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Substance over form is a well-known principle of the Common Law system which is the bedrock of Barbados legal system and explains its commitment to the rule of law. As home to the
supported by the United States, instigated the revision by the OECD of its own methodology underpinning its work on Harmful Tax Competition. This belief in substance over form forced the OECD to look at its own members who were tax havens in substance despite the form of their characterisation by the OECD in its report. More importantly it lead to the OECDs public recognition and declaration of what was already known by Barbados and its investors, namely that Barbados is a transparent jurisdiction with fully committed to tax information exchange, evidenced in part by the absence of bearer shares and mechanisms for tax information exchange in its tax treaties. This landmark about face by the OECD remains an important reminder that, in matters of international tax cooperation, as in other issues that rightly compete for the attention of the global community of states, substance should always trump form for it is this principle that makes an action by a state or group of states legitimate, credible and sustainable. That Barbados is again occupied with the now vexed problem of form over substance in matters of international tax which has again placed it in the cross hairs of OECD almost ten years later is perhaps unsurprising given the near universal acceptance of the tax information exchange agreement (TIEA) as the preferred means of demonstrating the commitment to the new standards. The OECD-fuelled global preoccupation about the number of such ratified agreements signed rather than the substance or the practice of information exchange amongst signatories to these agreements has found Barbados unable to pass the test of transparency and tax information exchange as detailed in the Phase I assessment of its legal regime as of December 3, 2010. An incredible result if one were to assess Barbados on the substance of its commitment to the new international standard on transparency and tax information exchange but an almost predictable result from an Organisation too often concerned with only form. According to its Phase 1 report on Barbados, the OECD/Global Forum has concluded that although the substance of Barbados network of 28 treaties clearly reflects its adherence to transparency and tax information exchange a number of new tax treaties and protocols including the 2008 standard have not yet been ratified admittedly
through no fault of Barbados. Thus the form of these agreements and not the substance Francoise L. M. Hendy that they contain By International Tax and were deemed Investment Attorney sufficient to disInvest Barbados-London qualify Barbados from advancement to a Phase 2 Assessment by the OECD. Concerned with the flurry of negative reports occasioned by the Phase 1 report but buoyed by its vindication by the OECD almost ten years earlier Barbados has determined that it will not allow this to distract it from the continued implementation of its national policy on international tax cooperation. Faced with an uncertain date at which time its new and existing treaty partners will be able to apply the agreed international standard on a bilateral basis, in March of this year Barbados issued regulations to its Income Tax Act to permit its Commissioner of Inland revenue to unilaterally exchange tax information on request and in accordance with the OECD 2008 standards. Not a substitute to the treaty basis for information exchange its provisions will be spent once its treaty partners have completed the process of ratification.
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The views expressed in Business in Barbados Special Report 2011 are not necessarily those shared with the publisher, Global Investment I Limited. Wishing to reflect the true nature of Barbados, the editor has included articles from a number of sources, and the views expressed are those of the individual contributors. No responsibility or liability is accepted by Global Investment I Limited for any loss to any person, legal or physical, as a result of any statement, fact or figure contained in Business in Barbados Special Report 2011. This publication is not a substitute for advice on a specific transaction.
