or from within Barbados with other IBVs and non resident persons and entities. While the international banks and insurance companies are subject to greater regulation than the other IBVs, they all enjoy low corporation tax rates ranging from 2.5% to 1% depending on income levels as well as exemption from the following: exchange control restrictions; property transfer tax; ad valorem stamp duty (except in respect of local real estate); import duties and taxes relating to equipment to be used by the IBV; withholding tax on dividends, interest, certain fees paid to non residents and (except for international banks), royalties.

For domestic entities the corporation tax rate is 25%, although certain types of companies, notably manufacturing and property rental companies, enjoy a 15% rate.

These rates can be mitigated using various tools designed by government to promote foreign investment. The valuable foreign currency earnings credit reduces effective corporation tax rates on a sliding scale depending on the level of profits made from

foreign currency earnings as a percentage of total profits. Effective rates range between 16.25% and 1.75%.

Individuals are taxed at 25% on the first BDS$24,200 and thereafter at 35%. Specially qualified international business sector personnel may utilise exemptions applicable to a percentage of annual income as follows: 35% of income up to BDS$150,000; 50% of income between BDS$150,000 and BDS$500,000; and 60% of income which exceeds BDS$500,000.

Withholding taxes range between 12.5% and 25%, but are not imposed on payments between Barbados resident individuals or Barbados companies. Happily no capital gains or inheritance tax is levied in Barbados.

With respect to double taxation general relief exists in the form of a credit allowed for taxes paid to any foreign jurisdiction on earnings made there. Barbados has also concluded double tax treaties (each a “DTT”) with 17 countries plus the CARICOM nations. These treaties allow for significant mitigation of withholding tax. The government considers the DTT strategy vital and presses on with expansion of the treaty network.

Barbados is proud of its human capital including its cadre of highly qualified and experienced professionals many of whom are members of firms with regional or global reach. Barbados’ business infrastructure is also excellent. It features advanced telecommunications and IT with related disaster contingency capability; reliable local utilities; and easy air travel with daily flights to London, New York, Toronto, Miami and several Caribbean islands. Add to this a stable economy in which the Barbados dollar has been tagged to the US dollar at 2:1 for over four decades, together with a sound banking system and the result is a competitive and facilitative business environment.

Barbados is a superb place in which to structure international transactions, set up global headquarters and invest locally. Barbadians and a growing number of discerning people from abroad live and work here in paradise. Come join us. l Copyright: Melanie Jones, Lex Caribbean, May 2010

Business in Barbados

A World Class International Business Centre With Excellent Professional Support

By Rosalind Jackson Managing Director of Caribbean Catalyst Inc. Barbados www.caribbeancatalyst.com

There is no doubt that Barbados is competing with many other jurisdictions to attract international business.

The reasons why Barbados has successfully attracted reputable global businesses are partially intrinsic. Many who have relocated to Barbados site quality of life, friendliness of the people and level of education as some of the factors that attracted them. Of course it is also important that the elements which facilitate operating a dynamic business in a global environment are ever present. Over the past twenty-five years the Government of Barbados, cognisant of the opportunities in this sector, have conscientiously worked to create a jurisdiction of substance.

Currently they are working through reform of the Immigration Act to better facilitate High Net Worth Individuals who may want to relocate some or all of their businesses to Barbados and reside and work there. The Government is also keen to facilitate entrepreneurial growth companies that will help boost Barbados’ Export Services while providing high quality employment for the well educated workforce.

Often when companies set up an operation in Barbados and hire locals, they are pleasantly surprised at the high level of education and professional standards of the local talent pool. As a country, Barbados has placed much emphasis on education. Both the University of the West Indies and the Cave Hill School of Business produce many graduates from their Undergraduate degree programmes and their Master programmes respectively.

Many young Barbadians also study and work in developed countries before returning to launch their professional careers in their homeland. In addition jobs

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of substance with reputable organisations located in Barbados readily attract Caribbean talent from the diaspora.

Clearly the tax regime is a big factor in the choice of a jurisdiction for international business. The Ministry of Finance has worked to have a balanced but attractive tax environment. Some main features of this regime include the fact that dividends earned by resident companies, including IBCs, from holdings in foreign (nonresident) companies are exempt from tax, provided the Barbados company owns at least 10% of the capital of the dividendpaying company and the holding is not merely a portfolio investment.

