ib - barbados international finance & business magazine 2010

8/8/2019 IB - Barbados International Finance & Business Magazine 2010

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4 Welcome to the 2010 Edition

5 Message rom the Minister

7 The Barbados Jurisdiction NextSteps in a Changing World

8 The Evolution o InternationalBusiness in Barbados: ABrie Commentary

9 Tax Treaties: New Instrumentso International Diplomacy

10 The Future o InternationalFinancial Centres A UniqueOpportunity or Barbados?

12 Increase Your International

Competitiveness byUsing Barbados

14 Raising the Bar Barbados as anInternational Financial Centre

16 Legal Issues on Operating anInternational Business in Barbados

17 How High Net Worth IndividualsUse International FinancialService Companies

18 Why Barbados Remains a Popular

Choice or International Business

19 New EU Opportunitiesor Barbados

20 Barbados: Gateway to China

ContentsSponsors

30% Post Consumer

Barbados oers International businesses the

necessary resources and structures required to

acilitate and manage operations

Barbados a undamental element o

the growth strategy

This publication was printed on Mohawk

30% PostConsumer Recycled paper.

By using PC recycled fibres in place o new

fibres the ollowing has been achieved:

13.54 treespreserved or the uture

17.74 kgwaterborne waste not created

289 kgsolid waste not generated

21,780 litreswastewater flow saved

569 kgnet greenhouse gases prevented

9,594,604 BTUs energy not consumed

22 Practical Issues oManaging InternationalCompanies in Barbados

23 The Basics o Captives

25 U.S. Property andCasualty Round Up

27 Captives - An Eective Solution orAccessing Reinsurance Markets

28 Trade Credit: How a Captive

Helped Improve Proftability

30 Auditing Captives WorkingTogether to Ensure a Timelyand Seamless Process

31 What Have We Learned romthe Global Meltdown?

33 Designing an InvestmentStrategy or New Clients

34 The End o International Financial

Planning? Not in Barbados

36 And So Much More

38 International Business TheUnintended Benefts in Barbados

Barbados International Finance& Business magaine is a

publication o Invest Barbados.Invest Barbados is grateul to theinternational business communityand the service providers or their

support on the editorial committeeand in contributing articles. Wewould like to thank the ollowing

sponsors:

International BusinessBreakwater Management Services Ltd.Chancery Chambers

Deloitte & ToucheErnst & YoungHarridyal & Sodha Associates

KMPGLexis Nexis

London LieMeridian LawPlatinum Oshore Management

Services, Inc.

PricewaterhouseCoopersTD Reinsurance (Barbados) Inc.Towner Management GroupTrilon International Inc.

Tricor Caribbean Ltd.

Captive InsuranceAmphora Bank and TrustAON Insurance Managers

(Barbados) Ltd.

CGE International Services Ltd.Global Re SCC

Wealth ManagementButterfield Bank

CIBC Oshore BankCidel Bank and TrustFirst Caribbean International Bank

Glenhuron BankJ & T Bank and TrustRoyal Bank o Canada

Scotiabank


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Welcome to the 2010 issue

o Barbados International

Finance & Business

and what a year 2009 was. The world

experienced a Global Financial Crisis

not seen since the Depression o 1929,

and o course Barbados has also been

impacted.

Barbados continues to be the domicile

o choice or international companies seeking to become more globally

competitive. The countrys strategy o pursuing Double Tax Treaties with

other nations remains a key platorm, and this strategy was rewarded

in April 2009 with an excellent standing endorsement in the Progress

Report on the Jurisdictions Surveyed by the OECD Global Forum in

Implementing the Internationally Agreed Tax Standard. The numbero tax treaties grows, with Spain, Vietnam and Italy to be added soon

and more to ollow.

The overall purpose o the magazine remains to provide an

annual update on Barbados as an International Business domicile,

and we thank Invest Barbados and our sponsors (both editorial and

nancial) or making this happen. We hope you enjoy reading the

2010 issue and invite you to send any comments and suggestions to

[email protected] .

James Gardiner

Welcome to the 2010 Edition

Barbados has been classied by the

OECD as a nancial centre that

has substantially implemented the

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www.investbarbados.org

4 BARBADOS INTERNATIONAL FINANCE & BUSINESS 2010


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Message froM senator the hon. Darcy BoyceMinister of state

Ministry of finance, investMent, telecoMMunications & energy

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Senator The Hon. Darcy BoyceMinister of State

Ministry of Finance, Investment,

Telecommunications & Energy



6/40

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Contributors

Copyright Invest Barbados 2010. All rights reserved. No part of this publication may be reproduced or transmitted in any form or any means, or stored in any retrieval system of any nature without prior

written permission of the copyright holder. The views expressed in this magazine are those of the contributors, and not necessarily those of Invest Barbados. The information provided in this magazine is

meant as a guide only and does not amount to professional advice.

Barbados International Finance & Business 2010 Edition Published by Invest Barbados | www.investbarbados.org

Barbados: (246) 626-2000, Toronto: (416) 214-9919, New York: (212) 551-4376, London: 44 0207 299 7195 Email: [email protected]

Technical Review:Ben ArrindellCidel Bank and Trust

[email protected]

Editorial Committee:

Caroline Gardiner

James Gardiner

Russ Jones

Sandra Payne

Dominique Pepin

Dawn Williams

Authors:Wayne KirtonInvestBarbados

[email protected]

Stephen GreavesPlatinum Oshore Management

Services Inc.

[email protected]

Dr. Trevor Carmichael, Q.C.Chancery Chambers

[email protected]

Francoise HendyMinistry o International Business

& International Transport Barbados

[email protected]

Andy SharpSpecialist Taxation [email protected]

Lincoln SchreinerPricewaterhouseCoopers

[email protected]

Russ JonesPricewaterhouseCoopers

[email protected]

Ricardo KnightTowner Management Group

[email protected]

Ken VillazorTrimel Biopharma

[email protected]

Dawn WilliamsMeridian Law

[email protected]

Gail IfllErnst & Young

[email protected]

H. Wayne LovellKPMG

[email protected]

Jonathan BrathwaiteCititrust (Barbados) International Inc.

[email protected]

Liza Harridyal-SodhaHarridyal Sodha & [email protected]

Gabriel KellyLondon Lie and Casualty

(Barbados) Corporation

[email protected]

Clennell JackmanTricor Caribbean Ltd.

[email protected]

Michael ArthurArtel CIMTEC Inc.

[email protected]

Nicholas CrichlowMarsh Management Services

(Barbados) Ltd.

[email protected]

Michael DouglasAON Global Risk Consulting

[email protected]

Chris EvansCGE Group Ltd.

[email protected]

Hugh RosenbaumHughro Limited

[email protected]

Mike HomanGildan

[email protected]

Steve ClarkeDeloitte & [email protected]

Richard BruceTD Reinsurance (Barbados) Inc.

[email protected]

Gordon AndersonRoyal Bank o Canada

(Caribbean) Corporation

[email protected]

David BusheClose Wealth Management

(Barbados) Limited

[email protected]

Dave ThomasJ & T Bank and Trust

[email protected]

E. Adrian MeyerCidel Bank & Trust

[email protected]

Design:Masthead and Cover DesignBlueprint Creative Inc.

Design, Layout and PrintingEVillages Ltd.


7/40

Firstly, welcome to the second

issue o our International

Finance & Business magazine.

Since our last publication, the world

has tumbled into recession, and shell-

shocked G20 leaders have launched

an entirely misplaced attack on

international nancial centres (IFCs).

Unortunately, even those centres

like Barbados - that ollowed a path o bilateral tax and investment

treaty negotiation Government-to-Government - have been under

attack, and some proposed G20 retaliatory measures would overturnor contravene negotiated agreements a unilateral trampling o

bilateral agreements that will no doubt trigger countless complaints

at WTO level.