Business in Barbados
We have seen a significant increase in the number of UK peo- other Caribbean islands and a weekly flight to Brazil. At other ple approaching us to enquire about Barbados. It is difficult to say times of the year there are numerous other destinations such as which are the key features when there are a number of features other parts of the UK, USA, Canada and Europe. For someone and each person seems to have a different set of reasons. However, who likes travelling it is a good place to be. the two that are most consistent are quality of life issues, e.g. the Of course there is the fact that the UK ruled Barbados for 350 weather, and the ability to retain more after tax income. Obviously years so the language is English, we have stable democratic Governbeing in the tropics the weather is going to be much warmer year ment, and we drive on the left hand side of the road. Barbados acround and significantly more sunshine than the UK and many cordingly is a member of the British Commonwealth which again other places people may consider. Fortunately as Barbados is in provides some familiarity to UK residents. the very southern part of the Caribbean the chance of a hurricane Another interesting feature of Barbados is that public (private in is very low. So for those people that enjoy outdoor activities and the UK) school is free through the tertiary level and is also mandatory living Barbados is a significant attraction. through the end of high school. This has resulted in a literacy rate in Regarding the after tax Barbados of 99% and a well income issue, although educated population. BarbaHNWIs in the UK were concerned about dos is unique among most we are referring mainly to HNWIs, virtually all the the significant increase in the personal tax of the Caribbean in that reones that have approached gard. In addition there is a us are either fully or partially rate so Barbados listened and made some University of the West Indies retired, so are likely to be on campus in Barbados of a sigchanges to make it more attractive and a nificant size. some form of fixed income. As they are of the age where In terms of a stable serious alternative. they remember the serious banking system many of the inflation during the 1970s banks are subsidiaries of the and the damaging impact it had on people who were on fixed Canadian banks and as we know, Canada was the only G7 country income, they are very conscientious of that risk. Now, with talk that did not require any government bail out of the banking system. of a new round of inflation; for example in oil prices, people are Finally on the financial side the Barbados dollar has been pegged concerned about their net income funds they will have to live on. to the US $ for over 40 years, so there is comfort in the currency When one is looking at up to 50% of ones income going to taxes, stability. Note also that Barbados currently ranks as the 2nd most and that is before VAT, property taxes and all the other taxes they transparent and least corrupt country in the Americas, after Canada, may face, it is very worrying. What Barbados has done, as I discuss and before the USA. below, is make it possible for them to retain much more of their As of 2007, there were approximately 120000 Non-Doms regafter tax income. The specific percentage of tax varies as each situ- istered in the UK worth around 17bn. A survey conducted in ation is different, but I can say that the people we have met so far June 2009 by Knight Frank Market Insight Survey found that 7% did not realise the savings would be so significant. of non-doms and 2% of HNWIs relocated away from the UK When looking at the Caribbean the other features Barbados has in the months following the tax announcements. With a further to offer is a population base of a sufficient size, about 280,000 peo- 31% considering relocation. Many have selected jurisdictions such ple, and consequently they can get many of the items they are used as Switzerland and Monaco. to, including numerous excellent restaurants plus the fact there are numerous cultural and sports events throughout the year. The events What is Barbados doing to attract some of these individuals? As a result of a business marketing trip to London in June 2009 are too numerous to mention here but they include many that UK people are familiar with such as football, cricket, polo, golf and sail- we heard that many HNWIs were concerned about the significant boat racing to name a few. Cultural events include Holders Season, increase in the personal tax rate so Barbados listened and made which occurs in the spring and includes a potpourri of international some changes to make it more attractive and a serious alternative. entertainment events, Jazz festivals and Kadooment at the beginning Barbados has always been a popular vacation spot for people from the UK so brand recognition was not a serious issue. By that I of August which is Barbados carnival event. Another key factor that exists in Barbados is significant airlift mean people were familiar with its location, people and services.