Also dividends paid to non-resident shareholders by Barbados resident companies are exempt from withholding taxes on the portion of income derived from foreign sources. Companies in the construction, manufacturing and tourism sectors achieving an internationally recognised environmental certificate qualify for a 150% deduction on the costs incurred in obtaining certification.

It is natural that any company considering the relocation of a business to a new environment will have some concerns and will need to have some questions answered.

Once Barbados has been identified as the jurisdiction of choice, the company and the individuals to be relocated will want to better understand the working and living dynamics of being “on the ground” in Barbados.

The areas which incoming investors tend to focus on during their “look see” visits are, from the business perspective: • The process and time frame for obtaining the necessary work permits or other immigration permissions.

• The availability of the talent needed.

• What constitutes competitive compensation and benefits in the Barbados context.

• The availability of other professional services needed to support the business e.g legal, accounting, payroll etc. and from a personal perspective: • Adequate housing.

• Adequate schooling for accompanying children.

• Social networking opportunities through established associations etc.

• Recreational and sports facilities etc.

Caribbean Catalyst Inc. (CCI) is a full service Human Resource Consulting company whose team has a long history of facilitating investors as they set up their businesses and relocate to Barbados. The Managing Director, Rosalind Jackson, has worked in the International Business Sector since the mid 1980’s, formerly with a big four professional services firm and now at CCI. Staff at CCI have worked closely with the Immigration Department for many years.

They understand both the policies and prevailing practices and have established strong working relationships with this Department. CCI provides advice on the types of permissions needed and assists relocating individuals and their families in obtaining these permissions.

CCI also provides a thorough search and selection service for filling vacancies, often drawing on their database of highly professional candidates.

This service helps investors to readily find the right talent. Their Compensation and Benefits service delivery is headed up by the other Director, Katrina Sam, who was the first Certified Compensation Professional on the island. This service helps investors to understand the market conditions and to pay competitively as they seek to engage the best talent.

Many investors want to ensure that their team focus on the core business and will outsource services such as payroll to competent local service providers. CCI provides payroll services to a number of companies in the international business sector with head counts ranging from two to one hundred and fifty.

Barbados continues to welcome businesses in the international business arena and High Net Worth Individuals who add substance to a balanced environment where opportunities abound and the standard of living and quality of life are excellent. l

Completing The Winning Strategy The quality of your team determines your future. You need a business partner who will provide a full suite of human resource advisory solutions, to enhance your team and your ability to effectively execute strategy, increasing your competitive edge. Caribbean Catalyst Inc. does this for its clients.  Recruitment & Selection  Compensation Strategy & Design  Performance Management  Immigration & Regional Mobility  Payroll & Personal Tax  Human Resource Programme Optimisation

For more information on our team and services, please visit our website or contact us.

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BGI Insurance Building, River Road St. Michael, BARBADOS BB11155 Tel: (246) 426-0821  Fax: (246) 426-3971 Email: rosalind.jackson@caribbeancatalyst.com Website: www.caribbeancatalyst.com

Business in Barbados

Barbados:

An International Jurisdiction of Substance

By Connie Smith Managing Director, Tricor Caribbean Barbados www.tricorglobal.com

In recent years, Western countries led by the US and UK have focused significant efforts on deterring the use of “off-shore jurisdictions” for secrecy and tax evasion. While most of these jurisdictions have

gone to much effort to meet international standards and thus become more transparent, the fury of Western governments over the loss of important tax revenue has not ceased. It is evident that jurisdictions with infrastructure to support transparency and provide substance will prevail. In the UK the importance of tax residence has more recently been brought to the fore in HMRC’s triumph in the Laerstate case. The decision of the Tribunal in Laerstate evidences the increased scrutiny of the actions of individuals who exercise control over the decisions made in a company, which can seriously impact the residence of the company. How does an international investor set about achieving substance and central management and control, when using international financial centres?

Barbados’ international business and financial services sector is grounded in a network of double taxation and bilateral investment treaties. Having currently ratified treaties with 18 countries as diverse as Botswana and the USA, and several others in the pipeline, Barbados continues its commitment to being a high quality investment platform from which to conduct international business. Additionally Barbados has been recognised by the OECD as a significant international financial centre. The OECD further acknowledges Barbados is not a tax haven. Barbados was prominently featured with all but four OECD member countries in their “white list” published in 2009 as a country that has fully met international standards in relation to transparency and exchange of tax information.

