Barbados Repeals Act to Achieve Convergence
In response to the Organisation for Economic Co-operation and Development ‘s (OECD’s) assessment that Barbados’ legislative framework provided preferential treatment to international companies doing business in the country, the Government of Barbados has enacted a number of legislative measures to move towards convergence of the country’s international and domestic business sectors. These initiatives also support Barbados’ commitment to the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
To achieve convergence, the Exempt Insurance Act has been repealed effective December 31, 2018, and all insurance entities, including Exempt Insurance Companies (EICs) and Qualified Insurance Companies (QICs), will be regulated under the Insurance Act, which has been amended to provide for the following three classes of licenses:
- Class 1 licenses will be issued to insurance companies which, inter alia, underwrite related party risks. These companies will be taxed at 0%.
- Class 2 licenses will be issued to insurance companies which underwrite risks of third-parties. These companies will be taxed at a rate of 2%.
- Class 3 licenses will be issued to insurance intermediaries, insurance management companies, and insurance holding companies. These entities will be taxed at a rate of 2%.
The legislation provides companies that were licensed before October 17, 2017, the option to be either grandfathered under the Exempt Insurance Act or transition and be licensed under the Insurance Act. Such companies may exercise the option to be grandfathered until June 30, 2021, but at any time during this period may elect to transition. While grandfathered, the rights and benefits previously conferred under the Exempt Insurance Act will be retained.
Companies that have elected to be grandfathered, however, may not engage in any new lines of business until they have transitioned and are required to be licensed under the Insurance Act to engage in new lines of business that they were not previously approved to underwrite.
It is not anticipated that these changes will have any negative impact on the international insurance sector as companies currently licensed in Barbados as captive insurance companies, which underwrite the risks of related parties, will continue to pay tax at a rate of 0%.