In deense o IFCs, the recent publication o University o Torontos

Proessor Walid Hejazis new study on the use and value o IFCs

which expands the original Canadian study to

include US companies, is certainly timely, as

it refects a similar conclusion to the original

study - that companies which use structures in

IFCs (as opposed to tax and secrecy havens) are

more successul, expand more rapidly, and pay

more taxes and employ more people in their

domestic market than companies that do not

use those structures.

However, while there is evidence in some

parts o the world that the recession has begun

to abate, credit availability is still problematical,

and the G20 are still playing the name, blame

and shame game with IFCs the latest ront

being regulatory havens. Todays investors are

understandably cautious, and that translates to

a wait-and-see attitude, or the most part.

So in this state o world investment fux, what is Barbados doingas a jurisdiction? Firstly, we are a treaty based jurisdiction and are

continuing to expand our tax treaty network. On the regulatory ront,

part o the reason why the World Economic Forum ranks our banking

system so highly among Western hemisphere countries is because

o our robust regulatory systems and anti-money laundering regime.

Recognising that we need to improve in the non-banking regulatory

arena, we are in the nal stages o implementing a Financial Services

Regulatory Commission, which will be in place early in 2010.

We are creating appropriate, but strong regulation or Hedge Funds

and Private Trusts, and we are making changes to various other

pieces o legislation to make it more attractive or Headquarters and

Holding Companies to set up in Barbados.

On the local business environment scene, Barbados has solicited the

technical assistance o the IADB in overhauling its processes in Town

and Country Planning, Corporate and Intellectual Aairs, Immigration,

and legal drating all aimed at aster and more transparent service

or international business. I am also delighted to

announce that the Immigration department has

dedicated an ocer to international business,

located in the oces o Invest Barbados, where

all international business immigration matters

are now processed on a ast track basis.

In terms o new oerings, Barbados will soon

provide a acility or high net worth individuals

who wish to become resident, but not domiciled,

or tax purposes in Barbados, oering a transpar-

ent and ast immigration process, reedom rom

exchange controls on unds brought in, and a

very attractive local income tax rate based on the

taxpayers level o oreign currency earnings.

We have also commissioned a study o the

insurance industry to see where we can improve

and whether there are any niches developing

that we should seek to acilitate in Barbados. Also on the cards isthe establishment o a branch o an international arbitration rm in

Barbados, with the aim o making the island a seat or international

arbitration by 2011. By early 2011, international investors structuring

their activities through Barbados should also be able to list their IPOs

on the new international trading foor o our stock exchange.

And lets not orget the quality o lie investors can enjoy in Barbados

- riendly and well educated people, an inrastructure that works,

saety, great weather, plenty o good restaurants, and many things to

do as our ad says, isnt it time you considered Barbados?

Wayne Kirton

Chie Executive Ofcer

Invest Barbados

Te Barbados Jurisdiction Next Steps in a

Changing World

By early 2011, international

investors structuring their activities

through Barbados should also be

able to list their IPOs on the new

international trading oor o our

stock exchange

Barbados Double Tax

Treaty Network includes:

Austria

Botswana

Canada

CARICOM(10 countries)

China

Cuba

Finland

Malta

Mauritius

Mexico

Netherlands

Norway

Seychelles

Sweden

Switzerland

UnitedKingdom

United Statesof America

Venezuela


Note From the CEO


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When the ramers o the original 1965

International Business Companies

legislation ormulated the statute

primarily to leverage the benets o United

Kingdom direct investment into Barbados, they

could hardly have considered that the ever chang-

ing scope o global nancial fows would dictate

such later fexibility in the statute. Indeed, that

fexibility and creativity, blended with consist-

ency, all mirror the wider scope o internationalbusiness in Barbados.

At the outset, and throughout the past orty

years, there has been an implicit recognition that

the path o a zero tax policy was one not to be

pursued. Having inherited, on independence,

the Scandinavian treaties, there ollowed an

ongoing recognition o tax treaty negotiation

and multiplication as an article o aith, which

has been maniested in dierent ways. The fex-

ibility in this policy may be easily identied by

the development o the negotiating machinery

itsel, which at one time comprised an inormal

mix o government ocials combined with some

unpaid proessional lawyers and accountants.

However, as international capital fows increased

and globalisation maniested itsel in its many

orms, the speed, organisation and skills required

or multiple treaty development accounted or

more rigorous treaty negotiating teams, as is

clearly maniested in the jurisdictions current

team o very eective proessionals.

In the decades o the eighties and nineties,

recommendation and change were essentiallyled by small groups o proessionals meeting

inormally with the Central Banks legal advisors.

However, this eature has been supplanted by the

organisation o ormal structures advising the

relevant Ministers. The fexibility has allowed

the development o the sector and, in particular,

has acilitated critical changes to be eected at

opportune times.

Hence, the decision to modiy the CARICOM

Model Corporate Legislation and to introduce,

in 1982, a statute which, although based on

the Ontario and Delaware models, was philo-

sophically in keeping with the CARICOM drat - a

strategic coup. For this new legislation proved to

be a catalyst in the expansion o the international

business agenda, and urther contributed to the

ease o captive insurance corporate ormations

and the growing transaction work which now

fows naturally within the local nancial services

industry as a whole. In this respect, the urther

renement o the legislation, with the introduc-

tion o segregated cell legislation and the Society

with Restricted Liability Act, has buttressed the

fexible use o the corporate vehicle. Furthermore,these two additions were introduced at the time

o particular need and have been very avour-

ably utilised, thereby underscoring the fexibility

which has marked the consistency within the

industry as a whole.

O no less signicance has been the creative

thinking which has marked the international

banking sector. When, in 1979, the relevant

legislation was introduced, which also employed

the term Oshore in its title, the international

nancial milieu recognised the importance attrib-

utable to the term. However, as the international

regulatory ethos changed and the term Oshore

lost much o its glamour and respectability, the

new International Financial Services legislation

recognised the trend and renamed, as well as

reashioned, the statute accordingly. Suce to

say, the amended legislation, regulations and

practice directives have endorsed the consist-

ent creativity o the sector, while ensuring that

proper banking regulation is not compromised by

banking condentiality. Hence, on the one hand

the Central Bank has set important categoriesand criteria or establishment while, at the more

international level, it has ensured that banking

regulation keeps pace with the ongoing Basle

nancial edicts.

The consistency o creativity and fexibility

remains a critical component o Barbados

international business, in ull recognition that

the delivery and rening o new products over the

years is a sine qua non or the ongoing eeding

o a national economy. Such growth, however,

will hopeully seek to continually recognise the

important ingredient o discipline which, as Tom

Rohn reminds, is the bridge between goals and

achievement. F

Te Evolution o International Business

in Barbados: A Brie CommentaryB Y D R . T R E V O R A . C A R M I C H A E L , Q . C .

Case

studyPl

atinum

Ten Years o PlatinumServiceBy Stephen Greaves

The genesis o Platinum Oshore

Management Services, Inc.

(Platinum) was in , when

we took over the inrastructure

and human talent o my ormer

employer, who decided to close

the operation which I had man

aged since .

One o our companys first innova

tions was to launch a website, as

a means o creating a presence in

the international market at a time

when ew local companies had

created websites. We ocused on

networking, by participating at

tax planning conerences and sym

posiums organised by the BIDC/

Invest Barbados, which generally

resulted in client reerrals.

Platinum is built on the basic core

values o ethics, integrity and a

passion or excellence in service,

by providing our clients with

responsive handson deliverables.

Our marketing strategy included

advertising in key global

periodicals, as well as writing

sectorbased articles in reputable

publications.

