NOTARIES PUBLIC ACT, 2024
OBJECTS AND REASONS
This Bill would revise the law relating to the appointment and regulation of Notaries Public in Barbados and provide for related matters.
NOTARIES PUBLIC ACT, 2024
Arrangement of Sections
- Short title
- Interpretation
- Appointment as a notary public
- Application and authorisation to be appointed as Notary public
- Appointment of notary public
- Notary Public Certificate
- Roll of notaries public
- Renewal and payment of fees
- Notarial acts
- Fees
- Proceedings for misconduct: suspension or revocation
- Notarial Acts Register
- Duty to notify Registrar of changes and events
- Power to obtain information
- Penalty for misfeasance
- Offences
- Regulations
- Amendment of Schedules
- Repeal of Act 2017–9
- Commencement
FIRST SCHEDULE Notaries Public – Ex Officio SECOND SCHEDULE Notary Public Application THIRD SCHEDULE Impression of Notarial Seal FOURTH SCHEDULE Form of Oath FIFTH SCHEDULE
Application, Registration and Renewal Fees
SIXTH SCHEDULE Notary Public Certificate SEVENTH SCHEDULE Notarial Acts and Fees EIGHTH SCHEDULE Notarial Acts Register BARBADOS
A Bill entitled
An Act to revise the law relating to the appointment and regulation of Notaries Public in Barbados and provide for related matters. ENACTED by the Parliament of Barbados as follows:
Short title
- This Act may be cited as the Notaries Public Act, 2024.
Interpretation
- In this Act,
“attorney-at-law” has the meaning assigned to it by the Legal Profession Act,
Cap. 370A; “Minister” means the Minister responsible for notaries public; “Registrar” means the Registrar of the Supreme Court.
Appointment as a notary public
3.(1) A person may be appointed as a notary public if he satisfies the requirements for appointment under this Act.
(2)
Any person holding or acting in a public office specified in the First Schedule shall be ex officio a notary public for Barbados.
(3)
A person may be appointed as a notary public if that person
(a)
is a citizen or permanent resident of Barbados;
(b)
is the holder of a CARICOM Skilled National Certificate and is ordinarily resident in Barbados;
(c)
has never been convicted of an offence punishable by imprisonment;
(d)
has never been found guilty of any act that constitutes misconduct in a professional respect or misconduct under this Act;
(e)
has not been adjudged bankrupt; and
(f)
meets any of the criteria specified in this section.
(4)
A person referred to in subsection (3) is eligible for appointment if that person
(a) is an attorney-at-law
(i) who has been practising law in Barbados for at least 15 years; and
(ii) who is in good standing with the Barbados Bar Association; or
(b)
is a certified public or chartered accountant
(i)
who has been practising in Barbados for at least 15 years; and
(ii)
who is in good standing with a recognised accounting body.
(c)
possesses at least 15 years professional or business experience in Barbados and is of good character.
(5) Every person other than an attorney-at-law shall complete a course of training prescribed by the Attorney-General.
Application and authorisation to be appointed as Notary public
4.(1) Subject to subsection 3, a person who wishes to be appointed as a notary public shall submit an application in writing to the Registrar in the form set out in the Second Schedule.
(2) An application made under subsection (1), shall be accompanied by the following documents:
(a)
proof of the applicant’s citizenship or permanent residence;
(b)
2 character references, one from each of the following persons:
(i)
an employer or former employer;
(ii)
a Justice of the peace;
(iii) a notary public;
(iv)
a minister of religion;
(v)
a police officer of the rank of inspector or above,
(vi)
a certified public or chartered accountant;
(vii) an attorney-at-law;
(viii) a medical doctor; or
(ix) a member of Parliament.
(c)
a police certificate of character issued within 3 months of the date of the application;
(d)
a photograph of the applicant, certified by any one of the persons listed at paragraph (b) to be a true likeness of the applicant;
(e)
proof of admission to practice law in Barbados;
(f)
proof of qualification as a certified public accountant or chartered accountant; and
(g)
any other information that the Registrar may require.
(3) The Registrar shall, upon receipt of the application, review the application and if satisfied that he is fit for appointment, appoint the applicant or if not so satisfied refuse to appoint him.
Appointment of notary public 5.(1) On receipt of the application, pursuant to
(a)
section 4(3)(a) and upon the applicant subscribing to the oath set out in the Fourth Schedule, the Registrar may appoint the applicant; or
(b)
section 4(3)(b) refuse to appoint the applicant.
(2)
If the Registrar refuses to appoint an applicant, the Registrar shall inform the applicant giving the applicant the reasons for refusal.
(3)
Every person appointed as a notary public shall deposit with the Registrar an impression of the embossed notarial seal, in the form set out in the Third Schedule, to be used by him in his capacity as notary public and pay the prescribed fee to the Registrar.
Notary Public Certificate
6.(1) Upon appointment as a notary public, and the payment of the registration fee set out in the Fifth Schedule, the Registrar shall issue a Notary Public Certificate to the person appointed a notary public, in the form set out in the Sixth Schedule.
(2)
The Notary Public Certificate referred to in subsection (1) shall be valid until the 31st day of January in the following year in which it was issued.
(3)
The Registrar shall cause to be published in the Official Gazette,
(a)
in the month of February in every year, an alphabetical list of persons who have at the 31st January in that year obtained a Notary Public Certificate;
(b)
as soon as practicable after he obtains a Notary Public Certificate, the name of any person obtaining a Notary Public Certificate after the 31st January in any year.
Roll of notaries public
7.(1) The Registrar shall keep a register, which may be in an electronic form, to be known as the “Register of Notaries Public” in which the Registrar shall register
(a)
the name of every person appointed as a notary public under this Act;
(b)
the date of appointment of the person;
(c)
the address of the person; and
(d)
the profession of the person.
(2)
The Registrar shall endorse the Register of Notaries Public with an appropriate notation if an appointment
(a)
lapses under section 8;
(b)
lapses by virtue of the notary public’s residency outside of Barbados for more than 12 months; or
(c)
is suspended or renewed.
(3)
The Registrar shall remove from the roll, the name of any person whose appointment has been revoked under this Act.
(4) The Registrar shall cause to be published annually, a list of all current notaries public in the Official Gazette and any relevant Government websites.
