Legal guidelines

 

It is imperative that the documentation is prepared and ready to be produced to a Purchaser or Purchaser’s counsel as the Vendor in both scenarios will need to illustrate clear and uncompromised ownership of the Barbados property and/or the entity being sold. Otherwise, the retrieval and/or procurement of some of the required documentation can be time consuming causing delays in the transaction. Below are the lists of recommended documentation that should be brought in order prior to the sale to facilitate the transaction.

 

1. Original Title Deeds including plan of land;
2. Current Land Tax Demand Notice (and receipt if already paid);
3. Municipal Solid Waste Tax Bill (and receipt);
4. Most recent receipts for utilities (water and electricity);
5. Insurance Policy, if applicable;
6. Inventory of all furniture and effects being sold with the property, if applicable;
7. Town Planning applications, permission, and compliance documents, if applicable;
8. Registered Central Bank of Barbados Foreign Investment (FI) forms in the name of the Vendor reflecting registration of the funds brought in to purchase the property, if applicable;
9. Keys to the property when completion of the transaction is imminent; and
10. Account for any and all rental bookings especially those set post completion.

 

1. Complete set of all original corporate or parallel documents and records for the entity being sold including a complete set of all original documents and records regarding the registration of that entity in Barbados if an offshore entity;
2. Certificate of good standing (or parallel document) evidencing good standing in the jurisdiction of origin of the entity being sold and, if an offshore entity, its registration in Barbados;
3. A certificate or letter from the registered agent (or parallel) in the offshore jurisdiction confirming that all fees to the registered agent and government have been paid up to date; and
4. All books of account including financial statements, balance sheets, and tax returns from the date of incorporation to present for the entity in Barbados and, if applicable, its jurisdiction of origin.

 

Additional documents may be requested on behalf of the Purchaser and this is dealt with on a case by case basis. Dentons (South Coast) Burnham Court, Bishop’s Court Hill Upper Collymore Rock, St. Michael Dentons (West Coast) Tropical Sunset Complex, Suite 3 Holetown, St. James

 

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Residents and non-residents are treated the same in Barbados with respect to the ability to purchase property. There are no restrictions on foreign ownership. The two primary methods in which Barbados property is purchased are: (1) domestic conveyance; or (2) transfer of shares of an offshore company owning the Barbados property.

 

Many non-residents elect to own Barbados property through an offshore company for the flexibility it can offer on resale on in estate planning. Upon a domestic transfer, there is a property transfer tax of 2.5% and stamp duty of 1% due by the vendor. There are exchange control regulations in place and foreign currency brought into Barbados must be registered with the Central Bank of Barbados. This process is generally a formality but can be necessary in order to be able to eventually remove the funds from Barbados. The utilization of an offshore company can eliminate the payment of both property transfer tax and stamp duty as well as the requirement to register foreign currency if resale of the property is by way of share transfer. Purchasers of property owned in a domestic capacity may therefore want to consider an offshore ownership structure. It is recommended that proper tax consultation be sought to confirm the benefits of an offshore structure taking into consideration the purchaser’s tax domicile and to address ownership of the offshore entity.

 

Depending on the jurisdiction of the offshore holding company, the complete set up costs are in the US$5,000.00 range. The British Virgin Islands, St. Lucia, and St. Vincent and the Grenadines are popular offshore jurisdictions for offshore ownership of Barbados property though other jurisdictions are utilized. Under Barbados law, an offshore company owning property in Barbados must register as an external company with the Barbados Corporate Affairs and Intellectual Property Office. In each offshore jurisdiction in addition to Barbados there are annual filings due to keep the company in good standing. Combined the annual costs total approximately US$1,600.00.

 

The most popular justifications for the use of an offshore holding company are the circumvention of the payment of property transfer taxes and stamp duty as well as Barbados exchange control regulations which allows for future sales of the property to be in United States dollars or other currencies. It is important to weigh these factors against the set up and annual costs of the structure.