Our achievements to date have

been due to hard work, determina

tion and strategic alliances with

other service providers, as well

as the continuous support o the

BIDC/Invest Barbados. It wouldalso be remiss o us i we did not

acknowledge the transer o useul

knowledge as an important source

o our proessional development

at Platinum.

With a track record o execut

ing the tax strategy o oreign

investors by eectively managing

the daytoday operations o the

Barbados subsidiary, Platinum

continues to be a service providero choice in the international

business segment o the industry.



9/40

For the early negotiators o

income tax treaties, com-

monly reerred to as double

taxation agreements (DTAs), the

policy and practice o their modern-

day counterparts might well cause

them to pause.

O course, DTAs have long been an

important expression o a country's

desire to expand bilateral trade by

addressing the tax constraints to the

cross-border movement o persons,goods and services through the

articulation o clear rules designed

to avoid double taxation and prevent

scal evasion.

Mindul o this customary basis

or DTAs, it should not be a surprise

that the rst question answered by governments prior to a round o

negotiations being scheduled would be, what is the level o trade

between the two countries, and are current levels suciently high

to warrant the establishment o a bilateral mechanism to address the

international aspects o domestic taxation?

For traditionalists, the satisactory determination o this issue,

based on quantitative data, is still a pre-condition or tax talks.

However, even or those who adhere to the purists view, equally

important today is the consideration o prospective trade fows and

the opportunity that such a negotiation would present to urther

multilateralize internationally accepted standards o transparency

and access to tax inormation.

Perhaps ushered in by the establishment o the World Trade

Organisation (WTO), subsequent work by the Organisation or

Economic Co-operation and Development (OECD) on tax havens,

prescriptions announced by the G20 in response to the global economic

crisis, and the practice o states, it is clear that tax treaties are nowimportant instruments o international diplomacy.

How else can one explain the prolieration o DTAs brought into

orce between countries where issues relating to trade fows might

otherwise preclude the conclusion o such an arrangement? O course

one can point to those non-traditional fows more closely associated

with an international business and nancial services centre, like

Barbados, which continues to successully interpose itsel in invest-

ment fows around the globe, adding value to and, in some cases,

ultimately re-deploying the investment.

Indeed, it is precisely because o the host/home country charac-

teristics o the major international business and nancial services

centres that DTAs have become an important tool in creating relation-

ships between the taxing authorities in such centres and those in

the countries rom which the investment fows originate, and in

those where the investment fows

are destined.

Moreover, because Barbados has

an established system o taxation on

income, is able to add signicant

value to the investment fows and

is already an exporter o goods and

services, the DTA is its preerred

vehicle to internationalise agreed

tax transparency norms over the

more recent construct o the Tax

Inormation Exchange Agreement(TIEA).

Aside rom the now well-known

act that Barbados was not required

to make a commitment to the OECD

as a result o that groups work on

Harmul Tax Competition, a position

that was recently endorsed by the G20 in its April 2009 announcement

o white-listed countries, Barbados has long subscribed to the view

that a ull tax treaty with the OECD-style provision on exchange o

inormation is the best way to give expression to the internationally

agreed standards in this area.

Indeed, many countries, with whom Barbados cannot boast sig-

nicant trade fows according to traditional indices, share Barbados'

view. As a result, Barbados' tax treaty network continues to expand at

a rate that demonstrates the currency o its thinking on transparency

and tax inormation exchange. Since the Washington Summit o the

G20 meeting, which ormally endorsed the use o tax treaties as

instruments o international diplomacy, Barbados has successully

concluded tax treaties with Spain, Vietnam and Italy. Dates have

already been conrmed in 2010 or negotiations with the Czech

Republic and Belgium, as well as second round talks with Chile,

Iceland and Brazil. Meanwhile, rm commitments have been received

rom Australia and Columbia. F

ax reaties: New Instruments o International

Diplomacy B Y F R A N C O I S E H E N D Y

Treaty Update

Treaties signed awaiting ratifcation: Luxembourg

and Ghana

Treaties initialled: Spain, Italy, Vietnam

Treaties currently under negotiation: Chile, Brail,

India, Iceland, Cech Republic, Belgium, Panama

Treaties awaiting negotiation dates: Australia,

Colombia, South Arica, Ireland, Malaysia

The Hon. George Hutson, M.P., Minister of International Business &

International Transport and His Excellency Mr. Hubert Wurth, Ambassador

for Luxembourg in the UK, participate in the signing ceremony of the

Barbados Luxembourg DTA



10/40

Te uture is clear the uture is

clean money

T

he ace o global nancial markets has changed dramatically

in recent months and many nations are now, as a result o

the credit crunch, suering signicant monetary pressureson cash fow and also ace mounting debts.

One o the key questions is how countries, such as the G20 nations,

can attempt to reduce their unheard o levels o debt? Rather surpris-

ingly, it seems that without realising it, several developed countries

have started a train o action which potentially will assist them

considerably in addressing their debt problems. The action in question

is tackling tax evasion by their citizens.

The recent actions o the OECD and the G20 nations, ollowing the

election o President Barack Obama, have concentrated on targeting

the traditional tax havens, or international nancial centres, in

order to orce transparency and, more importantly, the provision o

inormation regarding investors in international nancial centres.

Current estimates o undeclared tax unds in oshore centres range

between $6.5 and $11.5 trillion, which provide or an estimated

under declaration o tax across the globe in billions o dollars annu-

ally. Indeed, HM Revenue & Customs in the UK has conservativelycomputed that the tax lost in the UK to avoidance and evasion ranges

between 11 billion and 41 billion per annum. Other research in

the UK suggests that the tax lost annually rom avoidance alone is

well in excess o 25 billion.

Given the size o the potential recovery rom tackling tax evasion and

tax avoidance, it is hardly surprising that the OECD and G20 actions

against tax havens are beginning to produce results. Recently the IRS

has secured details o US citizens rom a leading Swiss bank and

Te Future o International Financial Centres

A Unique Opportunity or Barbados?B Y A N D Y S H A R P

Tailored to suit your needs

Deloitte offers clients a multi-dimensional approach toaddressing their issues. We draw upon a combination of audit,

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Every client is unique, that is why we structure our

multi-disciplinary services to suit our clients individual needs.

www.deloitte.com

[email protected]

Tel: +246 430 6400Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member rms,

each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed

description of the legal structure of Deloitte Touche Tohmatsu and its member rms.

Copyright 2009 Deloitte & Touche. All rights reservedMember of Deloitte Touche Tohmatsu

f



11/40

banks in the UK, and details were reported by a ormer employee

o a Liechtenstein bank to EU countries. So called Amnesties are

increasingly avoured by governments, as this produces high cost-yield

ratios and governments requently do not have the resources to ully

prosecute tax evasion in all cases.

In addition to this type o activity, inormation exchange is now

at a level never seen beore: who could have predicted

that Switzerland and Liechtenstein would sign

Tax Inormation Exchange Agreements with

the UK in 2010? Furthermore, who could have

oreseen that Liechtenstein would agree, within

12 months, to change its internal laws to allow

the British government to obtain the names o UK

residents who have unds hidden away in Vaduz?

These are very signicant and dramatic changes

and give a clear indication o the way traditional

oshore nancial centres will have to operate in

the uture. It is also clear that these developmentshave radically altered the relationship between the

OECD nations and the international nancial world.

Is there an opportunity or Barbados?

Two issues arise, and the rst relates to unds currently held in those

jurisdictions regarded by the OECD and G20 countries as traditional

tax havens. Current estimates suggest that within the next 5 years,

the number o international nancial centres will decline by at least

50%. Political pressure and concerted action by the OECD and G20

are likely to orce the smaller international nancial centres that are

viewed as tax havens to close and unds located in these jurisdictions

will have to move to other nancial centres. However, in that process,

it will be necessary or those previously undeclared unds to be

taxed, or cleansed, in the relevant jurisdiction. This will result

in countries which have a solid nancial basis and a good

reputation, like Barbados, attracting unds rom the

shrinking world o the tax havens.

