Income Tax Guide 2007 Information
NOTE: This guide presents a concise overview of the Income Tax Act, Cap. 73. This Page should be used only as a guide and is not to be construed as taking precedence over the Law to which reference should always be made in cases of doubt.
Who Is Liable For Income?
Amounts Granted To Companies / Self-Employed Individuals As Allowances
Amounts Granted As Allowances To Individuals
Deductions Granted To Individuals
Withholding Tax-Rates For Non-Residents
PAYE System
Payment By Instalments
© 2008 Department of Inland Revenue, Treasury Building, Bridge Street, Bridgetown, Barbados
all rights reserved.
Barbados Income Tax
Income Tax is levied on the income of persons resident or non-resident in Barbados. There is no tax on capital. The system of taxation is based on self-assessment.
 
Basis of Assesment
Corporation Tax is levied on the profits of a company earned in a fiscal period that should not exceed 53 weeks.
Income Tax is levied on: The profits of a trade or business earned by an individual in a fiscal year; and the income earned by any other individual in a calendar year.
Liability For Income Tax
Resident:
A Resident is a corporation managed and controlled in Barbados; or a non-national individual who is present in Barbados for more than 182 days in a calendar year.
A resident corporation is subject to tax on its world income. A resident and domicile individual is subject to tax on his world income. The resident but not domiciled individual is subject to tax on his income derived in Barbados and on his income from foreign sources remitted to Barbados, or from which a benifit is derived in Barbados.
 
Non-resident:
A Non-resident is a corporation whose place of management and control is outside Barbados; or a non-national individual who is present in Barbados for less than 183 days in a calendar year. A non-resident is subject to tax only on income derived in Barbados.
1. Interest on borrowed capital.
2. Expenditure on repairs of premises, plant and machinery.
3. Bad debts (any recoveries being treated as income when received).
4. Taxes on property.
5. Insurance premiums.
6. Travelling expenses.
7. Payments by employers under pension schemes approved by the Commissioner.
8. Payments made under settlement with registered benevolent organizations.
9. Losses sustained in previous years, not exceeding nine years, may be deducted.
Allowances- Companies
10. Annual Allowances (i.e., depreciation allowances on the straight-line method) at prescribed rates are deductible in respect of plant and machinery used in the trade. Initial Allowances at 20% of the cost are deductible for the year of purchase. Balancing Allowances and Charges (to ensure that total allowances equal but do not exceed cost) are made on the sale or obsolescence of machinery and plant.
11. Instead of the initial allowance, Prescribed Basic Industries are entitled to an Investment Allowance on plant or machinery which was new or which was imported into Barbados for the first time.
The investment allowance is not deducted like the initial allowance in determining the diminished value of the asset. The rate is 40% in the case of the manufacture and refining of sugar and the manufacture of products from clay or limestone. In any other case, the rate is 20%.
A person entitled to claim an Export Allowance could also qualify for an investment allowance at the rate of 40%.
12. Capital Expenditure on Industrial Buildings and Structures may be written off by an initial allowance of 40% of the cost and an annual allowance of 4%.
13. Agricultural Businesses (other than those engaged in the refining or manufacture of sugar) can claim a Cash Rebate on capital expenditure incurred on agricultural machinery or plant which was new or which was imported into Barbados for the first time. The rates are 10%, 15% or 18% depending on the type of machinery or plant.
14. Commercial buildings qualify for a building allowance equal to 10% of the improved value where the property is registered with the National Trust, and 1% of the improved value where it is not so registered.
15. Where a building, other than a commercial building or a building enjoying the benefits under the Hotel Aids Act, has been converted by the owner to provide units for rental to residents, 40% of the capital expenditure incurred on the conversion may be claimed as an initial allowance in the year the expenditure was made and 4% o as an annual allowance.
16. Persons engaged in the business of export to countries outside Cancom may claim a research and development allowance of 150% of qualifying expenditure on the research and development undertaken for the purpose of promoting the export sales of the business.
17. A market development allowance of 150% of the specific expenditure incurred for the purpose of encouraging tourists to visit Barbados may be claimed by persons engaged in the tourist industry.
18. A Person other than a company enjoying benefits under the Fiscal Incentives Act, 1974, that exports sugar to countries outside Caricom, is entitled to an export allowance at prescribed rates.
19. An export allowance may also be set off against the tax payable on the income derived from the reinvestment of profits earned in Barbados from enclave enterprises owned by persons other than Barbadian citizens, which produce goods exclusively for export outside of Caricom.
20. A foreign currency earnings allowance calculated as set out in the Fourth Schedule or Fifth Schedule, in the Income Tax Act is available to a person carrying on business in Barbados and whose assessable income is derived from the undertaking of qualifying overseas construction projects, or the supplying of qualifying overseas professional services, has the payment due, either by transfer of foreign currency to Barbados through the Barbados banking system or by payment in Barbados currency from funds held in Barbados which would be legally remitted from Barbados.
21. If a capital expenditure is made in relation to water storage facility on any commercial building, an allowance up to a maximum of $3,500 may be claimed for each commercial building.
22. Persons contributing an amount of money to the Tourism Development Corporation, that person can deduct an amount equal to: - 150% of the actual amount contributed, or 150% of 3% of his pre-tax profits from the preceding year, whichever is the lesser.
23. A company investing an amount in the Barbados Agency for Micro Enterprise Development Ltd. can deduct an amount equal to 120% of the actual amount invested up to a maximum of one million dollars.

24. A company, which has contributed an amount of money to the Regional Negotiating Fund, can deduct an amount equal to 150% of the actual amount contributed in calculating the assessable income.

