The Government of Barbados has made changes to its insurance law which will result in captives being zero taxed and paying a license fee instead.
Specifically, the Exempt Insurance Act will be repealed, meaning all insurance entities including Exempt Insurance Companies (EICs) and Qualified Insurance Companies (QICs) will be regulated under the Insurance Act which will be amended to provide for three classes of licenses, the first of which includes captives.
Class 2 includes all other insurance companies which re/insure third party risks and will be taxed at a rate of two percent. Class 3 applies to brokers and managers who will also be taxed at 2 percent.
Corporate entities carrying on business in the international insurance sector will be grandfathered under the same rules for non-intellectual property entities until June 30, 2021. All non-IP international business companies (IBCs) licensed before October 17, 2017, will qualify for grandfathering.
The legislative changes are part of Barbados’ commitment to ensure it is compliant with the Organisation for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) programme, in particular Action 5.
Action 5 is one of the four BEPS minimum standards, and involves process for reviewing preferential tax regimes to ensure they are not harmful, and a transparency framework that applies to tax rulings (the transparency framework).
A total of nine items of Barbados’ legislation will be amended, which includes the abolishment of the International Business Companies Act, with no new IBC licenses issued, effective December 31, 2018.
Government of Barbados, Captives, Legislation, Barbados