The second issue relates to the rise in the need

to carry out eective tax planning, given the

act that governments will attempt to increase

their domestic tax take by raising tax rates.

Accordingly, tax arbitrage has to be the uture

o the international tax world. However, to be

eective in this eld it is necessary to have

an extensive network o double tax treaties,

and it is this aspect which nds Barbados ata signicant advantage when compared to its

Caribbean competitors. Thereore, with the right

support and direction, Barbados can compete eectively in

the world o tax arbitrage.

What will be required is or the international nancial sector in

Barbados to have a greater outward ocus over the next 2-4 years, in

order to ensure that it remains ahead o its competitors. F

f



12/40

When Canadian corporations begin planning to expand their

businesses outside Canada, they usually engage a team

o advisors to make recommendations on all aspects o

the transaction. One aspect is to develop a global tax strategy to make

them internationally more competitive, and oten Barbados is included

as a undamental element o the growth strategy - here is why:

Stable Pathways or Capital Flows

The Central Bank o Barbados and tax policy decision makers do not

make radical changes rom one political administration to another.

Other comort actors include the act that English is the spoken

language and the major Canadian banks have signicant operations

in Barbados.

Investment Protection

Barbados and Canada have a Foreign Investment and Protection

Agreement (FIPA). A FIPA generally adds an additional layer o

benets, such as protection against economic discrimination, air

compensation in the case o appropriation, most avoured nation status

and curtailing the ability o a central bank to inhibit the repatriation

o oreign currency. Barbados has negotiated a number o FIPAs. It

should be noted, however, that FIPAs do not cover tax policy issues.

Such issues are dealt with in a tax treaty.

Familiar Corporate Law

Barbados corporate law is ounded on the Canadian corporate law

model.

Travel Access and Service Providers

Barbados has good commercial airline access and is in the US Eastern

seaboard time zone. Barbados legal, accounting and banking service

providers are experienced with serving the local Barbados needs o

Canadian companies.

Attractive Corporate Tax Regime

By world standards, Barbados has a low combined corporate income

and dividend withholding tax regime (ranging between 1% and

2.5%). The low tax regime applies to International Business. Some

examples include:

Global sales & distribution o goods;

Hedging the sale price o goods made or processed;

Collecting (actoring) trade receivables;

Paying trade payables;

Licensing intellectual property;

Lending or working capital & term debt needs;

Accepting deposits & investing excess cash; and

Providing various (captive) insurance needs.

Increase Your International Competitiveness by

Using Barbados B Y L I N C O L N S C H R E I N E R & R U S S J O N E S

f



13/40

Using a holding company located in Barbados as a vehicle

or investing in oreign subsidiaries is especially attractive,

because o the combination o the exemption rom tax in

Barbados on dividends derived by the holding company

rom the investment, and exemption rom withholding tax

on dividends paid by the holding company to its Canadian

parent.

Generally speaking, cash dividends received rom a Barbadossubsidiary that were derived rom operational prots earned in

Barbados can be exempt rom Canadian taxation in the hands

o the Canadian parent company, but there are exceptions

when such dividends are taxable in Canada1.

Tax Treaty Network

Barbados has 18 income tax treaties (covering 27 countries)

that may reduce or provide immunity rom taxation in a

country rom which the Barbados company derives income,

or in which it carries on business or has a representational

oce. Additionally, Barbadoss maturity as a good citizen is

well recognised in the global tax community, including the

Organisation or Economic Co-operation and Development

(OECD). In its April and subsequent status reports, the OECD

placed Barbados in its highest ranking as a country that has

made progress on the implementation o the internationally

agreed tax standard on tax inormation exchange.

Value Added

A Canadian company that creates an appropriately designed

investment, sales, intellectual platorm, and treasury platorm

outside Canada may actually increase the equity market-cap

value o the Canadian parent company. F

1 A Canadian corporate tax advisor needs to be consulted beore paying

a dividend rom a Barbados subsidiary to a Canadian company, to assess

i the dividend is coming rom exempt surplus retained earnings, in

which case no Canadian tax is payable, or i the dividend is coming

rom taxable or pre-acquisition surplus retained earnings, in which case

Canadian tax may be payable on the dividend.

Barbados has good commercial

airline access and is in the US

Eastern seaboard time zone

f

Let J&T Bank and Trust Make

the Most of Your Assets

A Clear Path

to the Green

A World of Investments at Your Fingertips:J&T Bank and Trust is a chartered bank that has operated in

Barbados for over a decade. We provide private banking andcomprehensive wealth management services to corporations

and individual investors located around the world.

The Ultimate Flexibility of Choice:

Banking, trust, corporate and other services;

Global investment opportunities from over1200

independent money management rms;

Choice of the degree of direct involvement an investor

elects to exercise in the portfolio management process;

Investment structures and domiciles;

Complementary consulting, planning & strategy services.

Contact Our Management Team:Toll free from North America: (866) 376-6230

Telephone: (246) 430-8650

[email protected]

www.jtbanktrust.com


International Business


14/40

Tere has been much talk in recent times o

the uture o International Financial Centres

(IFCs). One clear message emerging is the

need or IFCs to raise the bar. But what,

exactly, does that mean?

IFCs are widely perceived to be low-tax, lightly regulated jurisdictions

that typically specialise in the provision o the corporate and business

inrastructure to acilitate the ormation o legal entities and the

investment o unds.

Brand Dierentiation

Easy implementation and a seemingly unlimited access to jurisdictions

have highlighted the need or brand dierentiation and careul thought

as to how this can be strategically achieved. Identiying signicant

benets can oten result not only in brand preerence, but brand

insistence. Dierentiating actors to be considered in evaluating the

benets o the Barbados brand, in comparison to the other IFCs with

which it competes, include:

Unique and superior customer service

Superior perormance

Heritage (i.e. continuity and solid leadership)

Leading technology and innovation

Focus on, or expertise or specialisation in, a particular

customer segment

Choice o experts

Best overall value or the price

Conirmation o a brands worth is readily identiied in the

ollowing:

Expert endorsements

Top ratings by independent authorities

Industry analyst reports

Blue chip customer list

Market share

Positive comparison testing with competing brands

Ultimately, the conclusion is that all brands can be dierentiated,

and Barbados rating in the above areas speaks or itsel.

Global Economic Considerations

At the September 2009 meeting o the leaders o the Group o 20

economic powers, accusing ngers were pointed at perceived tax

havens across the globe, with the threat o sanctions being imposed

against those countries that ail to tighten standards and improve

transparency.

The lesson or Barbados rom the G20 pronouncements, and perhaps

the single most important challenge acing the international nancial

services sector, is the need or a comprehensive review and strengthen-

ing o the regulatory ramework governing the sector. The rst steps

towards improved regulatory oversight will be the establishment o

a Financial Services Commission, slated to come on-line in 2010.In addition, the Resident Agents legislation is expected to urther

regulate service providers operating within the sector.

Raising the Bar as an International Financial Centre

The easiest and most readily identiable way to dierentiate the

Barbados brand is by way o its extensive tax treaty network and

its ability to provide superior perormance and customer service. In

the prevailing environment, Barbados perormance will be judgedby its capacity to ensure that business is conducted seamlessly and

eciently with the highest level o proessional competence. It must be

the aim o service providers in the public and private sector to surpass

client service expectations and provide uncompromising excellence

and integrity, combined with a ocus on unrivalled compliance and

due diligence.

