International Banks
BARBADOS AS A FINANCIAL SERVICES CENTRE
Over the years, Barbados has established itself as a jurisdiction of choice in the realm of international financial services.
International banks benefit from a favourable tax regime which makes Barbados a tax-efficient jurisdiction to carry on international banking operations. There are currently more than 43 international banks in Barbados.
Barbados also offers political stability, a solid banking system, a broad tax treaty network, a low crime rate as well as modern communication and airport infrastructures. Its warm climate, welcoming people, gourmet restaurants, acclaimed golf courses and beautiful beaches have made it a preferred destination for affluent families.
ESTABLISHING AN INTERNATIONAL BANK
Foreign financial institutions and ultra high net worth families who wish to use Barbados as a platform to provide international financial services must first obtain an international banking licence under the International Financial Services Act (the “Act”).
In order to protect the reputation and integrity of the Barbados financial system, each applicant for an international banking licence is subject to a thorough due diligence process and assessment of its capacity to properly manage an international banking business.
Each international bank must have local staff and premises to conduct its business. It is impossible to obtain a licence for a “brass plate bank” with no physical presence and operations in Barbados.
Under the current licensing guidelines, a qualified applicant must be either a foreign financial institution duly licensed in its home jurisdiction or a private corporation or family with at least $50 million of equity.
International Banking Activities An international bank is permitted to conduct the following business activities in Barbados:
a. receive foreign funds through:
i) the acceptance of foreign money deposits payable upon demand or after a fixed period or after notice;
ii) the sale or distribution of foreign bonds, foreign certificates, foreign notes or other foreign debt obligations or other foreign securities; or
iii) any similar activity involving foreign money or foreign securities;
b. use the foreign funds so acquired, either in whole or in part, for:
i) loans, advances and investments;
ii) the activities of the international bank for its account of or at its risk;
iii) the purchase or distribution of foreign bonds, foreign certificates, notes or other foreign debt obligations or other foreign securities; or
iv) any other similar activity involving foreign money or foreign securities; or
c. accept in trust from persons resident outside of Barbados or from prescribed person:
i) amounts of money in foreign currencies or securities or both;
ii) foreign personal or foreign movable property; or
iii) foreign real or foreign immovable property.
CAPITAL REQUIREMENTS
An international bank which accepts third party deposits must have a capital of at least US$2,000,000. If the bank does not accept third party deposits, then its capital must be at least US$500,000. These are the statutory minimum requirements under the Act. Practically speaking, the regulator expects each international bank to hold capital which far exceeds the minimum statutory requirements.
Further, the Act requires that an international bank shall maintain a reserve fund and shall fund the reserve fund out of its net yearly profits.
TAXATION
International banks are taxed on a sliding basis of 2.5% to 1% and are entitled to claim a credit for taxes paid in foreign countries.
There is no withholding tax imposed on dividends, interest and other payments made to non-residents of Barbados nor are capital gains taxes levied. International banks are also exempt from all exchange control restrictions. A guarantee in relation to future tax treatment can be obtained from the Government of Barbados.
COSTS
The initial registration fee for an international bank is US$25,000 and the licence must be renewed annually at a cost of US$25,000.
The legal fees associated with the licence application are in the range of US$15,000 to US$25,000.