BARBADOS

6. Income Tax

A. Taxation Of Trusts

In order for a trust to be considered a tax resident of Barbados, the trustees must be resident in Barbados and the administration and management of the trust should be in Barbados. A domestic trust is taxed at the same rate as are individuals. The trustee is liable for payment of that tax, assessed on worldwide income of the trust. In determining taxable income, allowance is made for expenses incurred as well as any amounts payable to beneficiaries. Distributions made to non-resident beneficiaries will only be taxable on income derived from Barbados.

An international trust is deemed to be non-domiciled in Barbados for taxation purposes, and is subject to tax only on its Barbados source income and overseas income remitted to Barbados. In particular: income and gains are exempt from tax in Barbados; amounts allocated to non-resident beneficiaries out of income are not subject to tax in Barbados; and the trust is exempt from indirect tax or other imposts on transactions undertaken pursuant to its activities.

In the case of trusts regulated pursuant to the IFSA, no tax is payable either by the trust or beneficiaries.

B. Treaties

Barbados has income tax treaties with Canada, CARICOM countries, the People's Republic of China, Cuba, Finland, Malta, Norway, Sweden, Switzerland, the United Kingdom, the US and Venezuela. Reduced withholding taxes on dividends and interest are features of these treaties, resulting in the establishment of investment management companies and trusts in Barbados.

The government of Barbados continues to pursue its commitment to promote and develop the international business sector in Barbados. In this regard, the government is actively seeking to negotiate additional beneficial tax treaties with countries that it views as potential trading partners.


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© 2012 Society of Trust & Estate Practitioners