However, this will not be sucient to raise the bar. The real

distinction has to be either through industry innovation, expert

knowledge or specialty oerings. The challenge or the jurisdiction

is to strike the correct equilibrium between maintaining an eective

regulatory ramework that meets relevant international standards

and ensures high ethical standards, while creating an atmosphere

that remains attractive to business and enables them to mature and

develop successully. F

Raising the Bar Barbados as an International

Financial Centre B Y R I C A R D O K N I G H T

Te easiest and most readily

identiable way to dierentiate

the Barbados brand is by way o

its extensive tax treaty networkand its ability to provide superior

perormance and customer service




15/40

Melnyks Latest Investment Yet AnotherBridge between Canada and BarbadosBy Ken Villaor

TRIMEL BIOPHARMA was established

in Barbados in July 2008 by the interna

tionally recognised business executive,

Eugene Melnyk. Melnyk is the ormer

CEO and Chairman o Biovail Corpora

tion, and is renowned or his relentless

entrepreneurial spirit and global vision.

Ambitious Corporate Mandate

Trimel BioPharma is centred on a vision o rapidly building a

fledgling pharmaceutical business into a major market orce

aster than has ever been done beore.

World-class Pharmaceutical Innovation

Nearly two years into its research and development programme, Trimel Biopharma has ound a nice niche in the

nonsystemic drug delivery category. The traditional route

or administering medicines is orally in tablet, capsule or

liquid orm. Trimel Biopharma is bypassing this traditional

oral route and targeting a novel nasal delivery method. This

direct and efcient mode o drug delivery has the potential

or a variety o benefits, including improved eectiveness and

a decrease in a variety o challenging side eects normally

associated with orally administered medicines. Younger and

older individuals who have difculty swallowing pills will also

benefit rom the advantages o taking their medicine through

this unique orm o nasal delivery.

Trimel BioPharmas nasaldrug delivery platorm has yielded

our products now under active development. One o these

products is expected to enter Phase III clinical trials in the

United States this year, paving the way or Trimel BioPharma

to soon launch its first product in the largest pharmaceutical

market in the world.

From Research Bench to Bedside

The products under development are in market segments

that are currently achieving combined sales o $35 billion in

the United States. Thereore, it is our belie that the growth

and revenue potential or Trimel BioPharma over the next

ew years is phenomenal. As Trimel BioPharma grows, so

will significant new employment opportunities in Barbados,

Canada and worldwide.As a Canadian born resident o Barbados, Melnyk has made

a strong investment commitment to the island he has called

home or nearly twenty years.

Whether it is sport or business, Melnyk has a long list o

achievements, illustrating how he has leveraged and strength

ened the strong commercial, tourism and investment links

between Canada and Barbados. The establishment o Trimel

BioPharma in Barbados is expected to urther solidiy the

strong investment bridge that exists between both countries.

Cases

tudytRimelBiOPHaRma




16/40

Setting up an international business in Barbados is

a straight orward process, provided the requisite

Know-Your-Client, Due Diligence, incorporation

and licensing details are complied with.

Operating an international business in Barbados neces-

sarily means that the company must be doing business

outside o Barbados. Entities available or licensing to

undertake international business under Barbados law

include: an International Business Company (IBC); an

International Society with Restricted Liability (ISRL); a

Qualied Insurance Company (QIC); an Exempt Insurance

Company (EIC) or an International Bank.For example, an IBC must be carrying on at least one

o the ollowing:

International manuacturing, i.e. making, process-

ing, preparing or packaging any product within

Barbados which is exclusively or export outside

o Barbados, being a broker, agent, dealer, seller,

buyer or actor within Barbados o that product;

International trade and commerce, i.e. the busi-

ness o the selling services which, i originating in

Barbados, are to or or, or on account o, persons

resident outside Barbados.

What happens ater licensing?

Where the company is incorporated elsewhere and reg-

istered as an external company in Barbados and licensed

as an IBC, it will be taxed in Barbados only on the prots

earned rom its Barbados operations.

There are certain other requirements under Barbados

law which must be met in order to obtain the benet

o 1 to 2.5% tax on prots and other tax and nancial

benets. Compliance is thereore important and not to

be overlooked.

Compliance requirements include:

Licensing and annual renewal o licenses;

While there are no capital reserve requirements or

minimum capital requirements or IBCs, QICs and

International Banks must maintain the capital

reserve requirements as set out in the relevant

Acts or decreed by the Supervisor o Insurance

and Central Bank o Barbados respectively;

While this inormation is not kept publicly,

any inormation provided to the Director o

International Business or Supervisor o Insuranceor Central Bank that subsequently changes, e.g.

change o share ownership, change o name,

amendment to Articles, must be submitted to the

relevant licensing authority or approval (pursu-

ant to the governing Act).

Application to Inland Revenue or a corporate tax

number;

Annual ling o company tax return;

Application or work permits, where needed,

should be commenced as early as possible beorethe company goes active. Work permits or

applicants in the Barbados international business

sector are ast tracked;

Where the company has employees, the company

must register with National Insurance and pay

the applicable National Insurance employer and

employee contributions;

Compliance with Barbados labour laws. In-house,

or external, labour law advice is recommended.

Under the Companies Act o Barbados, many o therequirements may be amiliar to some as they are similar

to those in the Canada Business Corporations Act. These

include requirements or a company seal, annual general

meeting and meeting solvency requirements, beore reduc-

tions in capital or distribution o a dividend.

While this is just a quick overview o the issues, when

operating an international business in Barbados it is

recommended that local Barbados counsel be sought to

ensure that ull compliance is met, regardless o whether

the company is a local company or in an international busi-

ness structure, such as an IBC, ISRL, QIC or EIC. F

Legal Issues on Operating an International

Business in Barbados B Y D A W N A . W I L L I A M S

In addition to the many

benets o a Barbados

international business

company (IBC), setting up

an IBC is a straight orwardprocess

Lexis Nexis International

Tax and Trust Planning

Conerence

International Tax Planning

Bridgetown, BB

March 1-2

CICA International

Conerence

International Insurance

Orlando, FL

March 7-9

RIMS USA


Boston, MA

April 25-29

OfshoreAlert

Financial Due Diligence

Conerence


South Beach, FL

May 2-4

Society o Trust &

Estate Practitioners

(STEP) ConerenceWealth Management

and Trusts

Santa Monica, CA

May 6-7

STEP Caribbean

Conerence

Wealth Management

and Trusts

Bridgetown, BB

May 24-26

Canadian Marketing

Association (CMA)

Information

Communicationand Technology

Toronto, ON

May 26-27

Prairie Provinces

Tax Conerence


Saskatoon, SK

May 31 - June 1

STEP Canada Conerence

Wealth Management

and Trusts

Toronto, ON

June 7-8

UpcomingEvents 2010Updates to this

Calendar of Events

will be available atinvestbarbados.org

Continued on page 17




17/40

In the midst o the uncertainty surrounding the eco-

nomic crisis, not only companies but also wealthy

individuals and amilies need to closely manage their

portolios and ocus on potential savings, in order to

maintain and accumulate wealth. In addition, new econo-

mies are creating signicant wealth, with China, Brazil

and India being the most notable. These developments

account, in part, or the continued need or the manage-

ment o the wealth o such individuals and amilies. Buthow has such wealth been traditionally managed and

what role has Barbados played in the management o

such wealth?

Traditionally, private banks, trust companies and bro-

kerage rms have assisted wealthy amilies in managing

their nances. They have done so with the assistance o

lawyers, accountants and investment advisors. However,

amily oces staed by multi-disciplinary teams have

also played a major role in providing such services,

albeit on a more personalized basis. In modern times,

multiamily oces, i.e. where more than one amily sets

up an oce to deal with their nancial interests, have

emerged as a means o deraying the costs inherent in

such an undertaking. The advent o multiamily oces

has resulted in an increase in the use by wealthy amilies

o the services o experts in wealth management to assist

them in their eorts to preserve and grow their wealth.