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The implementation of effective central management and control and therefore substance, is the glue that binds together most planning using Barbados as a hub.

The test of central management and control of a legal entity is directed at the highest level of control of the business and takes into account the jurisdiction in which, and by whom, the strategic management of the entity is exercised. Traditionally, the two main areas of concentration have been the location of board meetings, ensuring that Board meetings, especially those to consider key investments or transactions, are convened in Barbados and the composition of the board, where majority of the directors attending the meeting were themselves physically present in Barbados.

There are other elements that are too frequently overlooked; they are not mandatory and in some cases considered economically impractical, but can provide that much sought after substance and evidence that central management and control of the corporate entity is being exercised in Barbados. Some of these include; maintaining corporate records and financial information in Barbados; experience of Barbadosresident directors; establishment of local bank accounts; and having a physical presence in Barbados through establishment of a local office and employees.

Barbados is home to many companies that are involved in the diverse activities of international trade such as call centres, software development, medical transcription, information processing, international banking and insurance, private wealth management, medical services, manufacturing, research & development and licensing of intellectual property. Many have moved headquarters of their operations to Barbados; they employ a number of Barbadians, enjoy a high standard of living and are able to effectively and efficiently conduct their international business from Barbados. Parallel to this is the growth in the providers of professional services who support this substantive business activity.

This brings us to another reason behind Bar-

bados’ success – its people – that is, it’s well established, yet growing, indigenous and foreign, pool of professional services providers. Barbados has consistently been placed highly in the United Nations Human Development Index (“HDI”), ranking 1st in Latin America and the Caribbean and 37th Worldwide in the 2009 survey. The HDI provides a composite measure of three dimensions of human development: living a long and healthy life, being educated, and having a decent standard of living. Furthermore Barbados enjoys a high literacy rate – The United Nations Development Program Human Development Report of 2007/2008 informs that Barbados’ literacy rate is ranked at 99.7% placing the Country alongside many of the industrialised nations of the world. This is in part related to the efforts of the Government who spends roughly 20% of its annual national budget on education.

The Island has an excellent economic and social infrastructure which supports this ranking. Barbados enjoys political and economic stability, has a robust economy and a transparent legal system with tremendous respect for due process. It has a strong business oriented Government – providing both local and foreign investors many incentives including exemptions from direct and indirect taxes and a supportive culture of facilitation of legitimate business. Furthermore, Barbados has a stable US dollar based currency and also has an admirable air transport hub - The most easterly of the Caribbean islands, it is just over three hours by plane from Miami, four and a half hours from New York and eight hours from London with excellent service by major airlines.

Barbados is about quality and substance and has the necessary infrastructure to support its claim as a centre of excellence for international business operations. The overall support businesses and professionals in Barbados have to offer is enormous, making it increasingly possible for international organisations of the highest calibre to make Barbados home and thus operate from one of the world’s most dynamic low tax jurisdictions. l

Business in Barbados

Wired Up Communication grows with demand in sought-after market.

Throughout human history, the idea of living in relative solitude upon an island separated from the mainland has caused great numbers of people to ship out and surround themselves by the sea.

In making this transfer, what many came to discover was that lost in the imagery of soft sunsets and humid trade winds, was the reality that living upon a slice of rock separated from the mainland was more easily dreamed than done. In the modern era, aircraft fostered a large role in making prime goods more readily available, with islanders not as dependent upon the choppy, unpredictable sea for trade. Now, after many years of struggle, what is finally catching up to the improved distribution of goods is distribution of information. The latest statistics from the Telecommunications Unit of Barbados, as of January 1, 2010, indicate that the penetration of fixed lines is about 100% of the population, with over 141,000 fixed lines in Barbados for both business and residential usage. Mobile penetration now exceeds 100%, as a population of approximately 280,000 currently has in excess of 330,000 mobile phones, both prepaid and post paid combined. The entire population seems to be using the Internet, with about 270,000 users, and over 50% of all households having computers.