25. Where a company has in an income year listed its shares on the Securities Exchange of Barbados, then in calculating the assessable income of that company for that income year, there shall be deducted an amount equal to 120% of any cost incurred in that income year by the company in listing its shares on the Securities Exchange of Barbados.

26. A company contributing an amount of money in the Arts and Sports Promotion Fund, established by the Arts and Sports Promotion Act, 2004 may claim as a deduction an amount equal to 150% of the actual amount invested.
Calculation of Assessable Income- (Deductions-Companies)
Deductions are allowed in respect of sums incurred for purposes of acquiring the income, including:
Calculation of Assessable Income- (Allowances- Individuals)
The following allowances are granted to a resident individual:
Personal Allowance
$40,000 - for an individual who is 60 years or over and is in receipt of a pension.
$25,000 - for all others.
Spouse Allowance
An individual may claim a spouse allowance of $3,000 for a spouse who had been habitually living with him/her if that spouse had no income or had investment income of $800 or less.
Note: A person who has exempt income is not entitled to claim a spouse allowance.
Child Allowance
$1,000 for each child which includes a legally adopted child and a stepchild. An individual may not claim more than two children.
Calculation of Assessable Income- (Deductions-individuals)
National Insurance Contributions
- Amounts contributed by that person on behalf of his/her employee(s).
Note: National Insurance Contributions deducted from salary or wages are not an allowable deduction for tax purposes.
Contributions to Registered Retirement Plan/ Savings Plan
-Contributions not exceeding 15% of assessable income or $10,000 which ever is the lesser.
- 15% of the assessable income from employment or business of that person. There is a maximum of $10,000 allowed as a deduction in respect of both plans.
Payments under Covenant to:
- Benevolent Organizations. 10% of assessable income
- Minors /incapacitated individuals. 5% of assessable income
Subscriptions to Trade Unions/ Statutory Associations
- Up to $240 annually.
Home Allowance

- An amount up to $10,000 in respect of expenditure of mortgage interest, house insurance premiums, house repairs/renovations, energy saving, water-saving devices or home energy audit and conservation systems or materials recommended in that audit (Maximum claim $2000 within home allowance limit of $10, 000) where the individual owns and occupies the residential property.

Environmentally Preferred Products

- Products that cause less harm to human health or the environment than alternative products that serve the same purpose – max $5,000 per owner occupied property.

Rent Deduction
- An amount equal to 20% of the rent paid in respect of residential property or $3000 which ever is the lesser (A certificate of the owner verifying tenancy must accompany claim).

Retrofitting
- With roof straps and window shutters - an additional amount of $2,500.
Shares in Corporative Societies
- Investment in shares in Co-operative Societies up to a maximum of $10,000.
New Shares purchased in a Public Company
- Cost up to a limit of $10,000.
Mutual Funds

- Amounts up to $10,000 invested in the fund.

Combined Deduction

- A maximum of $10,000 is allowed as a deduction in respect of a combination of investments made in mutual funds, new shares bought in a public company and shares in co-operative societies.
Venture Capital Fund
- Contributions made up to a maximum of $10,000 in an income year.
Withholding Tax for Payments to Non-Residents
Final Payments
The tax withheld from the following sources of income is a final tax:
Gross Earnings of Entertainers. 25%
Interest 15%
Royalties 15%
Dividends from taxed profits 15%
Branch profits. 10%
Payment for services
- Managerial, Technical, Administrative. 15%
- Other. 25%
Prepayments
Tax withheld from the following sources represents a prepayment of tax:
Rents. 40%
  1. In respect of income year 2004 – 33%
  2. In respect of income year 2005 – 30%
  3. In respect of income year 2006 and subsequent years – 25%
Payments under settlement or trust 20%
Covenants. 20%
Dividends
- Exempt profits 40%
- Untaxed profits 40%
Double Taxation Relief
Double Taxation agreements exist with the following countries:
Member States of the Caribbean Community, Botswana, Canada, China, Cuba, Finland, Malta, Mauritius, Norway, Sweden, Switzerland(Extension of United Kingdom Treaty), the United Kingdom, the United States of America, Venezuela.
Payment of Tax (PAYE System)
Employees
Tax on the earnings of employees is under a non-cumulative Pay As You Earn system. An employee is entitled to file with his employer a declaration form claiming the personal allowances to which he is entitled. The employer deducts tax for each pay period with reference to the appropriate tax table and the allowances claimed. Each pay period is treated separately and the cumulative pay and tax deductions are not taken into account. Any remainder of tax owing, as shown on the annual tax return, due by the 30th April of the following year may be paid in two equal instalments on April 30th and September 30th.
Payment of Tax by Instalments
Self-employed persons / Entrepreneurs
All entrepreneurs and persons receiving rents are required to pay 25% of tax paid as indicated on their returns for the preceding year, on June 15th, September 15th and December 15th. Any remainder of tax owing as shown in the submission of annual tax returns must be paid to the Commissioner of Inland Revenue on or before April 30th in the following year.
Companies
A company whose fiscal period ends at any time during the period.
January 1st to September 30th (both dates inclusive) must pay 50% of tax paid for the previous income year on October 15th. The remainder of tax due as shown on the Corporation Tax Return for that year is to be paid on March 15th.
A company whose fiscal period ends at anytime during the period:
October 1st to December 31st (both dates inclusive) must pay 50% of tax paid for the previous income year on December 15th.  50% on March 15th.  Any additional amount due as shown on the Corporation Tax Return for the year is to be paid on filing on or before June 15th.