2025: New Year's Message

Dear colleagues, friends, family:

As we conclude 2024, we reflect on the powerful year and significant legislative developments in Barbados and their implications for businesses in the coming year. At Axebridge, we are committed to keeping you informed and prepared to navigate these changes effectively. Below is an overview of key legislative updates introduced in 2024 that will impact your operations in 2025.

1. Monthly Prepayments for Income Year 2025

Effective Income Year 2025 (this can start earlier than January 1 2025 depending on fiscall year), all companies, except registered small businesses, will be required to make monthly prepayments of corporate income tax. This transition from the previous system of payment aims to enhance government cash flow management. We urge clients and businesses to adjust their financial planning and ensure that accounting systems are updated to comply with this new requirement. 

2. Corporate Tax Rate Adjustments

Barbados has restructured its corporate tax regime effective January 1, 2024, introducing differentiated rates based on business classifications:

• Standard Corporate Tax Rate: A flat rate of 9% applies to most companies.

• Small Business Development Act Companies: Qualifying small businesses earning less than BBD 2 million benefit from a reduced rate of 5.5%. 

• Licensed Insurance Companies: Classes I, II, and III will maintain their current tax rates. 

• International Shipping Companies: Entities in this industry will continue under the 2019 tax regime (5.5% – 1% sliding scale) due to exclusion from current GloBE rules, with a review expected for the calendar year 2025 onwards.

• Intellectual property (IP) companies: IP companies benefit from a reduced tax rate of 4.5%. It is the expectation that this will attract and retain business involved in intellectual property development, management, and commercialization whilst providing opportunities to the Barbados economy 

• Multinational Enterprise (MNE) Groups: In-scope MNE groups with an Ultimate Parent Entity (UPE) or Intermediate Parent Entity (IPE) located in a jurisdiction that hasn’t adopted the Income Inclusion Rule (IIR) or Undertaxed Profits Rule (UTPR) will remain under the 2019 tax regime (5.5% – 1% sliding scale) with no Qualified Domestic Minimum Top-up Tax (QDMTT) for Fiscal Year 2024. 

We recommend reviewing your company’s classification with your tax professional to ensure alignment with these changes and to optimize tax benefits.

3. Introduction of the Patent Box Platform

To further support the IP sector, Barbados introduced the Patent Box Platform aimed at streamlining the qualification process for IP companies under economic substance requirements. Key features include:

• Simplified Qualification: The Patent Box makes it easier for businesses engaged in IP activities to demonstrate compliance with the economic substance requirements under the Business Companies (Economic Substance) Act.

• Incentivized Innovation: Companies holding patents, copyrights, or other qualifying IP assets can now access significant tax benefits while meeting compliance obligations.

• Alignment with International Standards: The platform is structured to align with OECD standards, ensuring global competitiveness while maintaining transparency.

4. Qualified Domestic Minimum Top-up Tax (QDMTT)

A Qualified Domestic Minimum Top-up Tax of 15% will be applied to in-scope MNE groups with income subject to IIR or UTPR, starting from fiscal years commencing on or after January 1, 2024. However, for Fiscal Year 2024 only, a top-up tax will apply solely if the Barbados Group’s income is subject to IIR or UTPR in another jurisdiction. 

5. National Insurance Scheme (NIS) Ceiling Increase

The NIS contribution ceiling has been raised to BBD $5,280 per month effective January 1, 2025. This adjustment results in higher contributions for both employers and employees. It’s crucial to update payroll systems accordingly and to budget for the increased contributions.

6. Economic Substance Requirements

Under the Business Companies (Economic Substance) Act, every company, whether locally or foreign-owned, engaging in a relevant activity—such as banking, insurance, fund management, finance and leasing, headquarters, shipping, holding company, intellectual property, or distribution and service center business—is required to file annual economic substance reports. Failure to comply can result in penalties up to BBD 300,000. 

7. Engagement of Licensed Corporate Service Providers

Amendments to the Companies Act mandate that companies with gross revenue exceeding BBD $1 million must engage a licensed corporate service provider, regulated under the Corporate and Trust Service Providers Act, 2015. This requirement ensures adherence to international standards and best practices in corporate governance. 

Looking Ahead to 2025

The legislative changes in 2024 reflect Barbados’ commitment to strengthening its fiscal policies and regulatory framework. These developments present opportunities for proactive businesses. At Axebridge Group, we are here to support your operations including:

• Corporate services and administration: Ensuring you remain compliant wih continually changing legislation and regulations.

• Economic Substance Compliance: Assisting with reporting and operational alignment to comply with substance requirements.

• Bookkeeping and accounting services: with the shift to monthly corporate tax prepay,ents and adjusted tax rates, we can help monitor and support your financial and reporting obligations.

• HR and Payroll Updates: Supporting your human resources and adapting to changes including the new NIS contribution limits.

• Strategic Business Structuring: Helping you align with legislative changes to thrive in 2025.

Thank you for evolving with us. We reaffirm our commitment to helping you succeed both locally and internationally.

Wishing you a prosperous and compliant 2025!

Cheers!

Roland