International business in Barbados is a growing and dynamic sector which is already making a substantial contribution to the Barbados economy. In recent years the importance the government has placed on this sector and its recognition of the sector’s potential for leadership in Barbados’ social and economic development has become quite evident.

International insurance business is established in Barbados either as Exempt Insurance Companies (EIC) or Qualifying Insurance Companies (QIC) in accordance with the relevant legislation.

There are currently over 240 international insurance companies (EICs and QICs) operating in Barbados. These entities are primarily of US or Canadian origin.

The well known captive insurance business can be conducted within either of these legislative frameworks depending upon the wishes of the principals. 

The law of trusts in Barbados has its foundation in the English Trustee Act 1925, common law, and rules of equity. The general principles relating to trusts are supplemented by the Barbados Trustee Act and the International Trusts Act (“ITA”). The International Financial Services Act 2002-5 (“IFSA”) also regulates licensees acting as trustees of “offshore trusts” in Barbados and regulates the powers and duties of the licensee as trustee. Barbados has developed a legal infrastructure with accounting expertise to strengthen the proper establishment and administration of trusts.

A Barbados trust provides for distributions at any time during the lifetime and upon death of the settlor. It can provide most of the benefits of a will without requirements of probate and court approval for distribution of assets to beneficiaries. Law dictates that unquestioned legal title vests in the beneficiaries from the property of the trust.

A trust, which takes effect only upon the death of the settlor, must be declared as prescribed by the Succession Act 1981 since it is essentially a will and is therefore subject to probate. Further, the Property Act 1979 requires thatfor dispositions of real property, the instrument must be in writing.

Any person, resident or non-resident, may settle assets in a Barbados trust. A trust is arguably the most secure of all vehicles available to investors to protect their assets.

Historically, trusts have been utilized by wealthy individuals and families to protect assets from attack by creditors, minimize taxation, and provide for family members in the future without those beneficiaries being able to squander assets. For almost 20 years in Barbados, tax advisers and other professionals have used trusts in effective tax planning and wealth management for high net worth persons and in facilitating commercial transactions.

i.  Domestic Barbados trust

Where the trustee is a Barbados resident individual or company and the trust deed does not specify that it is an international trust, it will be considered a domestic trust. Domestic trusts are generally entitled to treaty benefits. This substantially reduces or even eliminates tax in the other treaty jurisdiction. Domestic trusts have the following features:

• majority of trustees must be Barbados residents;
• trustee can be an individual or a trust company licensed under the Financial Institutions Act 1996-1;
• worldwide income is taxable;
• expenses are subject to value added tax (“VAT”) in Barbados;
• exemption from exchange controls may be received if the trust has foreign assets, non-resident beneficiaries, and deals primarily in foreign currency;
• perpetuity period of 80 years; and
• no registration or filing requirements.

ii.  International trust

One of the principal benefits of the international trust is its asset protection provision. To qualify as an international trust:

• at least one trustee must be resident in Barbados;
• settlor must be resident outside of Barbados;
• beneficiary is not a resident of Barbados (with certain exceptions);
• trust instrument must specify that the ITA applies;
• immovable property is owned in Barbados;
• income derived within Barbados is taxed or remitted to Barbados
• VAT is zero-rated, exempt from exchange controls, and Barbados; withholding tax;
• perpetuity period is up to 100 years; and
• registration is required but does not become publicly available.

The ITA also provides for the establishment of non-charitable purpose trusts which may have no named or ascertainable beneficiaries. One of the key attractions of the purpose trust is that it need not be set up for charitable purposes and may therefore be established for a group that does not otherwise meet the criteria of a charity. The purpose trust may be used in many diverse business transactions.

iii. Offshore trust

An offshore trust is created when the trustee is licensed under the IFSA. The settlor and beneficiaries must be resident outside of Barbados and the trust assets must consist solely of foreign currency or securities. The offshore trust is exempted from all Barbados taxes, duties, and exchange control requirements.

There are no registration or filing requirements for an offshore trust, so confidentiality is easily maintained. The perpetuity period of the trust can be up to 80 years and income can be accumulated for the perpetuity period.

b. Proper law of trusts

The “proper law” is the law of the jurisdiction stated in the trust instrument. If not expressly provided for, it is the jurisdiction with which the trust had its closest connection at the time of its creation (meaning place of administration, situs of assets, residence of trustee, and fulfilment of trust).

Barbados is a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition, July 1, 1985, which seeks to establish common provisions on the law applicable to trusts.

It is preferable that the trust assets be managed in Barbados. If not, it is important to ensure that they are in a jurisdiction which recognizes trusts and applies similar rules of private international law as does Barbados. If the assets are held in a jurisdiction where trusts are not recognized or different international laws are applied, then the judgment creditor may succeed in enforcing judgment directly against the assets in that jurisdiction.

One of the primary duties of the trustees is to make trust assets productive by purchasing investments from which income and/or capital appreciation might be expected. The power to invest can be made explicit in the trust instrument or the trustee can rely on the provisions of the Trustee Act. The majority of trust companies in Barbados have specialized expertise in asset management and are able to fulfil their obligations with ease.

There are over 2,400 entities in Barbados conducting a wide variety of international trade and commerce business facilitated by the provisions of the International Business Companies Act or the Societies With Restricted Liability Act. These operations are engaged in activities including international sales of products and equipment, aircraft leasing, support for mining operations, and inbound and outbound call centres.

Types of Business Formations