The Barbados Ministry of International Business and Industry has issued a notice to grandfathered entities regarding International Business Companies (IBCs) and International Societies with Restricted Liability (ISRLs). Barbados effectively abolished IBCs and ISRLs in 2018 in order to comply with the requirements of BEPS Action 5 (Harmful Tax Practices), with grandfathering provisions. The notice, dated 15 October 2020, is as follows.
Notice to Grand-Fathered Entities
CONVERTING TO DOMESTIC ENTITIES HOLDING FOREIGN CURRENCY PERMITS
"Savings of right and benefits
Notwithstanding the repeal effected by section 2, the rights and benefits conferred upon International Business Companies under the International Business Companies Act, Cap. 77 are saved or shall cease as is hereinafter provided:
an international business company that does not hold intellectual property assets but holds a valid licence issued prior to 17th October 2017 shall be entitled to receive its benefits until 30th June 2021;
an international business company that does not hold intellectual property assets but holds a valid licence issued on or after 17th October 2017 shall cease to be entitled to any benefits after 31st December 2018;
without affecting paragraphs (a) and (b) an international business company that holds a valid licence issued on or before 30th June 2018 and also holds intellectual property assets acquired after 17th October 2017 but before 1st July 2018 where the intellectual property assets were already benefitting from a back-end regime; or the intellectual property assets were acquired from an unrelated party the company shall be entitled to receive those benefits in respect of those intellectual property assets until 30th June 2021."
Pursuant to the above excerpt from the International Business Companies (Repeal) Act, 2018-40 (and an identical provision in the Societies with Restricted Liability Amendment Act 2018 – 47 with respect to International Societies With Restricted Liability) all companies/societies desirous of applying for a Foreign Currency Permit under the Foreign Currency Permits Act, 2018-44 please be advised as follows:
- All Grandfathered IBCs and ISRLs will cease to be so grandfathered after June 30th
- All applications for the Foreign Currency Permit relating to the IBCs and ISRLs that were grandfathered and earn one hundred percent of their annual income in foreign exchange, must be submitted to the Ministry of International Business and Industry between June 1st and June 15th 2021 to ensure quick processing.
- All applications will attract the usual fee as prescribed in the Foreign Currency Permits Act.
- Where possible, applicants are encouraged to make payments utilizing Government's EZpay Portal.
- All applications must be accompanied by all required documentation in support pursuant to the Foreign Currency Permits Act.
- All Foreign Currency Permits issued to these to be previously grandfathered entities will be dated July 1st
Please be reminded that the economic substance requirements will be applicable to all of the now grandfathered IBCs and ISRLs from January 1st 2021 providing that those grandfathered entities remain under the grandfathered regime for the remainder of 2020. Should any grandfathered entity surrender its grandfathered status between October 15th and December 31st 2020, the economic substance requirements will be applicable from the date of surrender.
Finally, kindly note that in order to continue to be eligible for benefits under the grandfathered regimes until June 30, 2021, please complete the Annual Form and pay the prescribed annual fee of (Bds$1,000.00) by December 31st 2020. If the licensee fails to pay the prescribed annual fee by that time, the licensee should pay the prescribed annual fee (Bds$1,000.00) in addition to a pecuniary penalty for the late payment (equal in the amount of the annual fee $1,000.00) by 1st February of 2021. If the fee remains unpaid after 1st February of 2021, the licensee will not be considered as having its licence renewed and will no longer be under the rubric of the grandfathered regime.