In the year 1965, Barbados passed the International Business Companies (IBC) Act. Since its inception, it has permitted companies not trading in the Caribbean region to establish their headquarters in Barbados. In 1991, the Act was amended to provide for a broader range of activities an IBC can conduct.

The IBC status is conferred upon companies carrying on the business of international manufacturing or international trade and commerce. It provides tax reductions, exemptions and other benefits for the foregoing areas of activities.

Requirements to Qualify As an IBC

It is required to be incorporated in Barbados or be a local branch of a foreign corporation.

It cannot trade in goods or services in Barbados.

It may not carry on any business under other offshore incentive legislation.

A license must be obtained from the Minister of Finance. (Currently, the annual fee for the license is around $250)

Incentives

A 2.5% maximum corporate tax rates on net profits.

An IBC incorporated outside of Barbados will be taxed in Barbados only on the profits earned from its Barbados operations.

Taxes paid to a foreign country may be credited against tax payable in Barbados.

The credit cannot reduce the tax payable to less than one percent (1%) of the taxable income for the particular income year.

Capital gains are not taxed in Barbados.

The government of Barbados is prepared to guarantee the existing International Business Company benefits for at least fifteen years.

There are no withholding taxes on dividends, royalties, management fees, interest payments and other fees paid by an international business company to nonresidents of Barbados or to another IBC.

An IBC is exempt from exchange control restrictions and may keep its records and financial statements in a foreign currency.

Expatriate staff members can easily obtain work permits. They can be exempted from income tax and exchange control on up to 35% of their remuneration from an IBC.

An IBC may import, free from all customs duties, business equipment, machinery or materials for its use.

Barbados is certified as a "North American Area," which means that any business convention expenses incurred in Barbados by U.S. corporations and organizations are automatically deductible in the U.S. against U.S. taxes.

Profits of an IBC are exempt from taxes if the shares are wholly owned by a trust which is managed by a licensed offshore bank.

There are no minimum capital requirements.

Incorporation is very easy.

Provision for pre-incorporation contracts and telephone directors' meetings.

Exemptions from having to file public financial statements.

No investment restrictions.

Single shareholder companies are permitted.

A company may purchase its share back or reduce stated capital subject to solvency tests.

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