Renewal and payment of fees
8.(1) A notary public shall, on or before the 31st day of January in each year following the year of his first appointment, pay the prescribed annual renewal fee as set out in the Fifth Schedule.
(2)
Where a notary public fails to pay the prescribed renewal fee by the date specified in subsection (1), his appointment as a notary public shall lapse and he shall cease to perform any notarial act.
(3)
Subject to subsection (5), a notary public may pay an annual renewal fee at a later date, with an additional penalty equal to one-half of the annual fee.
(4)
Upon payment of the penalty and the fee subsection (3), the lapsed appointment shall be reinstated and an endorsement for renewal made on the date of the payment.
(5)
Where an appointment lapses for a period of more than 6 months, without reasonable cause or excuse, the notary public’s appointment shall be revoked.
Notarial acts 9.(1) A notary public may perform
(a)
the notarial acts set out in the column I of the Seventh Schedule;
(b)
any act that is required to be performed by a notary public
(i)
under any other enactment; and
(ii)
in accordance with the provisions of any treaty or agreement to which Barbados is a party; or
(c)
all the powers and authorities exercisable by custom to a notary public.
(2) Notwithstanding the requirement in law to exercise the powers of a notary public in the physical presence of an individual, regulations made under this Act may prescribe the conditions for the notary public to exercise his notarial powers remotely.
(3)
In any case where the circumstances surrounding a request for the notary public to do any act referred to in subsection (1) appears suspicious, the notary public shall refuse to act.
(4)
When any notarial act shall be refused to be noted or done, the notary public so refusing shall mark in the logbook, bill of exchange or other document, his refusal with his signature and the date of refusal subscribed thereon.
(5)
A person aggrieved by the refusal of a notary public to perform a notarial act may apply to Registrar for a review of the notary public’s refusal.
Fees
10.(1) A notary public shall charge for each notarial act set out in column I the Seventh Schedule, the fee set out in column II of that Schedule.
(2)
A notary public who charges a high fee than that prescribed for a notarial act commits an act of misconduct.
(3)
All fees collected by a notary public who is a public officer listed in the First Schedule, shall be paid into the Consolidated Fund.
(4)
Notwithstanding subsection (1), a notary public, other than a notary public ex officio, may waive the fee set out in the Seventh Schedule for any notarial act done.
(5)
The sum set out in the Seventh Schedule shall apply notwithstanding any enactment providing for a different sum for that notarial act.
Proceedings for misconduct: suspension or revocation
11.(1) The appointment of a notary public may be suspended by the Registrar if the notary public
(a) allows his name to be used by another person to perform notarial acts;
(b)
charges or accepts a fee for a notarial act in contravention of section 9; or
(c)
fails to file a notice in accordance with section 13, with the Registrar.
(2)
The appointment of a notary public may be revoked, if the notary public is
(a)
convicted of an offence punishable by imprisonment;
(b)
adjudged bankrupt;
(c)
deemed unfit and the High Court has made an order appointing a receiver for that notary public; or
(d)
found guilty of any act that constitutes misconduct whether in his capacity as a notary public or in his profession or occupation; or
(e)
has been or has been found negligent in the discharge of his duty;
(2)
Where the appointment of notary public is
(a)
suspended; or
(b)
revoked,
the Registrar shall endorse a notation of the suspension in the Register of Notaries Public or remove the name of the notary public from the register, as the case may be.
(3)
A person who has reason to believe that a notary public has committed an act of misconduct, may make a complaint on oath to the Registrar setting out the nature of the alleged misconduct.
(4)
The Registrar shall refer the complaint referred to in subsection (3) to the Attorney General.
(5)
The Attorney General shall investigate the complaint made in accordance with subsection (3) and report his findings to the Registrar and give the Registrar such directions as the Attorney General deems fit and the Registrar shall following those directions.
(6)
Notwithstanding subsections (1) to (6), the Registrar may revoke the appointment of any notary public if the Registrar has reasonable cause to believe that the notary public is unfit, incapable or incompetent to carry out the duties of the office.
(7)
Where a notary’s public appointment has been suspended or revoked, the Registrar shall cause a notice of the suspension or revocation to be published in the Official Gazette and by any other means that would bring it to the attention of members of the public.
(8)
A notary public who is aggrieved by a decision of the Registrar given under subsection (6) may appeal to the Attorney General.
Notarial Acts Register
12.(1) Every notary public shall keep and maintain a register to be called a “Notarial Acts Register” in the form set out in the Eighth Schedule in which he shall record the details of every notarial act done by him and shall preserve the record for a period of at least 7 years from the execution of the act.
(2) A notary public whose appointment has
(a)
lapsed;
(b)
been suspended; or
(c)
been revoked,
shall within 14 days of the date of the lapse, suspension or revocation, as the case may be, deliver all Notarial Acts Registers in his possession to the Registrar.
(3)
A person who, not being a notary public, comes into possession of a Notarial Acts Register shall immediately deliver the Register to the Registrar.
(4)
A notary public or any other person who contravenes this section is guilty of an offence and is liable to a fine of $1 000.
Duty to notify Registrar of changes and events
13.(1) A notary public shall, within 30 days of the occurrence of any of the following events, notify the Registrar in writing of
(a)
a change to his name under the Change of Name Act, Cap. 212A or under any other enactment;
(b)
a change of his address;
(c)
a change of his status, nationality or permanent resident; and
(d)
a change of his profession or occupation.
(2)
A notary public shall, with 7 days of the occurrence of any of the following events, notify the Registrar in writing
(a)
if he is convicted of an offence punishable by imprisonment;
(b)
of the decision by a professional body that he is guilty of professional misconduct; or
(c)
of an adjudication that he is bankrupt.
(3)
The Registrar shall revoke the appointment of a notary public to whom subsection (2), applies.
Power to obtain information
- The Registrar may, for the purpose of ascertaining whether a notary public is in compliance with this Act, and the conditions of his appointment, by notice in writing require the notary public to
(a)
furnish the information required to be kept by the notary public under section 7(1);
(b)
produce a copy of the Notarial Acts Register required to be kept by the notary public under section 11; and
(c)
produce any other information that the Registrar requires.
Penalty for misfeasance
- Any notary public who
(a)
wilfully certifies or propounds any false statement or document; or
(b)
fraudulently or with intent to deceive, conceals, withholds or perverts any fact pertinent to the subject of a notarial act,
is guilty of an offence and is liable on summary conviction to a fine of $10 000 or to imprisonment for a term of 3 years or to both and in addition, the Registrar shall revoke his appointment.