Business in Barbados
The main changes that were made or are in the process of being made are: Income tax it is too complex to describe in detail but the change here involved extending a benefit companies in Barbados have, called the Foreign Currency tax credit, to individuals. In simplistic terms, if an individual has much of their income in a foreign currency such is the British Pound, then their Barbados tax rate can be reduced significantly. Foreign Exchange Controls As noted above the Barbados dollar is pegged to the US dollar - at a rate of 2 BDS$ to 1 USD$. Accordingly Barbados has to manage its foreign currency reserves. While non-nationals of Barbados are already exempt from a number of foreign exchange controls there has been clarification of some rules to ensure that non-nationals can use multiple currencies in their investing activities and minimizing any foreign exchange control paperwork. Extended stay permits while economic citizenship is not available in Barbados, the program currently being proposed provides for an initial five year period, with immigrant status being possible thereafter. over the years. He can reach out to his network and due to his area of expertise Clive is one of the most likely people to come in contact with a UK person who is considering Barbados or will know how one might contact such persons. In addition, Invest Barbados, which is located in the British High Commission in London, has recently contracted Francoise Hendy from Barbados to ramp up its marketing to HNWIs in the UK. Fran ran the International Business Unit of the Barbados government for a number of years and was the leader of the Barbados negotiating team for its Double Taxation Treaties. She is well versed in the area of HNWIs and will be reaching out to those people in the UK. In terms of movement to Barbados the answer is yes, we have seen movement to Barbados. The interest has increased significantly over the last couple of months with a meeting with one or two persons a week on the subject. I expect this to increase over the next year or so and then likely level off unless there are further changes that would peak peoples interest.
What have you done as a firm to market the advantages of Barbados to these individuals? Have you seen any movement to Barbados already?
Before answering that question you have to put it in context. Barbados is not a large country, comprising only 166 sq. miles / 430 sq. km. So we are not going to be looking to attract thousands of people. Rather one has to target the most likely individuals. We have made contact with 4/14/11 one of our tax partners in London, Clive PwC TaxHH 02.pdf 8:22:24 AM Mackintosh, who knows Barbados well and has worked with us
How can PwC Barbados help those individuals that would like to relocate to Barbados?
As PwC is the largest firm in Barbados with about 220 people, plus a very long history in Barbados, combined with our network in the UK we can offer those interested individuals a seamless solution of dealing with both their UK and Barbados tax issues. Furthermore we are always pleased to work with the law firms in Barbados and any other non PwC firm in the UK who may have clients interested in exploring the idea of relocating to Barbados. n Russ Jones, Managing Tax Partner, PwC Barbados
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Business in Barbados
Business in Barbados
Barbados (or Little England as it is sometimes endearingly referred to) dos. Subject to the terms of the trust instrument, and the consent has an appeal which extends beyond pristine beachscapes, a rich cultural of any co-trustee, the assets of an offshore trust may be invested environment and the charming lifestyle which it offers. In fact, the juris- in a common trust fund established by the international financial
institution and the scope exists for the sale of interests in a common trust fund between offshore trusts. An offshore trust can also offer substantial tax planning advantages when a Barbados international business company (an IBC) is incorporated in the structure. An IBC, all of the shares of which are part of a common trust fund, enjoys a zero rate of tax, provided, amongst other things, that its activities are restricted exclusively to the business of buying, selling, holding or managing securities. Ordinarily, IBCs are subject to low corporation tax rates ranging from 1% to 2.5% depending on income levels. However, incorporating an IBC in an offshore trust can result in an effectively tax free structure and offers tremendous scope for creative tax planning. A domestic trust is one in which the trustee is a Barbados resident individual or company licensed under the Financial Institutions Act. Its worldwide income is taxable; it is subject to value added tax; and it may only be exempt for exchange control restrictions if the trust has foreign assets, non-Barbados resident beneficiaries and deals primarily in foreign currency. The central advantage of a domestic trust is that, if properly administered, it may be able to benefit under Barbados expanding double taxation treaty network under which Barbados enjoys advantages agreed bilaterally with each of several countries(more than 18 at the time of writing) and is useful in structures which require a trust which is prima facie taxable. Barbados therefore offers a variety of opportunities and advantages for an international clientele and astute estate and tax plannersnot least of which is our reputation as clean jurisdiction with right-sized regulation. In addition, it is a jurisdiction that enjoys political and economic stability, modern infrastructure, advanced telecommunication systems. With the added value of a well educated workforce; a cadre of highly skilled professionals and reputable service providers; and an exceptional quality of life for those who live and work on the island or visit on business or pleasure, Barbados is certainly a place which merits your trust. n by Melanie Jones and Tara Frater
