Tax Regime Overhaul Announced In Barbados

by Mike Godfrey, Tax-News.com, Washington

14 June 2018

Barbados's new government has issued a new Budget that would raise corporate and income tax rates, repeal the National Social Responsibility Levy and road tax and make other value-added tax and levy changes.

Effective July 1, 2018, the highest rate of corporation tax would rise from 25 percent to 30 percent. For individuals, a new higher rate income tax band of 40 percent would apply to incomes above BBD75,000 (USD37,500) per year, and incomes above BBD60,001 will be subject to a 33.5 percent rate. Other bands remain unchanged.

The National Social Responsibility Levy, a tax imposed on good imported into Barbados and on domestically manufactured goods, is to be repealed from July 1, 2018. Road tax is to be repealed from the same date and replaced by a fuel tax levied at 40 cents per liter of petrol and diesel, and 5 cents per liter on kerosene.

All interest and penalties payable on unpaid income tax, land tax, corporation tax, and value added tax for the tax years 2000 to 2016 are waived providing taxpayers agree a payment plan with the Barbados Revenue Authority between July 1, 2018, to December 31, 2018.

In line with recommendations of the Authority, the Ministry of Finance has agreed to write-off all unpaid taxes from 1968 to 2000 as these taxes are deemed "uncollectable."

From 2018, interest and penalties will apply to all unpaid taxes, but the Government has said it will amend the law so that simple interest rather than compound interest is charged.

Effective October 1, 2018, a health service contribution will be introduced at a rate of 2.5 percent on incomes, with 1.5 percent payable by employers and one percent by employees.

All online transactions for the purchase of goods and services by Barbadian residents will be liable to value-added tax (VAT) from October 1, 2018.

VAT on hotel accommodation will double to 15 percent from January 1, 2020, with a per night hotel room levy applying in the interim, which will range from USD2.50 to USD10 per night. In addition, a 2.5 percent product levy will be imposed on all direct tourism services. This will be collected by the providers of these services.

A 10 percent tax on all sharing economy transactions, such as those provided by Airbnb, Homeaway, Expedia, and others, will be imposed from August 1, 2018.

An airline travel and tourism development fee will be introduced from October 1, 2018. Passengers flying to destinations outside the Caribbean Community will pay USD70, while those flying to destinations within the Caribbean Community will pay USD35. This fee will be in addition to the departure tax.

The annual registration fee for commercial transportation vehicles will be reduced by 50 percent from July 1, 2018, and a fee of BBD400 will be charged on the transfer/sale of private vehicles, rising to BBD1,000 for new or second-hand commercial vehicles.

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