Offences 16.(1) A person who
(a)
performs any notarial act without having been appointed as a notary under this Act; or
(b)
holds himself out to be a notary public or receives any fees or reward as a notary public,
without having been appointed as a notary public is guilty of an offence and is liable on summary conviction to a fine of $10 000 or to imprisonment for a term of 3 years or to both.
(2)
A notary public who performs any notarial act while his appointment has been suspended or revoked is guilty of an offence and is liable on summary conviction to a fine of $10 000 or to imprisonment for a term of 3 years or to both.
(3)
This section does not affect the power of any consular officer in Barbados to do any notarial act which he is authorised to do.
Regulations
- The Minister may make regulations prescribing
(a)
the fees which may be charged for the execution of any notarial act;
(b)
the fees payable upon the application and renewal as a notary public;
(c)
the conduct of notaries, including record keeping protocols;
(d)
the manner in which the Registrar shall store, preserve or dispose of seals and certificates submitted to the Registrar;
(e)
training courses and other educational materials for notaries;
(f)
the accreditation of any person, agency or educational institution for the delivery of training courses;
(g)
any other matter related to the discharge of the duties or functions of notaries; and
(h)
anything that is authorised or required by this Act to be prescribed.
Amendment of Schedules
- The Minister may by Order amend the Schedules to this Act.
Repeal of Act 2017–9 - The Notaries Public Act, 2017 (Act 2017-9) is repealed.
Commencement
- This Act shall come into operation on a date to be fixed by proclamation.
FIRST SCHEDULE
(Section 3(2))
Notaries Public – Ex Officio
(a) Solicitor-General
(b) Deputy Solicitor-General
(c) Permanent Secretary in the Ministry responsible for Foreign Affairs
(d) Permanent Secretary in the Ministry responsible for Home Affairs
(e) Permanent Secretary in the Ministry responsible for International Business
(f) Permanent Secretary in the Office of the Attorney General
(g) Permanent Secretary in the Prime Minister’s Office
(h) Deputy Permanent Secretary in the Ministry responsible for Foreign Affairs
(i) Deputy Permanent Secretary in the Ministry of Home Affairs
(j) Deputy Permanent Secretary in the Ministry responsible for International Business
(k) Deputy Permanent Secretary in the Ministry responsible for the Office of the Attorney
General
(l) Supervisor of Insolvency
(m) Registrar of the Supreme Court
(n) Deputy Registrar of the Supreme Court
(o) Assistant Registrar of the Supreme Court
(p) Registrar of Corporate Affairs and Intellectual Property Office
(q) Deputy Registrar of Corporate Affairs and Intellectual Property Office
(r) Assistant Registrar of Corporate Affairs and Intellectual Property Office
(s) Registrar of the Land Registry
(t) Deputy Registrar of the Land Registry
(u) Assistant Registrar of the Land Registry
(v) Director of International Business
(w) Deputy Director International Business
(x) Cabinet Secretary, Cabinet Office
FOURTH SCHEDULE
(Section 5(1)(a)) Form of Oath
I, do swear that I will faithfully exercise the office of a notary public. I will faithfully carry out such notarial duties as may be required for any party or between any parties requiring the same, and I will not add or diminish anything without the knowledge and consent of such party or parties that may alter the substance of the facts. I will not make or attest any act, contract or instrument in which I shall know there is violence or fraud or is contrary to law; and in all things I will act uprightly and justly in the business of a notary public according to the best of my skill and ability. So help me God.
Read three times and passed the House of Assembly this day of , 2024.
Speaker
Read three times and passed the Senate this day of , 2024.
President
CORPORATION TOP-UP TAX ACT, 2024
OBJECTS AND REASONS
This Bill would make provision for the establishment of an effective tax rate of 15 per cent for a qualifying entity through the imposition of a top-up tax.
CORPORATION TOP-UP TAX ACT, 2024
Arrangement of Sections
PART I PRELIMINARY
- Short title
- Interpretation
- Purpose
- Administration
PART II IMPOSITION AND SCOPE OF TOP-UP TAX
- Imposition of top-up tax
- Scope of top-up tax
- Location of an entity
- Currency conversion
PART III
COMPUTATION OF QUALIFYING INCOME OR LOSS
Determination of qualifying income or loss
- Determination of qualifying income or loss
Adjustment to Determine Qualifying Income or Loss - General approach to adjustment to determine qualifying income or loss
- Stock based compensation adjustment to determine qualifying income or loss
- Arm’s Length Principle adjustment to determine qualifying income or loss
- Tax credit adjustment to determine qualifying income or loss
- Fair value or impairment adjustment to determine qualifying income or loss
- Tangible asset gain or loss adjustment to determine qualifying income or loss
- Intra-group financing arrangement adjustment to determine qualifying income or loss
- Election to consolidate transactions in the same jurisdiction
- Insurance companies adjustment to determine qualifying income or loss
- Additional tier one capital adjustment to determine qualifying income or loss
- International shipping income exclusion
International shipping income exclusion Allocation of qualifying income or loss
- Allocation of qualifying income or loss between a main entity and a permanent establishment
- Allocation of qualifying income or loss from a flow-through entity
PART IV
COMPUTATION OF ADJUSTED COVERED TAXES
- Covered taxes
- Adjusted covered taxes
- Total deferred tax adjustment amount
- Qualifying loss election
- Specific allocation of covered taxes incurred by certain types of constituent entities
- Post-filing adjustments and tax rate changes
PART V
COMPUTATION OF THE EFFECTIVE TAX RATE AND TOP-UP TAX
- Determination of the effective tax rate
- Computation of top-up tax
- Substance-based income exclusion
- Additional current top-up tax
- De minimis exclusion
- Minority-owned constituent entities PART VI
SPECIAL RULES FOR CORPORATE RESTRUCTURING AND HOLDING STRUCTURES
- Application of the consolidated revenue threshold to group mergers and demergers
- Constituent entities joining and leaving an MNE group
- Transfer of assets and liabilities
- Joint ventures
PART VII
TAX NEUTRALITY AND DISTRIBUTION REGIMES
- Ultimate parent entity that is a flow-through entity
- Ultimate parent entity subject to a deductible dividend regime
- Determination of the effective tax rate and top-up tax of an investment entity
- Election to treat an investment entity as a tax transparent entity
- Election to apply a taxable distribution method
PART VIII
ADMINISTRATIVE PROCEDURES AND ENFORCEMENT
- Elections
- Filing obligations
- Return and self-assessment
- Payment
- Audit and investigations
- Assessment and determinations by Commissioner
- Objection
- Appeal to Tribunal
- Appeal to the High Court
- Enforced collection
PART XI
TRANSITIONAL RELIEF
- Tax treatment of deferred tax assets, deferred tax liabilities and transferred assets upon transition
- Transitional relief for filing obligations
- Exclusion from the top-up-tax of MNE groups in the initial phase of their international activity
PART X TRANSITIONAL SAFE HARBOUR
- Transitional safe harbour election
- Qualified financial statements and basis of calculations
- Application in the case of a joint venture group
- Qualifying income tax expense
- Adjustments
- Threshold test
- Simplified effective tax rate test
- Routine profits test
PART XI MISCELLANEOUS
- Administrative Directions and Guidelines
- Regulations
- Amendment of Schedule
- Consequential amendments
FIRST SCHEDULE
Transitional relief for the substance-based income exclusion
SECOND SCHEDULE Consequential Amendments BARBADOS
A Bill entitled
An Act to establish an effective tax rate of 15 per cent for qualifying entities through the imposition of a top-up tax. ENACTED by the Parliament of Barbados as follows:
PART I
PRELIMINARY
Short title
- This Act may be cited as the Corporation Top-up Tax Act, 2024.
