Why Establish a Trust in Barbados?
There are several advantages to setting up a trust in Barbados:
- An offshore trust is exempt from all Barbados taxes and duties and is not subject to any exchange control requirements
- No registration or filing requirements for an offshore trust therefore confidentiality is easily maintained
- International Trusts are subject to tax only on its Barbados-source income and any income remitted to Barbados. Not subject to any control requirements
- Trusts are permitted for non-charitable purposes provided such purpose is specific, reasonable and capable of fulfillment. A protector must also be appointed to enforce the trust
- Income paid to the beneficiary before the end of the calendar year of which is earned will not be taxed. Capital gains earned by the trust are not subject to tax.
- Exemptions from exchange control where the trust has foreign assets, beneficiaries resident outside of Barbados and deals primarily in foreign currency
- No withholding tax on distributions made by the trust to non-resident beneficiaries.
- Fraudulent disposition provisions protect the rights of existing creditors and certain deferred future creditors
- Barbados incorporated International Business Companies and International Banks can be beneficiaries
- International trusts may conduct commercial ventures
- There are no minimum capital requirements
- Interest may be fixed or discretionary
Number of New Trusts in Barbados
As of December 31, 2015, there were a total of 35 new trusts licensed in Barbados.
Trusts are licensed by the Central Bank of Barbados. Only non-Barbados residents can be creators or settlors of trusts unless it is a domestic trust.
Forms of trusts
There are four types of trusts in Barbados, International, Offshore, Domestic and Private trusts.
- International Trusts – The International Trust Act Cap 245, 1995 S3 (1) (ITA) describes trust as the legal relationship created when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose. An international trust may only be created by instruments in writing. This written trust deed must specify that the ITA applies. An international trust has a lifespan of 100 years if not sooner terminated in accordance with the terms of the trust instrument. This does not apply to a purpose trust or a trust established exclusively for charitable purposes. Such trusts may continue in force without any limit as to time. The rule of law known as the rule against perpetuity does not apply to an international trust. An international trust is deemed to be non-domicile in Barbados for tax purposes, and therefore, will be subject to tax only on its Barbados source income and on its overseas income that is remitted to Barbados.
- Offshore Trusts - An offshore trust is regulated by the International Financial Services Act Cap 325, 2002. It is a business accepting trust from persons resident outside of Barbados from prescribed persons amounts of money in foreign currencies in foreign securities or both, foreign personal property or foreign movable property or foreign real property or foreign immovable property. There are no registration or filing requirements. The perpetuity period of trust can be up to 80 years for an Offshore Trust. Offshore Trusts are exempt from all Barbados taxes and duties and free of any exchange control requirements. Offshore trusts are generally not entitled to treaty benefits because they are not subject to tax in Barbados.
- Domestic Trusts – Domestic trusts are regulated by the Trustee Act Cap 250, 1985. There are no registration or filing requirements. If the trustee is a Barbadian resident and the trust deed does not specify that it is an international trust then a domestic trust is created. Barbados tax is payable on income not paid to the beneficiary before the end of the calendar year of which it is earned. Capital gains earned by the trust are not subject to tax. There are exemptions from exchange control where the trust has foreign assets, beneficiaries' resident outside of Barbados and deals primarily in foreign currency. Domestic trusts are entitled to treaty benefits under the DTAs.
- Private Trusts – Private Trust Companies (PTCs) are licensed under the Private Trust Companies Act 2012. A PTC must have a Registered Agent who has a duty to ensure that the company complies with the requirements of the Act and annually submits a Declaration of Compliance to the Minister of International Business. It must also have a Special Director as a member of its board, with responsibility for the general administration of the company. The Special Director must be a resident of Barbados, of good character and have at least five years experience in a discipline related to the administration of trusts. PTCs that are established by and for the benefit of persons not resident in Barbados, provided that certain other conditions are met, would be exempt from income and capital gains tax in Barbados.