The sector is regulated by the Telecommunication Unit, a respected division of the Ministry of Finance, along with the Fair Trading Commission—the mission of the T.U. is to facilitate a competitive, fully liberalised telecommunications sector while achieving the government’s vision of making Barbados a centre of excellence for information technology and telecom in the Caribbean. The telecom sector in Barbados is comparable with other countries in the region, with the exception of Jamaica and Trinidad, which have a very robust telecommunication sector with multiple carriers in mobile and voice and data. In addition, Jamaica, Trinidad, St. Lucia and Grenada have multiple wired line providers offering triple play solutions. Today there is no provider offering triple play solutions in Barbados.

Globally, it can be said that Barbados is still a number of years behind in its telecommunication sector. Policies such as local loop unbundling where new entrants can rent the ‘last mile’ of the infrastructure of the incumbent in order to supply customers does not exist, nor do policies for local number portability, where a customer can keep his number and switch between carriers for sake of obtaining different telecommunication services. While the world has seen the growth of the telecommunication sector driven by the demand for greater and greater amounts of bandwidth for Internet and entertainment purposes, Barbados has remained at a relative plateau in bandwidth availability since 2005. It is expected that the majority of telecom growth in the next 5 years shall stem from greater demand for Internet capacity for business and residential consumers, alongside international private lease circuits—in other words, as a result of supreme need, the bandwidth plateau shall soon begin to pinnacle. As Barbados continues to develop its tax treaties with more countries across the globe, many companies will start to look at Barbados as a viable location for international businesses. Indeed, 2009 saw several Canadian and Asian companies make the jump already. In other words, digital capability needs to grow—quickly.

TeleBarbados, a full service telecommunications company, primarily offers data

and telephony services. The management of TeleBarbados believes that a key factor that will continue to drive the location of home-based and satellite offices to Barbados shall revolve round clients’ ability to remain in contact and communicate with their head offices, multi-national business partners and family as if they were in the office next door. TeleBarbados seeks to make this a reality for organisations in Barbados. The company’s suite of products includes: IPLC’s, dedicated Internet access, broadband internet, business and residential telephone services, co-location, audio and video conference bridges. The creation of the company followed the full liberalisation of the market in 2005, and coincided with the need to offer competitive, world-class telecommunication services to business and residents on the island. With their world-class telecommunication service offering data and voice services comparable to the more developed countries, corporate London can be assured that they can operate in ‘Little England’ as they would in the financial district of London.

It is expected that 2010 will see TeleBarbados expanding its on-island fiber optic and fixed wireless networks. The company is looking closely at the entertainment side of the telecommunication sector, as they see this as a key business driver in the future. The challenges ahead revolve around the development of transparent legislative policies and frameworks, whose absence plagued the industry. As the landscape gets more competitive, TeleBarbados sees their role as the backbone capable of carrying the challenges of the market into a faster-paced tomorrow. Its ability to adapt to clients’ needs, provide one-ofkind solutions and continue a strong adherence to customer service will ensure that TeleBarbados remains the premier telecommunication service provider in Barbados, thereby enhancing the country’s economic expansion as its demand for use as an international low-tax business jurisdiction increases. l

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Business in Barbados

An Energising Future A responsible approach ensures energy stability.

Formed in 1982 after the government took over Mobil Inc’s operations, the Barbados National Oil Company Ltd.

(BNOCL) is a national state-owned energy provider in the country of Barbados, and is the only licensed Hydrocarbons Company on shore. The company satisfies about 20% of the country’s total consumption of oil and gas. With approximately 90,000 homes across the island of Barbados, the company lays claims to having natural gas hook-ups with 16,000 of them through the Government Natural Gas Corporation. In addition to the many homes that connect to the islands’ natural gas infrastructure, the company also supplies the Barbados Light and Power Company, the airport, and provides gas distribution for many of the islands’ privately owned gas stations.

In total, BNOCL supplies roughly 20% of petroleum energy on island.

The full circle process of production and usage involves drilled crude oil sent to Trinidad, where it is refined and subsequently reimported as fuel oil for the power company.