Interpretation
2.(1) In this Act,
“acceptable financial accounting standard” means International Financial Reporting Standards and the generally accepted accounting principles of Australia, Brazil, Canada, the member states of the European Union, member states of the European Economic Area, Hong Kong (China), Japan, Mexico, New Zealand, the People’s Republic of China, the Republic of India, the Republic of Korea, Russia, Singapore, Switzerland, the United Kingdom and the United States of America;
“additional tier one capital” means an instrument issued by a Constituent Entity pursuant to prudential regulatory requirements applicable to the banking sector that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features which are designed to aid loss absorbency in the event of a financial crisis;
“Agreed Administrative Guidance” means guidance on the interpretation or administration of the GloBE Rules issued by the Inclusive Framework;
“Authority” means the Barbados Revenue Authority established under section 3 of the Barbados Revenue Authority Act, 2014 (Act 2014-1);
“Commissioner” means the Revenue Commissioner appointed pursuant to section 7 of the Barbados Revenue Authority Act, 2014 (Act 2014-1);
“consolidated financial statements” means
(a)
the financial statements prepared by an entity in accordance with an Acceptable Financial Accounting Standard, in which the assets, liabilities, income, expenses and cash flows of that entity and the Entities in which it has a controlling interest are presented as those of a single economic unit;
(b)
where an entity meets the definition of a group under paragraph (b), the financial statements of the entity that are prepared in accordance with an Acceptable Financial Accounting Standard;
(c)
where the entity has prepared statements that would fall within paragraph (a) or (b) but they were not prepared in accordance with an acceptable accounting standard, those statements but adjusted to prevent any material competitive distortions; or
(d)
where no statements were prepared falling within paragraphs (a) to (c), the statements that would have been prepared, whether or not the entity was required to prepare such statements, in accordance with an Authorised Financial Accounting Standard that is either an Acceptable Financial Accounting Standard or another financial accounting standard that is adjusted to prevent any material competitive distortions;
“constituent entity” means
(a)
any entity that is part of an MNE group; and
(b)
any permanent establishment of a main entity that is part of an MNE group referred to in paragraph (a);
“controlling interest” means an ownership interest in an entity such that the interest holder
(a) is required to consolidate the assets, liabilities, income, expenses, and cash flows of the entity on a line-by-line basis in accordance with an acceptable financial accounting standard; or
(b) would have been required to consolidate the assets, liabilities, income, expenses, and cash flows of the entity on a line-by-line basis if the interest holder had prepared consolidated financial statements;
and a main entity is deemed to have the controlling interests of its permanent establishments.
“DMTT Group” means, for a fiscal year, all of the qualifying entities of an MNE group;
“entity” means company, a partnership, a trust or any other arrangement, association, organization or body for which separate financial accounts are prepared, but shall not include central government, or their administration or agencies that carry out government functions;
“filing entity” means an entity filing a top-up tax return in accordance with section 45;
“fiscal year” means
(a)
an accounting period in respect of which the ultimate parent entity of an MNE group prepares its consolidated financial statements; or
(b)
if paragraph (d) of the definition of “consolidated financial statements” applies in respect of the ultimate parent entity, the calendar year;
“flow-through entity” means an entity to the extent it is fiscally transparent with respect to its income, expenditure, profit or loss in the jurisdiction where it was created unless it is tax resident and subject to a covered tax on its income or profit in another jurisdiction and a flow-through entity shall be deemed to be
(a)
a “tax transparent entity” if the domestic tax law of the owners also treats it as fiscally transparent and requires the owner to recognize the income, expenditure, profit or loss of the flow-through entity as if it was income earned or expenditure borne by the owners; or
(b)
a “reverse hybrid entity” if the domestic tax law of the owners is not treating it as fiscally transparent and therefore, it does not recognize
the income, expenditure, profit or loss when earned or incurred by the entity, but until the entity distributes profits or make an equivalent payment to its owners;
“GloBE Model Rules” means the model rules published by the Inclusive Framework on Base Erosion and Profit Shifting as “Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two): Inclusive Framework on BEPS”;
“government entity” means an entity
(a)
that is part of or wholly-owned by a government including any political subdivision or local authority thereof;
(b)
that has the principal purpose of:
(i)
fulfilling a government function; or
(ii)
managing or investing that government’s or jurisdiction’s assets through the making and holding of investments, asset management, and related investment activities for the government’s or jurisdiction’s assets; and does not carry on a trade or business;
(c)
that is accountable to the government on its overall performance, and provides annual information reporting to the government; and
(d)
the assets of which vest in such government upon dissolution and to the extent it distributes net earnings, such net earnings are distributed solely to such government with no portion of its net earnings inuring to the benefit of any private person.