And with this change, Barbados has played, and will

continue to play, a key role.

The Barbados Solution

From 1979, with the introduction o the Oshore Banking

Act, Barbados became involved in a more structured wayin the provision o management and nancial services to

the wealthy. This legislation was repealed and replaced

by the International Financial Services Act in 2002. The

existence o such legislation, together with a network o

double taxation agreements, presents attractive options

or wealthy individuals, since it allows them to maxim-

ise the returns on their investments when structured

through Barbados. For example, in many instances

investment through a Barbados international nancial

services company (IFSC) could reduce the exposure to

withholding taxes ordinarily applicable on the income

earned on investments, by virtue o the 18 double taxa-

tion treaties that Barbados has entered into with oreign

Governments. This advantage is signicant, especially as

Barbados continues to vigorously expand its tax treaty

network.

In addition, income derived by the IFSC rom such

investments is taxed in Barbados at low rates ranging

rom 2.5% down to 1%. Further, distribution o the invest-

ment income by the IFSC to its non-Barbadian-resident

shareholder would be exempt rom withholding taxes in

Barbados. Additional benets can also be enjoyed where

the investments are made through a Barbados trust, the

trustee o which is an IFSC. The reasons or this are

that the income earned by such trusts would be exemptrom tax in Barbados and, in addition, the remittance o

such income to the beneciaries would be exempt rom

withholding tax.

IFSCs have also been used or establishing amily

oces, particularly by wealthy Canadian amilies seeking

to take advantage o the Canadian exempt surplus rules.

These rules provide that dividends derived by a Canadian

company rom active business prots earned by an aliate

resident in a oreign country with which Canada has a

double taxation treaty, would not be taxable on receipt

in Canada. Investment income earned by an IFSC which

employs more than 5 ull-time employees generally

qualies or this exemption. Thereore, in order to take

advantage o the above exemption, the Barbados IFSC will

usually be owned through a Canadian company and not

directly by the Canadian resident individuals. In such a

case, dividends paid by the IFSC to the Canadian company

would generally be entitled to exempt surplus treatment

in Canada. The Canadian company, and its shareholders,

benet rom these increased ater-tax prots, which can

be distributed to the shareholders or reinvested.

The existence o the segregated account and segregated

cell legislation also enhances the Barbados legislativeramework, as several amilies can now join together

to deray the costs associated with the operation o the

amily oce, while at the same time segregating their

assets, income and liabilities rom those o other amilies.

The legislative ramework will become even more fexible

with the passage o proposed legislation that will allow

or the establishment o private trust companies. It is

proposed that such companies would not be required to

meet the same regulatory requirements associated with

the international nancial services regime.

As long as wealthy individuals and amilies require

a well-regulated environment to manage their wealth

in a tax-ecient manner, Barbados must ensure that its

legislation continues to meet their needs. F

How High Net Worth IndividualsUse International Financial Service

Companies B Y G A I L I F I L L

ACCE Show

Information

Communication

and Technology

New Orleans, LAJune 14-17

BPO Conerence

Information

Communication

and Technology

London, UK

June 23

Global Business

Solutions Expo

Information

Communication

and Technology

London, UK

June 24-25

AHDI

Medical Transcription

Austin, TX

August 3-7

Institute o Chartered

Accountants Barbados

Financial Services

Workshop

Barbados

August 27

Call Centre & Customer

Management Expo

Information

Communicationand Technology

Birmingham,UK

September 21-22

AHIMA


Orlando, FL

September 25-30

RIMS Canada


Edmonton, AB

September 26-29

Barbados International

Business Week

Barbados

October 17-23

62nd Annual Canada

Tax Foundation

(CTF) Conerence


Vancouver, BC

November 28-30

OHA Health Achieve


Toronto, ON

November 8-10

World Captive Forum

International InsuranceScottsdale, AZ

November 8-10

Upcoming Events

( Continued)




18/40

Beore looking at international developments impacting multi-

national companies, we should rst get some understanding

as to why companies and individuals use Barbados as their

domicile.

Companies looking to thrive in a highly competitive global mar-

ketplace invest in Barbados to capitalise on its business riendly

environment, strong human capital, high quality inrastructure,

tax advantages and investment protection. Barbados, thereore,

enjoys a high degree o respectability among investors as a reputable

International Financial Centre and has been successully attracting

Foreign Direct Investment (FDI) or decades.

Non-Tax Criteria

Barbados oers a well-regulated, transparent, politically stable and

supportive environment or business. Competitiveness is enhanced

by transparent policies, eective laws and a fexible and business-

riendly tax administration and regulatory ramework. It has a

strong legal system which ensures that property rights are well

protected and an independent judiciary guarantees the impartial

and eective resolution o disputes.

Barbados world-class educational system, with several tertiary

and training institutions, produces a highly skilled, English-speakinglabour orce. Investors can readily access the services o tax advisors,

reputable international banks, global accounting rms, lawyers

and management companies oering the ull range o corporate

services.

Barbados has a well-developed seaport and a modern international

airport oering daily connections to countries in North America,

Europe and the Caribbean. It has gained the respect o the world

or the quality o its communication inrastructure.

Tax Criteria

Barbados biggest attraction or FDI may be its reputation as a

low-tax jurisdiction or international business, having a high level

o transparency and disclosure, and procedures or tax inormation

exchange. Multinational companies can minimise their global tax

burden by using a Barbadian entity to conduct business overseas.

The country oers a range o tax ecient vehicles through which

international business can be conducted. These specially enacted

entities enjoy tax and other incentives locally, including low rates

o corporate tax, participation exemption or dividends and capital

gains, low or nil withholding tax rates on dividends and capital gains

on holding company shares and reedom rom exchange controls.

Investors can also benet rom no (or minimal) control oreign

corporation rules, subject to tax requirements, income character

tests, no (or minimal) capital duty, net worth tax, or other indirect

taxes and the ability to obtain binding tax rulings.

In addition, investors using Barbados entities to conduct

international business may benet rom the extensive treaty network,

which oers low dividend withholding tax rates and exemption

rom source-country tax on capital gains.

These tax and non-tax criteria have enabled Barbados to develop

an excellent reputation among investors as a jurisdiction rom which

to conduct business o substance, including nancial services,business process outsourcing and niche manuacturing.

Canada has been important to Barbados because o the benets o

using Barbados as a jurisdiction o choice or Intermediate Holding

Companies (IHC). This acilitates repatriation planning through

managed ordering o distributions rom surplus and blending o

low with high-taxed taxable surplus. IHCs also enable repatriation

o taxable surplus to be deerred, provide or reduced oreign with-

holding tax on dividends and capital gains, allow or deerral o

Canadian tax on dispositions o oreign aliates and acilitate cash

redeployment and centralisation o head oce unctions. Barbados

is the third leading destination or Canadian direct investment

abroad, ater the UK and USA. F

Barbados world-class educational

system, with several tertiary and

training institutions, produces a

highly skilled, English-speaking

labour orce

Why Barbados Remains a Popular Choice or

International Business B Y H . W A Y N E L O V E L L

The new Supreme Court building




19/40

New developments in international nance mean that

Caribbean advisors are going to be aced with a big threat

to their business over the next ew years and an equally

big opportunity.

The drive or increased tax revenues in many developed countries

(as a result o the nancial crisis) has seen a demand or greater

inormation exchange, more anti-avoidance rules and more ocused

action by the tax authorities. For example, the UK authorities have

recently issued an amazing three hundred and eight (308) Section

20(8) A notices to UK nancial institutions, which will in due course

yield tens or even hundreds o thousands o clients who have held

undeclared unds oshore many in the Caribbean.