Gasoline and diesel are also supplied to other major oil companies such as Esso, Texaco, and Shell. Production has increased this year with 7 new wells—4 of which are already producing, with the others set to come online soon. Despite the complex geological conditions in Barbados, the company has managed to produce 10 million barrels of crude oil, 22.8 billion cu. ft. of associated natural gas and 274,000 barrels of Liquid Petroleum Gas within the last 20 years. In total, there are 110 wells currently producing in Barbados on-

shore, and these wells combine to produce an average of 1000 barrels of oil per day. Seismic testing indicates oil offshore, however the government has taken the lead in farming out some of these blocks to multinational oil companies. BNOCL’s currently manages government’s interest in the offshore sector.

An oft-stated principal of the Barbados National Oil Company is that it respects and embraces the communities in which they live and work. Because of the fact that they are government owned, BNOCL is more focused on providing sustainable products to the local market than seeking high rates of return—it has been said that islanders recognise and respect the fact that this is not the usual stance of your average energy company. As a government owned entity, BNOCL is dedicated to effective corporate citizenship through charitable giving, corporate governance and a commitment to the environment. It is highly understood they operate in a sensitive environment and, therefore, must remain keenly familiar with their environmental and safety responsibilities. Therefore, BNOCL takes all of the necessary steps to ensure high standards of quality. In conjunction with the Barbados Water Authority, the water quality programme was started in 1977 to ensure that the quality of water was not being compromised. They also work closely with the relevant authorities to eliminate indiscriminate dumping within the oilfields. The safety of their employees, along with the company’s integrity, is of high importance to BNOCL. Thus, their staff attends workshops to bet-

ter educate themselves on workplace health and safety.

The biggest user of BNOCL’s services is the Barbados Light and Power Company—the sole electricity utility provider in the country of Barbados. In service since 1911, they have three power generation stations that serve more than 100,000 customers. In upcoming years, the company is seeking to diversify how they produce energy so they are not entirely dependent on oil. With renewable energy they are taking a multi prong approach—with a combination of wind and solar power, they seek to alleviate some of the dependency on oil. Electricity is cheaper in Barbados compared to the rest of the Caribbean—4th lowest in the region, with May 1983 being the last rise in electricity rates until last year. The electric utility is a wholly owned subsidiary of Light & Power Holdings, which is traded on the Barbados Stock Exchange. According to Peter W.B. William, Managing Director of Light and Power, “We operate on 85% heavy fuel oil, all of which comes from BNOCL. We operate very efficiently in contrast to most utilities because our plants have extremely high thermal efficiency, and we even have waste heat recovery systems in plants to recover energy from exhaust systems, which is a big advantage.” Indeed, with such sustained cooperation amongst the two heavy industry giants in Barbados, the public finds itself reaping benefits such as low energy costs fused with continued dependability that would make global citizens jealous of more then white sandy beaches and sunsets. l

Barbados National Oil Company Limited P: 246-420-1800 F: 246-420-1818 www.bnocl.com CEO: Winton Gibbs gibbsw@bnocl.com Woodbourne • St. Phillip • Barbados • West Indies 14

Business in Barbados

A Home with Growth The bubble-proof market.

In this time of great economic uncertainty, investing in the right asset class, in the right place and at the right time is a troublesome question that plagues the minds of many. What percentage of

people, only five years ago, would have thought that one of today’s biggest challenges would be that the safest place for our investments seems to be a cookie jar buried in the yard? Even the supposed safest of places, “In the bank”, proved to be insecure, as British, American, Icelandic and other banks have quivered or collapsed in recent times, leaving depositors with losses. Real estate, historically one of the most secure and collapse-proof positions, has taken a big hit in the past few years. Through the 1990s, rapid increases in valuations of real property such as housing ballooned until they reached unsustainable levels relative to incomes and other economic elements, has been followed by a massive reduction in price levels. Unlike a stock market crash following a bubble, a real estate crash is usually a slower process, because the real estate market is less liquid than the stock market. Whether real estate bubbles can or should be identified or prevented, and whether they have broader macroeconomic importance or not are debated within and between different schools of economic

thought. What is known, is that the island of Barbados has many distinct advantages over the rest of the globe that have helped to allow its market evade a great number of broadly seen problems.