Business in Barbados
After a six-year absence, Hilton Barbados welcomed its first guest on June 6, 2005 and is clearly on the path to making an indelible impression on the islands hospitality industry. Set on the site of the original Hilton
Besides the conference rooms the spacious, landscaped grounds offer outdoor options for events. During the celebration of the hotels 5th anniversary in September 2010 General Manager, Matthew Mullan, commented, the team involved has built a beautiful world class hotel facility that will continue to dominate the business and social calendar of Barbados for many years to come. Of course our success to date could not be realised without the efforts of our greatest assetour team members. Dedicated to providing high service, friendly, efficient and willing to go the extra mile to enhance their stay are just a few of the wonderful qualities guests comment on time and time again. Prior to the opening of the hotel team members were exposed to extensive training in the Hilton brand standards, customer service, and health and safety to name a few. To date our ability to constantly delight guests in addition to our high percentage of repeat guests is testament to the success of our training sessions. Hilton Barbados recognises the importance of giving back to the community and its surrounding environs and continues to play a vital role in this regard. To this end the hotel has forged mutually beneficial relationships with the Bay Primary School, the Garrison Secondary School, the Geriatric Hospital and the Childrens Development Centre, in addition to donating towards various causes and events island wide. High standards, outstanding amenities and exceptional service are synonymous with the Hilton brand and competing against a field of six top hotels within the Caribbean region and eight top hotels in Barbados respectively, Hilton Barbados was awarded the Caribbean Leading Business Hotel and Barbados Leading Hotel in 2007 and 2010 respectively by the prestigious World Travel Awards. On the local front the hotel was awarded the Pillar of Tourism Industry (Business) Award and the Award of Excellence (Accommodation) Award in 2009 by the Barbados Tourism Awards. Hilton Barbados forms part of the seven Hilton hotels and resorts throughout the Caribbean which includes properties in Curacao, Nassau - Bahamas, San Juan and Ponce - Puerto Rico, Santo Domingo, and Trinidad. The hotels location itself bears much historical significance as the Charles Fort (originally named Needhams Fort) was the former site for British Militia and on George Washingtons 7 week visit to the island on November 2, 1751 he dined at the Fort. The hotel also lies on one of the most important beaches for the nesting of the Hawksbill Turtle, one of the most common turtle species now nesting on Barbados beaches and now classified as Critically Endangered globally. Whether its enjoying a succulent meal at the The Grille and the Lighthouse Terrace Restaurants, or simply networking in our lobby lounge, our attentive team members will be on hand to provide exceptional service. We look forward to welcoming you to the Hilton Barbados. n
Business in Barbados
What were the reasons behind Scotiabank setting up its wealth management subject to the current ecodivision in Barbados in 2008? What growth have you seen in terms of demand nomic realities as seen in both locally and internationally for private banking and investment services? the slowdown over the past
2-3 years. While much depends on the improvement of the U.S. and U.K. economies, our clients and our business activity indicate that 2011 will see continued, albeit modest, improvement in the local and major economies.
What percentage of your clients are private, and corporate or commercial? Which markets will you be focusing on over the coming 18 months with the wealth management arm?
As Centre Director for Barbados and Caribbean East, Maya Johnston, MBA, manages the full suite of client services offered under the Scotia PriMAYA JOHNSTON vate Client Group umbrella for Barbados and eight East Caribbean territories. Maya brings a wealth of management experience Centre Director for Barbad in banking to her role As having joined offered under the Scotia Privat Scotiabank Group Jamaica as a SeMaya brings a weal nior Vice President in territories. 2007. There, Scotiabank Group Jamaica as a she established the Customer ExperiExperience unit which institute ence unit which instituted improved more customer-centric service systems, governance structures and President of Non-Branch Sales practices to drive a more customerservices to clients outside of th centric service culture within the international growth. bank.
What is Scotiabanks wealth management product and service offering in Barbados? What interest and take up of your services have you seen in the last 24 months from clients?