“group” means
(a) a collection of entities which are related through ownership or control as defined by the acceptable financial accounting standard for the preparation of consolidated financial statements by the ultimate parent entity, including any entity that may have been excluded from the consolidated financial statements of the ultimate parent entity solely
based on its small size, on materiality grounds or on the grounds that
it is held for sale; or
(b) an entity that has one or more permanent establishments, provided that it is not part of another group as defined in paragraph (a);
“IFRS ” means the International Financial Reporting Standards;
“Income Inclusion Rule” or “IIR” means a set of rules that are implemented in the domestic law of a jurisdiction, provided that such a jurisdiction does not provide any benefits that are related to those rules, and that
(a)
requires the parent entity of an MNE group to compute and pay its allocable share of top-up tax in respect of the low-taxed constituent entities of that group; and
(b)
is administered in a manner that is consistent with the GloBE Model Rules;
“insurance investment entity” means an entity that would meet the definition of an investment fund or a real estate investment vehicle except that it is established in relation to liabilities under an insurance or an annuity contract and is wholly-owned by an entity that is subject to regulation in its location as an insurance company;
“intermediate parent entity” means a constituent entity that owns, directly or indirectly, an ownership interest in another constituent entity in the same MNE group and that does not qualify as an ultimate parent entity, a partially-owned parent entity, a permanent establishment or an investment entity;
“international organisation” means any intergovernmental organisation, including a supranational organisation, or wholly-owned agency or instrumentality thereof that meets all the following criteria:
(a)
it is comprised primarily of governments;
(b)
it has in effect a headquarters or substantially similar agreement with the jurisdiction in which it is established; and
(c) law or its governing documents prevent its income inuring to the benefit of private persons;
“international shipping” means the operation of a ship owned or leased by an entity that is engaged primarily in transporting passengers or goods in international traffic;
“investment entity” means
(a)
an investment fund or a real estate investment vehicle;
(b)
an entity that is at least 95 per cent owned directly by an entity referred to in paragraph (a) or through one or more of such entities and that operates exclusively or almost exclusively to hold assets or invest funds for their benefit; or
(c)
an entity where a minimum of 85 per cent of the value of the entity is owned by an entity referred to in paragraph (a), provided that substantially all of its income is derived from dividends or equity gains or losses that are excluded from the computation of the qualifying income or loss for the purposes of this Act;
“investment fund” means an entity or arrangement
(a)
that is designed to pool financial or non-financial assets from a number of investors, some of which are non-connected;
(b)
invests in accordance with a defined investment policy;
(c)
allows investors to reduce transaction, research and analytical costs or to spread risk collectively;
(d)
that is primarily designed to generate investment income or gains, or protection against a particular or general event or outcome;
(e)
the investors of which have a right to return from the assets of the fund or income earned on those assets, based on the contribution they made;
(f)
that is or the management thereof, is subject to the regulatory regime, including appropriate anti-money laundering and investor protection
regulation, for investment funds in the jurisdiction in which it is
established or managed; and
(g) that is managed by investment fund management professionals on behalf of the investors;
“joint venture” means an entity whose financial results are reported under the equity method in the consolidated financial statements of the ultimate parent entity, provided that the ultimate parent entity holds, directly or indirectly, at least 50 per cent of its ownership interest and shall not include
(a)
an ultimate parent entity of an MNE group;
(b)
an excluded entity referred to in section 6(6);
(c)
an entity whose ownership interests held by the MNE group are held directly through an excluded entity, referred to in section 6(6), and which meets one of the following conditions:
(i)
it operates exclusively or almost exclusively to hold assets or invest funds for the benefit of its investors;
(ii)
it carries out activities that are ancillary to those carried out by the excluded entity; or
(iii) substantially all of its income is excluded from the computation of qualifying income or loss in accordance with section 10(1), paragraphs (b) and (c).
(d)
an entity that is held by an MNE group composed exclusively of excluded entities referred to in section 6(6); or
(e) a joint venture subsidiary; “joint venture subsidiary” means
(a) an entity whose assets, liabilities, income, expenses and cash flows are consolidated by a joint venture under an acceptable financial accounting standard or would have been consolidated had the joint venture been required to consolidate such assets, liabilities, income,
expenses and cash flows under an acceptable financial accounting
standard; or
(b) a permanent establishment whose main entity is a joint venture or an entity referred to in paragraph (a) and in such cases the permanent establishment shall be treated as a separate joint venture subsidiary;
“low-taxed constituent entity” means
(a)
a constituent entity of an MNE group that is located in a low-tax jurisdiction; or
(b)
a stateless constituent entity that, in respect of a fiscal year, has qualifying income and an effective tax rate which is lower than the minimum tax rate;
“low-tax jurisdiction” means a jurisdiction where the MNE group has qualifying income and an effective tax rate for that fiscal year that is lower than the minimum tax rate;
“main entity” means an entity that includes the financial accounting net income or loss of a permanent establishment in its financial statements;
“material competitive distortion” means an application of a specific principle or procedure, under the set of generally accepted accounting principles used in preparing the consolidated financial statements, that results in an aggregate variation greater than €75 000 000 in a fiscal year as compared to the amounts that would have been determined by applying the corresponding IFRS principle or procedure;
“minimum tax rate” means 15 per cent;
“MNE” means Multinational Enterprise;
“MNE group” means any group that includes at least one entity or permanent establishment which is not located in the jurisdiction of the ultimate parent entity;
“net book value of tangible assets” means the average of the beginning and end values of tangible assets after taking into account accumulated depreciation, depletion and impairment, as recorded in the financial statements;
“non-qualified refundable tax credit” means a tax credit that is a not a qualified refundable tax credit but that is refundable in whole or in part;
“OECD” means Organisation for Economic Cooperation and Development;
“ownership interest” means any equity interest that carries rights to the profits, capital or reserves of an entity, including the profits, capital or reserves of a main entity’s permanent establishment;
“parent entity” means an ultimate parent entity which is not an excluded entity, or an intermediate parent entity;
“permanent establishment” means
