International manufacturing is defined as the business of making or packaging within Barbados of any product exclusively for export to countries outside the English-speaking Caribbean region.
The term international trade and commerce covers a wide spectrum of activities including the provision of services and encompasses:
- The business of being a broker, agent, dealer, buyer or factor within Barbados of goods existing outside Barbados or of goods transshipped through Barbados;
- The business of selling services which if originating in Barbados, are to be for or on account of persons resident outside the English -speaking Caribbean Region;
- The provision of a prescribed service to an IBC or other offshore structure other than a licensed bank.
BENEFITS OF USING AN IBC
Taxation
The low rate of taxation of IBCs in Barbados is one of the major benefits to be gained from establishing an IBC on the island. While corporations in some jurisdictions can be taxed at relatively high rates, for example in Canada where corporations are taxed at a basic rate of 28% plus a 4% surtax, and additional taxes may be levied by federal and provincial authorities resulting in companies paying tax at as high rates as 46.12%, IBCs in Barbados are taxed as follows:
It is to be noted that, where branch operations of foreign IBCs are established in Barbados the IBC is taxed in Barbados only on profits and gains accruing to the IBC from its Barbados branch operations.
- 2.5% on profits and gains up to $10,000,000;
- 2% on profits and gains between $10,000,000 and $20,000,000;
- 1.5% on profits and gains between $20,000,000 and $30,000,000 ;
- 1% on profits and gains over $30,000,000.
Dependent on the laws of the country in which the parent IBC is domiciled the parent IBC may or may not be taxed on the income accruing to it from its dependent IBC. It may be possible in some countries to utilise benefits available under existing double taxation treaties.
Wide Scope Of Activities
The use of the IBC as a corporate structure allows an enterprise to engage in a wide and varied range of activities in international manufacturing, commerce and trade. This variety in operational activities is not generally possible with other offshore structures whose sphere of operations is limited by the provisions of the legislation which govern their operations.
Manufacturing activities engaged in by IBCs on the island include, the production of aerosol products, tools, computer board components, eye wear, ladies' lingerie and the assemble satellite components.
Of the services engaged in, the more popular by far has been that of information processing or data entry. IBCs in this sector engage in activities which include insurance claims processing, software development, and litigation and support services.
Special Concessions
Special concessions have been given to IBCs in the nature of the waiver of the payment of stamp duty on all transactions except the purchase of real estate in Barbados.
Machinery, equipment and raw materials imported exclusively for use by the IBC are exempt from the payment of tax and duties.
In cases where the IBC has had to bring specially qualified persons into the Island to work in the IBC because of the unavailability of qualified persons locally, and where the services of these persons could not be obtained without special tax concessions being made, provision is made for a prescribed percentage of 35% of that person's salary or fees to be paid free from income tax and/or in a foreign currency.
No tax is withheld from dividends, interest and royalties paid to non-residents by IBCs.
Other Benefits
The high quality of factory facilities, direct data transmission and infrastructure, as well to the availability of a very proficient and skilled labour force together with the presence of highly reputable and experienced service providers on the Island facilitate the smooth and effective running of IBC's operations.
Assets sold or transferred to the IBC by a shareholder become the property of the IBC and cannot be considered to be part of the shareholder's estate in cases of bankruptcy or death.
The filing of financial statements is not required and the disclosure of information relating to the affairs of the IBC without the permission of the IBC is prohibited so far as that information is part of a public record, stiff penalties are imposed where such disclosure is made. The books of the IBC need not be audited unless the IBC makes gross revenue in excess of US$500,000.00.
In addition to the above the Barbados' government with the aim of encouraging investment by non-residents in the Island's economy has established a body known as the Barbados Industrial Development Corporation (BIDC). This body provides technical and other related services to investors and gives advice and assistance on among other things factory location, and labour acquisition.
ESTABLISHMENT AND ADMINISTRATION
IBCs may established with a single shareholder and a single director neither of whom is required to reside on the island, these persons need not be a natural person. However the name and address of the shareholder must be disclosed on an application for an IBC licence.
It is to be noted that the basis for obtaining the benefits listed above now rests on the IBC being resident in Barbados and not merely being incorporated on the island as was previously the practice. To establish that it is resident in the island it must be shown that the management and control of the IBC is in Barbados.
This is best done by the maintenance of an administrative office in the island as well as holding a majority of the shareholders and directors meetings, on the island. The appointment of a person resident in the island as a director of the IBC may further satisfy the management and control criterion.
The annual shareholders general meeting must be held in the island and voting by proxy is allowed. Meetings of shareholders, other than the shareholders annual general meeting and directors meetings may be held outside the island and may be conducted by telephone, if all the persons participating can be heard simultaneously.
In addition pursuant to section 82 of the Companies Act a resolution in writing of all the directors of a company entitled to vote at a directors meeting is valid as if prepared at a formal directors' meeting.
PROCEDURE FOR FORMING AN IBC
The formation of an IBC is a two-stage process. Initially a company must be incorporated locally under the Companies Act, and thereafter an application is made an IBC license.
To incorporate the company the following information is needed:
- The proposed name of the company and an alternative.
- The names, addresses and occupation of the Directors.
- The address of the registered office.
On applying for the IBC licence the following information must then be provided:
- The proposed business of the IBC.
- The names and addresses of the shareholders and the proposed percentages of shares to be held by them as not more than 10% of the shares in an IBC cannot be held by persons resident in the English-speaking Caribbean region.
COSTS
The costs of formation and operation of an IBC are (listed in U.S. Dollars) are set out below:
Incorporation of initial company (this includes the provision of By laws, and the holding of an Organisational meeting) $1,500.00 Registration fee for company $ 375.00 Miscellaneous Expenses $ 150.00 - $ 250.00 Obtaining initial IBC license $ 100.00 Annual Provision of a registered office and secretarial services for the IBC $1,500.00 Annual provision of services of local director $1,000.00 Annual IBC license fee $ 100.00
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.