Barbados real estate has long been a favoured retreat of the rich and famous worldwide, but you don’t have to be rich and famous to experience Barbados. The Barbados real estate market has something to offer everyone, whether you are looking for a vacation rental, a home away from home, a small plot of land or beachfront real estate for your hot development. Barbados’ property market remains buoyant, despite the global crisis. Property prices are still rising by about 5% to 8% a year, with bigger increases at the upper-end. A major reason for this is the simple economic reality of supply and demand. Barbados has a well developed, mixed economy, and a moderately high standard of living.

Since the 1990s, the Barbados Government has been seen as business-friendly and economically sound. The island has seen a construction boom, with the development and redevelopment of hotels, office complexes, and luxury real estate. Recent government administrations have continued efforts to encourage foreign direct investment via the development of pleasant tax codes for persons and businesses.

With many global jurisdictions seeking to increase taxes, Barbados stands firm like a gem set away from global agents of financial abduction, and hence people continue to flock to her white, sandy shores.

In recent years, however, the island has diversified into the mid-market. Apartments and condominium units under BB$1.98 million {US$1 million} are common. There are no restrictions on foreigners buying property. Non-residents need only obtain permission from the Barbados Central Bank before the purchase, which is a formality. In Barbados, no tax is levied on capital gains. For residential properties, this tax is levied on the ‘improved value’ of the property, essentially the fair market value, as determined by the Commissioner of Land Tax. The residential property tax

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rate on the most expensive of properties {above $501,253} is a magnificently low rate of 0.75%. This percentage may have American and British investors seeking a stronger belt when comparing it to rates back home, and feeling the weight of paper remaining in their pockets.

House prices have risen steadily over the past three decades. According to local real estate agents, property is more expensive in Barbados than in other less developed Caribbean islands. Luxury houses and villas still dominate Barbados’ property market.

Beautiful coral stone homes, full service office buildings, luxury villas, modern hotels and resorts, historic plantation houses, regal churches and the modest chattel homes are the hallmark of Barbados. Projects such as Beachlands, an exclusive beachfront development of two to five bedroom apartments and three to five bedroom penthouses exemplify this. Located on the Platinum Coast of Barbados in the parish of St. James, Beachlands is situated between Sandy Lane and Holetown, which is just a short walk away on the new ocean front boardwalk.

The developer is UK-based LTG Real Estate, which is the property business of Lewis Trust Group, a renowned and experienced developer. Its property portfolio includes the Ritz Carlton at Palm Beach, Florida, the Isrotel Hotel Group in Israel, and developments in the US, UK, Europe and Asia.

Indeed, LTG spared no cost in developing Beachlands, which has the flexibility to provide clients with whatever level of service they require. Depending upon the package of services tailored for you, staying in your condo at Beachlands could feel like staying in a hotel.

Barbados is an attractive place to live, with a vibrant economy in a stable setting with excellent infrastructure. It is no wonder that the world’s richest families build elegant mansions on the islands shores, movie stars rent villas and companies have discovered its business benefits. With its warm climate, social and political stability and friendly people, Barbados is the perfect place to purchase that retirement house or holiday home. l

BARBADOS

Live the Dream

Computer generated image, details may vary.

Arguably the premier site in the Caribbean.

Situated just north of Sandy Lane with 700ft of beachfront in an unrivalled, secluded location.

Apartments and penthouses within beautifully landscaped gardens. An oasis of serenity, the four and a half acre grounds benefit from tall mahogany trees, carefully protected to conserve a vital part of the island’s heritage. These two to five bedroom properties mix the grandeur of classical plantation homes with European quality and elegance developed for 21st Century living.

US $ 2 million to US $ 10 million.

First sales release now available.

Barbados: Sales Centre 001 246 432 3224 UK: Knight Frank 0207 629 8171

sarah.hamilton@beachlandsbarbados.com julian.cunningham@knightfrank.com

www.beachlandsbarbados.com

With Tricor, the sky is your limit.

We enable you to focus on growing your business You’re in good hands with Tricor looking after your non-core business support functions.

Tricor is a global provider of integrated Business, Corporate and Investor services. As a business enabler, Tricor provides outsourced expertise in corporate administration, compliance and business support functions that allows your company to concentrate resources on what you do best – building business.

The Business Enablers

Tricor Caribbean’s services include: • Accounting • Book-Keeping • Data Processing • Company Formations & Licensing • Company Maintenance • Company Secretarial • Payroll and Treasury Services • Registered Agent and Office

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