The Latin America Opportunity

The DTA with Venezuela provides reduced rates of withholding tax, ranging from 5% to 10% on dividends, interest on royalties paid by a resident from Venezuala to a resident of Barbados, compared to the usual rate of 34% or otherwise applicable under domestic law. Barbados has a bilateral investment treaty with Venezuela which means that investments of a Barbados resident company into Cuba will have certain remedies including protection against expropriation, compensation for losses resulting from national emergency, riot or other similar conflict.

The tax treaty with Cuba offers foreign investors the opportunity to minimise the tax liability in Cuba on certain investment returns. E.g. A Barbados resident IBC disposing its shares in a Cuba resident company would be subject to capital gains tax in Barbados only (Barbados CGT is zero rated). Similar to Venezuela, Barbados also has a bilateral investment treaty with Cuba.

The tax treaty with Mexico also provides for reduced withholding taxes on dividends, interest and royalties. Perhaps one significant benefit we hope to get out of this newly negotiated treaty will be the removal of Barbados from Mexico’s tax haven list. The removal of Barbados as a tax haven would mean that dividends, interest and royalty payments paid to a Barbados resident company would be subject to Mexico’s normal tax rates which hover between 10% to 28% instead of the 40% which would now apply to an entity resident in a tax haven.

Opportunities in Latin America extend to captive banks established in Barbados which finance operations in some of those Latin American companies (including some not yet part of the DTA network such as Chile and Guatemala).