The UK middle class is going to be extensively targeted over the

next ve years starting November 30th, when the

Oshore Disclosure amnesty closes. This is

likely to lead to signicant tax expo-

sure or many UK taxpayers with

oshore accounts. Barbados

practitioners will possibly at rst

see a decrease in business, as

UK clients liquidate their oshore

positions.

However, this presents advisorswith UK clients with an opportu-

nity to provide such clients with

pro-active advice now.

In Ireland, taking into account

the levies, the income tax rate or

high earners is going to be more

than 60%. In the UK, sel employed

higher rate earners will be subject to

more than 50% higher rate tax on earnings

over 150,000. For those in the UK with close

companies, the higher rate is eectively 55-64%.

These high tax rates have resulted in an exodus o hedge und

managers, private bankers and entrepreneurs rom the UK and

Ireland to Switzerland and other countries with more avourable

tax regimes.

Barbados will introduce the non dom regime or personal taxation

early in 2010, and has a growing double tax treaty network. This

should be enough to be attractive to UK and Irish entrepreneurs who

do not ancy giving away two thirds o their wealth to the state.

The UK has a growing battery o anti-avoidance legislation. This

has increased substantially this year with the introduction o the

Corporation Tax Act (CTA) 2009. The CTA 2009 has introduced anti-

avoidance provisions pertaining to oreign dividends paid to the UK.

As Barbados has a double tax treaty with the UK, this market segment

can use Barbados most eectively in conceptually the same way asCanadian SMEs use the Barbados international business platorm.

In addition, as Barbados has a double tax treaty network, it is ve

to ten years ahead o Jersey, Guernsey, Isle o Man and Bermuda.

Barbados is also outside the EU and has an established international

business inrastructure. Barbados' main competitors are, essentially,

Singapore, which does not have a treaty with the USA but has a much

larger treaty network, and Hong Kong, which does not have a treaty

network because it is not currently oering inormation exchange in

its treaty negotiations. However, Hong Kong has recently committed

to inormation exchange in accordance with the EU Savings Directive,

a eature which is likely to spread to other oshore centres as time

goes by.

Barbados, thereore, is in an ideal position to win signicant new

business. Because o its tax treaty network, many types

o business activities can be commercially

structured out o Barbados in a tax ecient

manner. Cayman, BVI, Bermuda and the

other overseas territories all have to restruc-

ture their economies to introduce a proper

tax base, otherwise they will not be able to

negotiate double tax treaties and that will

have implications or them within ve years.

In any case, some o these territories that are

not Sovereign states will have challenges in

this respect, as they may be unable to negotiate

tax treaties in their own right.

The developments highlighted above

present Barbados with a signicant oppor-

tunity to expand its customer base to EU

countries. F

New EU Opportunities or BarbadosB Y J O N A T H A N B R A T H W A I T E

Barbados will introduce the non

dom regime or personal taxation

early in 2010, and has a growing

double tax treaty network

DOUBLE

TAXTREATY

NETWORK




20/40

T

he signing o the China/Barbados Double Taxation Agreement

(the Treaty) has placed Barbados in a unique position in

relation to other competing nancial jurisdictions. The Treaty

not only makes Barbados an attractive jurisdiction or International

Business Companies (IBCs) and other special incentive entities rom

a corporate planning perspective, but its ratication has created

the architecture that can support and sustain signicant Chinese

Investments.

The key benets o the Treaty are:

Dividends, Interest and Royalty Payments

Under Chinese domestic law, dividend remittances are

exempt rom withholding tax, i originating rom a oreign

enterprise or rom a oreign investment enterprise operatingin China. Should there be any change to Chinas tax laws,

Article 10 o the Treaty stipulates that dividends paid by a

Chinese resident company to a Barbados entity are taxed at a

minimum withholding rate o 5%.

An IBC that is resident in Barbados and receiving such

dividends is subject in Barbados to a tax rate o 2.5% down

to 1%. However, the dividends will be exempt rom tax in

Barbados, provided the IBC owns at least 10% o the shares

o the capital o the entity paying the dividend and the

shareholding does not constitute a portolio investment. In

general, where the dividend is taxable in Barbados, the IBC

can claim a credit or the Chinese withholding tax and, i

Te reaty not only makes

Barbados an attractive jurisdiction

or IBCs and other special incentive

entities rom a tax planning

perspective, but its ratication has

created the architecture that can

support and sustain signicantChinese Investments

Barbados: Gateway to China B Y L I z A H A R R I D Y A L - S O D H A

f

Operational Multidisciplinary Global

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KPMG

Hastings

Christ Church

Barbados

Tel: 246-434-3900

Fax: 246-427-7123

Email: [email protected]

www.kpmg.bb




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applicable, the tax paid in China on the prots out o which

the dividends were paid. However, the credit can not reduce

the total tax payable to less than 1%. Any remittances by the

said IBC to its non-resident shareholders

are normally exempt rom withholding

tax under the Barbados IBC Act.

Interest and royalty payments arising

in China and paid to a company resident

in Barbados are subject to 10% with-

holding tax.

Tax Exposure and Capital Gains

The Treaty also provides opportunities or

tax planning under Article 5-Permanent

Establishment and Article 7- Business Prots,

in that:

Chinese resident companies acting through an independentagent and not establishing a xed place o business in

Barbados can enjoy complete exemption rom taxation in

Barbados. Entities that set up permanent establishments and

derive income in Barbados are subject to Barbados tax;

Fees charged by Barbadian service providers acting outside o

China will not be taxable in China.

Another important provision under Article 13 o the Treaty is

the treatment o capital gains:

Capital gains derived by a oreign investor rom the sale o

shares in a oreign investment enterprise which is operating

in China, are subject to withholding tax o 10% in China,

compared to the 33% levy that would

normally be applicable in respect o a sale o

shares by resident Chinese entities;

If a Barbados IBC owns shares in a

Chinese entity and then disposes o those

shares, then only Barbados has taxation

rights with respect to this transaction. In this

case, since Barbados has no capital gains tax,

there would be no tax due. This is possible

because the Treaty allows the right to tax the

state where the seller o the shares is resident,

thereby preventing the other treaty partner

rom levying tax on the capital gain.

From a macro-economic perspective, there has never been a moreopportune time or investors to capitalise on Barbados strategic

alliance with China in structuring their investments into China.

Similarly, opportunities exist or Chinese investors to utilise Barbados

as a conduit or certain o their overseas investments. China boasts the

third largest economy in the world and has been the astest growing

economy or the past 30 years, with an annual GDP growth rate above

10%. China is standing rm against world economic patterns due to

the implementation o a series o proactive responses, including the

shiting o ocus rom an export driven economy to one that ocuses

on domestic consumption, partnered with the emergence o long term

demand drivers o urbanisation and middle class society. F

20 Years o London Lie

in BarbadosBy Gabriel Kelly

In 1989, London Reinsurance Group

Inc. (LRG) established operations

in Barbados. LRG is part o a much

larger financial services organisation

under GreatWest Lie Assurance

Company (GreatWest), which is

one o the largest insurers in North

America. GreatWest, in turn, is

ultimately part o Power Corporation

o Canada, a diversified internationalmanagement and holding company.

LRG oers specialty reinsurance

products to the lie insurance and

property and casualty markets in

the United States, Europe, Bermuda

and a number o other countries

worldwide. Activities in the US and

Europe represent the majority o the

Group's current business mix.

Today we employ 20 people, themajority o whom are

Barbadians, and LRG

has a programme

that encourages con

tinuing proessional

development or our

employees, many

o whom have been

with us in excess o

10 years. Further, our

Group is conscious

o the needs o the

community and, since

1990, has made annual contributions

to local charities and social and

sporting events.