Scotia Private Client Group is an umbrella of services designed to help our clients grow, protect, and transfer their wealth from one generation to the next. At the foundation of this service is our Private Banking Package which pairs our clients up with a local Relationship Management team to take care of their day-to-day banking needs, and to provide our clients with customized solutions which are tailored to their unique needs and which are not typically available within traditional retail bank offerings. We have a resident team of International Investment Advisors who can meet the investment needs of our clients through access to major financial markets, and a wide selection of both in-house and independent investment vehicles. The team of Scotia Private Client Group experts accessible to our clients is expanded beyond the shores of Barbados to include discretionary investment management services offered through the Five Continents Group, Trust and Estate Planning Services offered by Scotiabank International Wealth Structuring, and U.S. Private Banking. This enables us to leverage Scotiabanks local and international banking network to effectively coordinate teams of experts across the disciplines to craft an individual solution through one office. Of course, personalized service, confidentiality and discretion are paramount in what we do. Since opening in April, 2008, we have grown from a group of 5 to our present team of 9 professionals in the Private Banking and International Advisory groups here in Barbados. Having added our first private client at inception, we now provide service and advice to clients throughout Barbados, the Eastern Caribbean, and the world. While the performance of the Centre is undoubtedly a success, our clients are
some of them may use holding companies or trust structures to manMaya, a Barbados age their wealth. We have a diverse client base which includes a sig-National Sc Economics and Engineering fr nificant number of Barbadian nationals and residents, as well as many Harvard Business School. non-resident clients from countries such as the UK, Europe, Canada and Asia. In the coming months, we will continue to expand our client base within these targets, and into the Eastern Caribbean market. Scotia Private Client Group is financial solutions While International Investment Advisory services the needs of our that will ena of professionals from your Private Clients, they also provide investment and brokerage services to ongoing partner is dedicated institutional investors such as captive insurance companies. financial solutions that provide
and financial What are your goals for the wealth management division over personal the next two years goals. and how do you look to achieve them? What major challenges do you face?
Prior to joining Scotiabank, M focused on Customer Experien All of our private banking clients are private individuals, although working with eminent firms in
We start by hiring the very best people we can to care for our clients Scotia Private Client Group is and that tradition will continue as the team grows. We also continuincluding private banking, inve ously assess our product and service offering to ensureknowledge that we remain of local and global goals, us to develop bank in tune with our clients needs, and are competitive in the allow market. A your overall financial portfolio great example of this is the introduction of MasterCard Black to our Group worldwide network, wh Private Banking product portfolio. In Barbados, this across card is exclusive the country and around to the clients of Scotia Private Client Group, with unmatched capabilities and rewards for our clients. * Trademark of T he B ank of Nova Scotia. Scotia Private Client Group is composed of the Scotiabank group companies that provide private client services, including Scotia Wealth management continues to of be a growth business for ScoCapital Inc., a Member CIPF. tiabank, and we are committed to making the right investments to ensure our continued success in this space. We recognize that this is a relationship-business and, in the end, our goal to grow is inextricably bound with ensuring that each and every one of our clients feels that their best interests are being served by the Scotia Private Client Group, that the relationship they have built with us is one of unquestioned value, and that they would not hesitate to do more business with us or recommend our services. n
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For more information on how we can put our teams knowledge to work for you, contact:
Ben Crayston Financial Consultant 246.417.2027 ben.crayston@scotiabank.com Maya Johnston Centre Director 246.417.2004 maya.johnston@scotiabank.com
Scotia Private Client Group | International Trading Centre | Warrens | St. Michael | Barbados
Trademark of The Bank of Nova Scotia, used under license (where applicable). Scotia Private Client Group is composed of the Scotiabank group of companies that provide private client services, including Scotia Capital Inc., a Member-Canadian Investor Protection Fund and a member of the Investment Industry Regulatory Organization of Canada. (03/11)
Business in Barbados
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