 

As to the purchase process itself, once the purchase price is agreed upon, the parties sign a sale and purchase agreement (usually reviewed and approved by legal counsel) and ten percent (10%) of the purchase price is paid and held in trust until completion. The balance of the purchase price is paid over at completion. In the interim, purchaser’s attorney verifies free and clear title to the property and ensures that there are no other impediments to the sale. If the transaction involves an offshore company, purchaser’s counsel conducts a complete corporate search of the offshore entity. Upon a domestic completion, there will be a conveyance of title to the purchaser which is evidenced by the recording of title deeds at the Barbados Land Registry. In the case of an offshore company, the shares of that company are transferred to the purchaser or purchaser’s designee.

 

 

 

1. Category 1 - Evidence of Investment in Barbados of at least US $2 million from funds sourced outside of Barbados in addition to evidence of high net worth in excess of US $5 million
2. Category 2 - Property Owner. The value of the property must be at least US $300,000.00.
3. Category 3 - Persons who possess special skills which are deemed critical to the growth and development of Barbados.
4. Category 4 - Parents or Grandparents of a citizen of Barbados. Must be over the age of 60 years.

 

There are some fundamental differences between that Category 1 SERP and the Category 2 SERP. The duration of the Category 1 SERP varies and becomes indefinite after age 60 whereas the Category 2 SERP is issued for renewable five (5) year periods. Category 1 holders have automatic entitlement to work permits; Category 2 holders are not allowed to work in Barbados.

 

Each SERP applicant must submit under cover letter a completed Form B – Application for Permission to Vary Period of Stay in Barbados or Conditions of Stay and the application fee of US $150.00 in addition to the following:

• Evidence of health insurance in excess of US $500,000.00
• 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.
• One passport size photo.
• Original birth certificate and a copy.
• Certified copy of the bio-data page of the applicant’s passport.
• Marriage certificate, if applicable.
• Proof of relationship to dependents where applicable i.e. birth certificates/ legal documents.

 

All documents in a foreign language other than English must be translated.

 

An applicant seeking a Category 1 SERP must furnish a certified statement of assets in excess of US $5 million from an auditor or broker and evidence of investment in Barbados with a value of at least US $2 million.

 

Category 2 applicants must provide proof of ownership of property in Barbados as well as evidence that they can financially support themselves for the duration of the period granted.

 

‘Investment’ is defined to include rental real estate, property development projects, manufacturing, tourism, bank deposits, mutual funds or bonds or any financial instrument. All SERP qualifying investment must be purchased from funds sourced outside of the island and not subject to any encumbrances.

 

 

• Over age 60: indefinite term; one-time fee of US $5,000.00.
• Between ages 50-60: term of 5-10 years but renewable as indefinite after age 60; one-time fee of US
• $3,500.00 up to age 60; one-time fee of US $5,000.00 if renewed at age 60.
• Under age 50 years – term of 5 years until the age of 60, fee of US $5,000.00 per term up to age 60, renewable as indefinite after age 60; one-time fee of US $5,000.00 if renewed at age 60.

 

Subject to payment of an additional fee, SERP holders are entitled to a work permit. Fees are as follows:

• Over age 60: up front one-time fee of US $15,000.00 or US $1,750.00 per annum.
• Under age 60: up front one-time fee of US $20,000.00 or US $2,000.00 per annum.

 

Spouses and dependents under 18 or still attending University will get the same period as the SERP holder (evidence of schooling required every 3 years). A spouse will have to pay a US $150.00 application fee plus the appropriate SERP fee mentioned above. The US $150.00 application fee will need to be paid for each dependent.

• SERP holders are also required to declare tax residency in writing to Barbados Revenue Authority.

 

 

• US $5,000 per adult for a renewable five (5) year period.
• US $150 for minor dependents (who are students) for the life of the SERP.

Spouses and dependents under 18 or still attending University will get the same period as the SERP holder (evidence of schooling required every 3 years). A spouse will have to pay a US $150 application fee plus the appropriate SERP fee mentioned above. The US $150.00 application fee will need to be paid for each dependent.

• SERP holders are also required to declare tax residency in writing to Barbados Revenue Authority.

SERP holders are entitled to claim a foreign currency tax credit (FCTC) in relation to income which is foreign sourced if such income is transferred to Barbados through the banking system. Depending on the percentage of foreign currency earned in relation to total earnings, the potential tax credit can amount to 93 per cent of the income tax that would otherwise be payable in Barbados. It is therefore possible for such persons to enjoy an effective tax rate of 2.45 per cent in Barbados in relation to their foreign sourced income which is transferred to Barbados.