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AN ATTRACTIVE REGIME FOR HNWIs

BEN ARRINDELL SCM

OCTOBER 2015


Countries with Citizenship and/or Residence by Investment Programs

Citizenship By Investment

(8)

Residence By Investment

(11)

Antigua and Barbuda Barbados

Austria Belgium

Cyprus Canada

Dominica Hong Kong

Grenada Jersey

Malta Monaco

St. Kitts and Nevis Portugal

St. Lucia (2015) Singapore

Switzerland

United Kingdom

United States


The Barbados Regime for HNWIs

Consists of two main elements as follows:

• An Immigration component (Special Entry and Reside Permit)

• A tax component


Special Entry and Reside Permit for HNWIs

The Special Entry and Reside Permit (“SERP”) was introduced in 2012 and is designed to make it easier for HNWIs to relocate to Barbados.

How Does an Individual Qualify for a SERP

There are several categories of persons who can qualify for an SERP

• An individual who invests US$2m in Barbados (either by acquiring a residential property or other investments in Barbados), purchased with funds sourced outside the Island, is eligible for a SERP for a 5 year period

• An individual who has a net worth of at least US$5m and invests at least US$2m in Barbados (either by acquiring a residential property or other investments in Barbados purchased with funds sourced outside the Island) is eligible for a SERP as follows:

• An individual who is over 60 years of age can obtain a SERP for an indefinite period



How Does an Individual Qualify for a SERP (continued)

• An individual who is under 60 years of age will be granted a SERP for the period to take the

individual up to age 60 and thereafter it can become indefinite

• An individual with special skills will be eligible for a SERP for 5 years

• Spouses and dependants under 18 or in full time education will be granted same the status as the SERP holder



Application Process

Documents to be submitted:

• Form B – Application for Permission to Vary Period of Stay in Barbados or Conditions of

Stay

• Evidence of health insurance in excess of US$500k

• Police Certificate of Character (PCC) from any country in which the applicant has resided

for a period of six (6) months or more after the age of 16. Enhanced disclosure certificate

in lieu of PCC for British applicants.

• Application fee of US$150.00

• One passport size photo

• Original birth certificate and a copy

• A copy of the bio-data page of the applicant’s passport

• Marriage certificate if applicable

• Proof of relationship to dependants where applicable i.e. birth certificates/ legal

documents


SERP Fees

Category of Person Fees

Over 60 years (indefinite) USS$5,000 one-time fee

Under 60 years but over 50 US$3,500 one-time fee

Under 50 USS$5,000 one-time fee

Renewal for period up to age 60 US$5,000

Dependant US$150

Category of Person

Fees

Over 60 US$15,000

Under 60 US$20,000

Work Permit Fees


Taxation of HNWIs

• Concepts of residence and domicile

• Individuals who are resident and domiciled in Barbados are taxed on worldwide income whether or not remitted to Barbados

• Individuals who are resident but not domiciled in Barbados for tax purposes are taxed on their foreign income only if such income is remitted to Barbados

•

• Foreign income remitted to Barbados will generally be subject to income tax at an effective tax rate of less than 3% under the Foreign Currency Earnings Credit (FCEC) rules (see slides 4 and 5)

• No capital gains tax, wealth tax or inheritance tax

• Access to reduced withholding taxes and, in many cases, exemption from tax on capital gains under Barbados’ tax treaty network


Taxation of HNWIs

Foreign Currency Earnings Credit

• Companies or individuals deriving income from certain qualifying activities

can claim a foreign currency earnings credit (“FCEC”) which can be

deducted from their tax liability

• The amount of the credit will depend on the level of income derived from the

persons qualifying activities compared to the total assessable income for the

year

• Qualifying activities include management consultancy services,

administrative services and certain technical and advisory services

• The FCEC was extended to include all foreign income of residents of

Barbados (irrespective of the individual’s domicile status) that is remitted to

Barbados through the Barbados banking system


Taxation of HNWIs

Foreign Currency Earnings Credit

Profits from qualifying activities FCE Credit Effective Tax rate

as a % of total profits (Income Tax Rate of 35%)

Up to 20% 35% 22.75%

21% - 40% 45% 19.25%

41% - 60% 64% 12.6%

61% - 80% 79% 7.35%

81% and over 93% 2.45%


Tax Treatment of Pensions of HNWIs Under Barbados’ DTAs with

Canada and the UK

Canada

• RRSP payments received from Canada subject to withholding tax of 15%

under Article XIX of the Barbados/Canada DTA provided that the income is

remitted to Barbados. A Canadian tax saving of approx. 25%.

UK

• Pension payments received from a private (i.e. non-UK Government) pension

scheme in the UK exempt from UK tax provide the funds are remitted to

Barbados

• The remitted income will generally be taxed at an effective rate of 2.45% after

applying the FCEC.


Exchange Controls

• The exchange control rules apply to individuals who are regarded as resident in

Barbados for the purposes of the Exchange Control Act.

• An individual is regarded as resident in Barbados for exchange control purposes

after he has resided in Barbados for a continuous period of 3 years.

• However, under a longstanding practice of the Central Bank, these rules are only

applied to expatriate individuals living in Barbados, even after the 3 year period

has expired, to the extent that they wish to transfer Barbados currency out of the

Island. Therefore, these rules will not apply to foreign assets which are acquired

using foreign currency.


Summary of the Main Benefits to HNWIs of the Barbados Regime

• Relatively straight forward application process for the SERP

• A SERP holder can work in Barbados but must obtain a work permit

• Foreign income only subject to tax if remitted to Barbados

• Remitted income taxed at a low effective tax rate (less than 3%)

• No capital gains tax, wealth tax, estate or inheritance tax or gift tax

• Access to the benefits of Barbados’ wide network of DTAs, including

reduced withholding taxes and protection under the tie-breaker provisions

• Exemption from Exchange Controls in practice

To understand where a person wants to be, you first have to know the

person

Perhaps we should talk?

This document is for informational purposes only and we have endeavored to offer current, accurate and clearly expressed

information. However, since inadvertent errors may occur, relevant legislation and regulations may change and or the

application of laws and regulations may vary; the information may be neither current nor accurate. Additionally, the information

contained in this document is intended to provide general guidance and is not intended to replace or serve as substitute for

any professional or tax advice, consultation, advisory or service, nor does any information constitute a comprehensive or

complete statement of the issues discussed. All individuals should obtain specific professional advice with regard to the

respective tax or other professional area. No action should be taken or omitted to be taken in reliance upon any of the

information provided and in no event shall Cidel Bank & Trust Inc., its subsidiaries, its directors, principals, agents or

employees be liable for any direct, indirect, incidental, special, exemplary, punitive, consequential or other damages

whatsoever including but not limited to contract, negligence or other tortuous actions arising out of or in connection with any

content of the information provided or other use hereof.

Questions? Contact:

Ben Arrindell

Cidel Bank & Trust Inc.

Suite 100, One Financial Place

Lower Collymore Rock,

Bridgetown, Barbados

Phone: (246) 430 5350

Fax (246) 430 5353

[email protected]