We are proud o our record o

growth and development here

in Barbados, as we continue to

service our clients and brokers and

contribute to shareholder value.

Casestu

dylOndOn

l

ife

f




22/40

Expanding your corporate operations outside o your home

jurisdiction to an international nancial services centre

can be a challenging exercise or even the most

seasoned o investors. Much eort is expended

in ensuring the nancial, commercial, market

and tax rationales driving such expansion are

sound and tested.

Considering whether to use Barbados in

your international operation can be an easy

decision, given the Islands reputation as a

mature, highly-respected and well-regulated

jurisdiction. Beyond the strategic critical successactors are several ongoing practical elements, which

must also be considered at the planning stages to

identiy the necessary resources and structures required

to acilitate and manage the operation.

Barbados built its enviable reputation by moving beyond hosting

brass plate operations to emphasising the need or commercial and

strategic substance in international business entities established in

the Island. Barbados legislative regime imposes various compliance

essentials on both domestic entities and those operating in its

International Business and Financial Services sector by requiring,

among others:

the maintenance in Barbados o nancial and

accounting records;

the audit o nancial statements

where prescribed asset and revenue

limits are exceeded;

the ling o corporation tax returns;

the maintenance o corporate

records;

the application and renewal o enabling

business licences; and

regulatory lings.

While these requirements are by no means onerous or unique to

Barbados, they are not likely to be the main ocus o the investor

during the initial planning stages or the Barbados venture. F

Practical Issues o Managing International

Companies in Barbados B Y C L E N N E L L J A C K M A N

Barbados has attracted and

developed excellent, internationally-

branded, and indigenous businesssupport providers

Strategic Partnering+

with Service Provider

Tax Compliance+

Due Diligence+

Business Licence+

Corporate Filings+

Accounting Records+

Corporate Records+

Banking Facilities+

CasestudyaRtelCimteC

Exporting ManuacturedProducts to the WorldBy Michael Arthur

Artel CIMTEC Inc. (Artel) is an Assem

bly Manuacturing Services company

providing services to major US

companies. Operating rom its Newton,

Christ Church location in Barbados,

Artel currently produces electrical coils

or Haydon Kerk Motion Solutions

o Waterbury Connecticut, and RF

connectors to Santron Inc. o Ipswich

Massachusetts, thus providing these

companies with the opportunity tooutsource their costly labourintensive

activities with significant economic

benefit.

During its th anniversary cel

ebrations in August , Artels

management articulated its business

strategy: Reevaluating, Renewing and

Reinventing ourselves to meet the

challenges o the uture, by embark

ing upon a programme that strives

to ensure success even beyond thecoming decade. The renewal eort

entails building upon the existingproduct base and identiying new

market niches. Commensurately, the

company is seeking to reinvent itsel

by working at enhancing its human,

technical and operating resource

capabilities in its eort to meet the

uture head on.

Artel remains committed to develop

ing an internationally competitive,

worldclass Centre o Manuacturing

Excellence, which can be the standardbearer or Barbadian Industry.




23/40

A

captive insurer is a legal entity ormed primarily to insure

the risks o one corporate parent or a number o similar

corporations (e.g., trade associations), thereby contributing

to a reduction in its parents total cost o risk. Captives are ormed

or many reasons including:

lack o a commercial market or certain lines o coverage;

a desire to recapture underwriting prots and investment

income that would otherwise be earned by the commercial

underwriter;

as a means to access the reinsurance market; or

in certain circumstances, as a means o diversiying into

insurance services.

Captives are used extensively throughout the world by major

corporations to cover both domestic and international risks. The

largest developments historically have been in North America, the

United Kingdom, and Europe, but recently considerable interest has

been evident in South America and in the Far East, particularly rom

Japan and Australia.

Captive Insurance Structures

Many captives operate as reinsurers, with a licensed commercial

insurer (the ronting company) located in the country where the

risks are insured, issuing the policies to the parent company and

providing claims-handling, loss-control and other insurance-related

services. The ronting company cedes a portion o the premium and

risk to the captive through a reinsurance contract. The captive can

then retain all the risk and premium it assumes or, i appropriate, it

can pass on, or retrocede, a portion to another reinsurer. Alternatively,

a captive may insure the risks directly.

The premium received by the captive, together with the investment

income earned on its capital and reserves, is used to pay losses and

loss-adjustment expenses. The premium also covers various captive

operating expenses, including captive management expenses, any

local regulatory costs and legal and audit ees. The captive must be

adequately capitalised to ensure its nancial viability, that it satis-

es the regulatory requirements in its domicile, and that it can bedemonstrated that the insurance structure represents real transer

o risk to the captive.

Advantages o a Captive

The major benets that the establishment o a captive brings to

its parent can be divided into two main categories: nancial and

insurance.

Te Basics o Captives B Y N I C H O L A S C . C R I C H L O W

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Captive Insurance


24/40

Financial Advantages

Reduced Insurance Costs: A captive can reduce the overall cost

o an insurance programme by retaining the premium or the

expected losses, thereby avoiding the premium loading or a

commercial insurers overheads and prots.

Protected Cash Flow: Reserves or unpaid claims and unearned

premium, otherwise kept by a commercial insurer, can be held

by a captive and invested.

Perormance Measurement: As nancial statements are pre-

pared or the captive, its perormance can be monitored and

evaluated in terms o return on investment (ROI) or other

nancial criteria.

Source o Additional Revenue: A captive can expand its book

o business by oering insurance to related third parties, such

as ranchisees, vendors or customers, thereby generating an

additional revenue stream or its parent.

Insurance Advantages

Coverage for Risks: A captive can provide insurance cover

that is either not available in the commercial market, or not

available at a realistic premium.

Reduced Need for Commercial Insurance: As a captive matures

and its net worth grows, it becomes capable o retaining a

greater proportion o its parents risks.

Flexibility in Programme Design: A captive provides opportuni-

ties to more easily structure insurance programmes, since the

captive is not subject to the same constraints and conventions

normally associated with traditional insurers.

Better Risk Management Programme: A captive acilitates the

design o allocation systems to distribute costs more equitably

among prot centres, the implementation o uniorm account-

ing procedures, the accumulation o actuarial inormation,

the design o more eective claims-handling, loss-control

and engineering programmes, and the unication o the

application o risk management throughout all divisions or

subsidiaries.

Disadvantages o a Captive

While there are many potential benets in orming a captive,

several signicant disadvantages exist. Beore deciding to

establish a captive, an organisation should establish and

maintain an eective enterprise risk management programme,

then thoroughly assess the potential disadvantages, which

include providing the necessary capital to satisy the regu-

latory requirements and providing capital to cover adverse

underwriting results. F

f


Captive Insurance


25/40

Michael Douglas provides a brie analysis o the

current state o the insurance industry, its trends

and uture growth prospects, together with a view

on where the opportunities are or industry captives.

Tis analysis is against a background o

unprecedented fnancial crisis and a combination

o events which have posed many challenges and

opportunities or the insurance market over the

past 18 months.

Property Snapshot Holding the Line

The eeling rom property insurance carriers entering 2009 was

decidedly shaky, due to attrition, global natural catastrophes and

the global nancial meltdown. In the coming year, insureds expect

renewed competition and modest downward pressure on rates.

Premiums: There is an overall expectation o continued sotening

into 2010, as carriers repair balance sheets rom organic growth and

are actively seeking resh capital. Clients with a signicant natural

catastrophic exposure saw the most upward premium rate pressure,

with only a ew insureds experiencing higher than 20% rate increase.

Insureds with little or no natural catastrophe exposures remained

competitive, which has the hallmarks or sotening.

Limits: The initial reaction to purchase higher limits due to the eco-

no

ib - barbados international finance & business magazine 2010

Documents