(a)
a place of business or a deemed place of business located in a jurisdiction where it is treated as a permanent establishment in accordance with an applicable tax treaty, provided that such jurisdiction taxes the income attributable to it in accordance with a provision similar to Article 7 of the OECD Model Tax Convention on Income and Capital, as amended;
(b)
if there is no applicable tax treaty, a place of business or a deemed place of business located in a jurisdiction which taxes the income attributable to such place of business on a net basis in a manner similar to which it taxes its own tax residents;
(c)
if a jurisdiction has no corporate income tax system, a place of business or a deemed place of business located in such jurisdiction that would be treated as a permanent establishment in accordance with the OECD Model Tax Convention on Income and Capital, as amended, provided that such jurisdiction would have had the right to tax the income that would have been attributable to the place of business in accordance with Article 7 of that Convention; or
(d) a place of business or a deemed place of business that is not described in paragraphs (a) to (c) through which operations are conducted outside the jurisdiction where the entity is located, provided that such jurisdiction exempts the income attributable to such operations;
“Pillar Two commentary” means the following
(a)
the commentary on the GloBE Model Rules published by the Inclusive Framework on Base Erosion and Profit Shifting as “Tax Challenges Arising from the Digitalisation of the Economy – Commentary to the Global Anti-Base Erosion Model Rules (Pillar Two)”; and
(b)
the examples illustrating the application of the GloBE Model Rules published by the Inclusive Framework on Base Erosion and Profit Shifting as “Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) Examples”;
“Qualified Domestic Top-up Tax” or “QDTT” means a top-up tax or a top-up tax implemented in the domestic law of a jurisdiction by way of a set of rules, provided that such a jurisdiction does not provide any benefits related to those rules and those rules are implemented and administered in a manner that is consistent the GloBE Model Rules;
“qualified refundable tax credit” means
(a)
a refundable tax credit designed in such a way that it is to be paid as a cash payment or a cash equivalent to a constituent entity within 4 years from the date when the constituent entity is entitled to receive the refundable tax credit under the laws of the jurisdiction granting the credit; or
(b)
if the tax credit is refundable in part, the portion of the refundable tax credit that is payable as a cash payment or a cash equivalent to a constituent entity within 4 years from the date when the constituent entity is entitled to receive the partial refundable tax credit,
but a qualified refundable tax credit does not include any amount of tax creditable or refundable pursuant to a qualified imputation tax or a disqualified refundable imputation tax;
“qualifying entity” means an entity referred to in section 6 that is subject to the imposition of top-up tax under this Act;
“qualifying income or loss” means the financial accounting net income or loss of a constituent entity adjusted in accordance with the rules set out in Parts III, VI and VII;
“real estate investment vehicle” means a widely held entity that holds predominantly immovable property and that achieves a single level of taxation, either in its hands or in the hands of its interest holders, with at most one year of deferral;
“top-up tax” means the top-up tax imposed under section 5;
“transition year” means the first fiscal year that a DMTT Group is subject to top-up tax under this Act;
“Tribunal” means the Barbados Revenue Appeals Tribunal established by section 24 of the Barbados Revenue Authority Act (Act 2014-1);
“ultimate parent entity” means;
(a)
an entity that owns, directly or indirectly, a controlling interest in any other entity and that is not owned, directly or indirectly, by another entity with a controlling interest in it; or
(b)
the main entity of a group as defined in paragraph (b) of the definition of “group”.
“Under Taxed Profits Rule” or “UTPR” means a set of rules implemented in the domestic law of a jurisdiction, provided that such a jurisdiction does not provide any benefits that are related to those rules, and that
(a)
allows that jurisdiction to compute and collect its allocable share of top-up tax of an MNE group that was not charged under a QDMTT or IIR in respect of a low-taxed constituent entity of that MNE group;
(b)
administered in a manner that is consistent with the GloBE Model Rules.
(2) This Act shall be construed in a manner that generates outcomes that are consistent or functionally equivalent with the GloBE Model Rules, supplemented by the Pillar Two Commentary and any agreed administrative guidance on the interpretation or the administration of the GloBE Model Rules issued by the Inclusive Framework on Base Erosion and Profit Shifting.
Purpose
- The purpose of this Act is to establish an effective tax rate of 15 per cent for a DMTT Group through the imposition of a top-up tax which is designed to ensure
(a)
that profits of the entity are taxed where the economic activities generating those profits are performed and where value is created;
(b)
the removal of substantial part of the advantages of shifting profits outside of Barbados; and
(c)
to better protect Barbados’ corporation tax base.
Administration
- The Authority is responsible for the administration of this Act and the provisions of section 51 of the Income Tax Act, Cap. 73, which relate to secrecy, shall apply to the administration of this Act as if this Act formed part of the Income Tax Act.
PART II
IMPOSITION AND SCOPE OF TOP-UP TAX
Imposition of top-up tax
5.(1) For the fiscal years commencing on or after 1st January, 2024, and every subsequent fiscal year, a DMTT Group shall have an effective tax rate of 15 per cent.
(2)
Where the effective tax rate of a DMTT Group is below 15 per cent in a fiscal year, the qualifying entities in the DMTT Group shall pay to the Commissioner, a tax to be known as a “top-up tax” for that fiscal year, to be calculated in accordance with this Act.
(3)
All the qualifying entities in a DMTT Group shall be jointly and severally liable for the “top-up tax” payable under subsection (2) and the entire tax liability may be assessed against each qualifying entity of the DMTT Group.
(4)
Notwithstanding subsection (2), for the fiscal year 2024, the “top-up tax” shall apply only where a DMTT Group’s income is subject to an IIR or to a UTPR in another jurisdiction.
(5)
The top-up tax, referred to in subsection (2), shall be paid into the Consolidated Fund.
(6)
The Minister may amend the effective tax rate specified in subsection (1) by order.
Scope of top-up tax
6.(1) This Act shall apply to qualifying entities.
(2)
An entity is a qualifying entity if
(a)
it is located in Barbados;
(b)
it is a constituent entity of an MNE group;
(c)
that MNE group has an annual revenue of €750 000 000 or more in the consolidated financial statements of the ultimate parent entity in at least 2 of the 4 fiscal years immediately preceding the tested fiscal year; and
(d)
the entity is not an excluded entity.
(3)
A joint venture shall be considered to be a qualifying entity where
(a)
it is located in Barbados; and
(b)
the financial results of which are reported under the equity method in the consolidated financial statements of the ultimate parent entity of an MNE group that has an annual revenue of €750 000 000 or more in its consolidated financial statements in at least 2 of the 4 fiscal years immediately preceding the tested fiscal year.
(4)
A joint venture subsidiary shall be considered to be a qualifying entity where it is
(a)
located in Barbados; and
(b)
consolidated by a joint venture that meets the conditions under subsection (3)(b).
(5)
Where one or more of the fiscal years of a qualifying entity is of a period longer or shorter than 12 months, the revenue threshold in subsection (2)(c) and subsection (3)(b) shall be calculated as follows:
€750,000,000 x A/365 where A is the number of days in the fiscal year concerned.
(6)
For the purposes of this section “excluded entity” means
(a) a governmental entity, an international organisation, a non-profit organisation, a pension fund, an investment fund that is an ultimate parent entity or a real estate investment vehicle that is an ultimate parent entity;
(b)
an entity where at least 95 per cent of the value of the entity is owned by one or more entities referred to in paragraph (a), directly or through one or several excluded entities, except pension services entities, and that:
(i)
operates exclusively, or almost exclusively, to hold assets or invest funds for the benefit of the entity or entities referred to in paragraph (a); or
(ii)
exclusively carries out activities ancillary to those performed by the entity or entities referred to in paragraph (a);
(c)
an entity where at least 85 per cent of the value of the entity is owned, directly or through one or several excluded entities, by one or more entities referred to in paragraph (a), except pension services entities, provided that substantially all of entity’s income is excluded dividends or excluded equity gains or losses that are excluded from the computation of the qualifying income or loss in accordance with Part
III.
Location of an entity
7.(1) For the purposes of this Act, an entity other than a flow-through entity shall be determined to be located in the jurisdiction where it is considered to be resident for tax purposes based on its
(a)
place of management;
(b)
place of incorporation or
(c)
criteria similar to (a) or (b).
(2)
Where it is not possible to determine the location of an entity other than a flow-through entity based on subsection (1), it shall be deemed to be located in the jurisdiction where it was incorporated.
(3)
A flow-through entity shall be considered to be stateless, unless it is
(a) the ultimate parent entity of an MNE group; or
(b) required to apply an IIR,
in which case, the flow-through entity shall be deemed to be located in the jurisdiction where it was incorporated.
(4)
A permanent establishment
(a)
as defined in section 2, paragraph (a) of the definition shall be determined to be located in the jurisdiction where it is treated as a permanent establishment and is liable to tax under the applicable tax treaty;
(b)
as defined in section 2, paragraph (b) of the definition shall be determined to be located in the jurisdiction where it is subject to net basis taxation based on its business presence;
(c)
as defined in section 2, paragraph (c) of the definition shall be determined to be located in the jurisdiction where it is situated;
(d)
as defined in section 2, paragraph (d) of the definition shall be considered to be stateless.
(5)
Where a constituent entity is located in Barbados and another jurisdiction and that jurisdiction has an applicable tax treaty with Barbados, the constituent entity shall be deemed to be located in the jurisdiction where it is considered to be resident for tax purposes under that tax treaty.
(6)
Where
(a)
the applicable tax treaty referred to in subsection (5) requires that the competent authorities reach a mutual agreement on the deemed residence for tax purposes of the constituent entity, and no agreement is reached; or
(b)
there is no relief for double taxation under the applicable tax treaty, referred to in subsection (5), due to the fact that a constituent entity is resident for tax purposes in both contracting parties
subsection (7) shall apply;
(7)
Where a constituent entity is located in Barbados and another jurisdiction and that jurisdiction does not have an applicable tax treaty with Barbados, the constituent entity shall be deemed to be located in the jurisdiction which charged the higher amount of covered taxes for the fiscal year.
(8)
For the purpose of computing the amount of covered taxes referred to in the subsection (7), the amount of tax paid in accordance with a controlled foreign company tax regime shall not be taken into consideration.
(9)
If the amount of covered taxes due in Barbados and another jurisdiction is the same or zero, the constituent entity shall be deemed to be located in the jurisdiction where it has the higher amount of substance-based income exclusion computed on an entity basis in accordance with section 31.
(10)
If the amount of the substance-based income exclusion in Barbados and another jurisdiction is the same or zero, the constituent entity shall be considered to be stateless, unless it is an ultimate parent entity, in which case it shall be deemed to be located in the jurisdiction where it was created.
(11)
Where a constituent entity changes its location in the course of a fiscal year, it shall be deemed to be located in the jurisdiction where it was deemed to be located under this section at the beginning of that fiscal year.
Currency conversion
8.(1) Every amount relevant to the computation of the qualifying income or loss of a qualifying entity for a fiscal year should be consistent with the reporting currency as defined in subsection (4).
(2) If an amount that is relevant to the computation of the qualifying income or loss of a qualifying entity for a fiscal year is denominated in a currency other than the reporting currency of the consolidated financial statements of the ultimate parent entity of the qualifying entity and is not converted to the relevant reporting currency in the course of preparing the consolidated financial statements, that amount is to be converted to the relevant reporting currency using the foreign currency translation principles of the financial accounting standard that would have been used to convert the amount to the relevant reporting currency if that conversion were undertaken in the course of preparing the consolidated financial statements.
(3)
Notwithstanding the generality of subsection (1), when determining if any materiality or other threshold in this Act that is denominated in the currency of the European Monetary Union is satisfied or exceeded by an amount in respect of a group, entity or jurisdiction for a particular fiscal year, the amount is to be converted from that currency to the currency of the European Monetary Union using the average of the daily rates of exchange, in respect of the 2 currencies for the month of December included in the fiscal year, one year immediately preceding the particular fiscal year, as determined by the Central Bank.
(4)
For the purposes of this section “reporting currency” means the relevant reporting currency utilised in the course of the preparation of a consolidated financial statement.
PART III
COMPUTATION OF QUALIFYING INCOME OR LOSS
Determination of qualifying income or loss
Determination of qualifying income or loss
9.(1) For the purposes of this section, the income or loss of a qualifying entity is the financial accounting net income or loss determined for the qualifying entity for the fiscal year adjusted for the items described in sections 10 to 22.
(2)
Financial accounting net income or loss is the net income or loss determined for a qualifying entity for the fiscal year, before any consolidation adjustments eliminating intra-group transactions, in preparing consolidated financial statements of the ultimate parent entity.
(3)
Where it is not reasonably practicable to determine the financial accounting net income or loss of a qualifying entity based on the acceptable
financial accounting standard or authorised financial accounting standard used in the preparation of the consolidated financial statements of the ultimate parent entity, the financial accounting net income or loss of the qualifying entity for the fiscal year may be determined using another acceptable financial accounting standard or an authorised financial accounting standard provided that
(a)
the financial accounts of the qualifying entity are maintained based on that accounting standard;
(b)
the information contained in the financial accounts is reliable; and
(c)
permanent differences in excess of €1 000 000 that arise from the application of a particular principle or standard to items of income or expense or transactions, where that principle or standard differs from the financial standard used in the preparation of the consolidated financial statements of the ultimate parent entity, are adjusted to conform to the treatment required for that item under the accounting standard used in the preparation of the consolidated financial statements.
Adjustment to Determine Qualifying Income or Loss
General approach to adjustment to determine qualifying income or loss
10.(1) A qualifying entity’s qualifying income or loss shall be determined by adjusting the financial accounting net income or loss of that qualifying entity in the manner set out as follows:
(a)
net taxes expense;
(b)
excluded dividends;
(c)
excluded equity gain or loss;
(d)
included revaluation method gains or losses;
(e)
gains or losses from the disposal of assets and liabilities;
(f)
asymmetric foreign currency gains or losses;
(g)
policy disallowed expenses;
(h)
prior period errors and changes in accounting principles;
(i)
accrued pension expenses.
(2) For the purposes of this section
“net taxes expense” means the net amount of the following items:
(a)
covered taxes accrued as an expense and any current and deferred covered taxes included in the income tax expense, including covered taxes on income that is excluded from the qualifying income or loss computation;
(b)
deferred tax assets attributable to a loss for the fiscal year;
(c)
qualified domestic top-up taxes accrued as an expense;
(d)
taxes arising pursuant to the rules of this Act, or any tax under an IIR or UTPR, accrued as an expense; and
(e)
disqualified refundable imputation taxes accrued as an expense;
“excluded dividend” means a dividend or other distribution received or accrued in respect of an ownership interest, except a dividend or other distribution received or accrued in respect of
(a) an ownership interest
(i)
held by the group in an entity, that carries rights to less than 10 per cent of the profits, capital or reserves, or voting rights of that entity at the date of the distribution or disposition (a ‘portfolio shareholding’); and
(ii)
that is economically owned by the qualifying entity that receives or accrues the dividend or other distribution for less than one year at the date of the distribution;
(b) an ownership interest in an investment entity that is subject to an election pursuant to section 42;
“excluded equity gain or loss” means a gain, profit or loss, included in the financial accounting net income or loss of the qualifying entity, arising from:
(a)
gains and losses arising from changes in the fair value of an ownership interest, except for a portfolio shareholding;
(b)
profits or losses in respect of an ownership interest that is included under the equity method of accounting; and
(c)
gains and losses from the disposal of an ownership interest, except for the disposal of a portfolio shareholding;
“included revaluation method gain or loss” means a net gain or loss, increased or decreased by any associated covered taxes for the fiscal year, arising from the application of an accounting method or practice that, in respect of all property, plant and equipment
(a)
periodically adjusts the carrying value of such property, plant and equipment to its fair value;
(b)
records the changes in value in other comprehensive income; and
(c)
does not subsequently report the gain or loss accrued in other comprehensive income through profit and loss;
“asymmetric foreign currency gain or loss” means a foreign currency gain or loss of an entity whose accounting and tax functional currencies are different and that is:
(a)
included in the computation of the taxable income or loss of a qualifying entity and that is attributable to fluctuations in the exchange rate between the accounting functional currency and the tax functional currency of the qualifying entity;
(b)
included in the computation of the financial accounting net income or loss of a qualifying entity and that is attributable to fluctuations in the
exchange rate between the accounting functional currency and the tax
functional currency of the qualifying entity;
(c)
included in the computation of the financial accounting net income or loss of a qualifying entity and that is attributable to fluctuations in the exchange rate between a third foreign currency and the accounting functional currency of the qualifying entity; and
(d)
attributable to fluctuations in the exchange rate between a third foreign currency and the tax functional currency of the qualifying entity, irrespective of whether such third foreign currency gain or loss is included in the taxable income
the tax functional currency is the functional currency used to determine the qualifying entity’s taxable income or loss for a covered tax in the jurisdiction in which it is located; the accounting functional currency is the functional currency used to determine the qualifying entity’s financial accounting net income or loss; a third foreign currency is a currency that is not the qualifying entity’s tax functional currency or accounting functional currency;
“policy disallowed expense” means
(a)
an expense accrued by the qualifying entity for illegal payments, including bribes and kickbacks; and
(b)
an expense accrued by the qualifying entity for fines and penalties that equal or exceed €50 000 or an equivalent amount in the functional currency in which the financial accounting net income or loss of the qualifying entity is computed;
“prior period errors and changes in accounting principles” means all changes in the opening equity of a qualifying entity at the beginning of a fiscal year that is attributable to
(a) a correction of an error in the determination of the financial accounting net income or loss in a previous fiscal year that affected the income or expenses able to be included in the computation of the qualifying income or loss in that previous fiscal year, except to the extent such correction of an error resulted in a material decrease of a liability for covered taxes subject to section 28; and
(b) change in accounting principles or policy that affected the income or expenses included in the computation of the qualifying income or loss;
“accrued pension expense” means the difference between the amount of pension liability expense included in the financial accounting net income or loss and the amount contributed to a pension fund for the fiscal year.
Stock based compensation adjustment to determine qualifying income or loss
11.(1) At the election of the filing entity, a qualifying entity may substitute the amount allowed as a deduction for the computation of its taxable income in its location for the amount expensed in its financial accounts for a cost or expense of such qualifying entity that was paid with stock-based compensation.
(2)
Where the option to use the stock-options has not been exercised, the amount of stock-based compensation cost or expense that has been deducted from the financial accounting net income or loss of the qualifying entity for the computation of its qualifying income or loss for all previous fiscal years shall be included in the fiscal year in which that option has expired.
(3)
Where part of the amount of stock-based compensation cost or expense has been recorded in the financial accounts of the qualifying entity in fiscal years prior to the fiscal year in which the election is made, an amount equal to the difference between the total amount of stock-based compensation cost or expense that has been deducted for the computation of its qualifying income or loss in those previous fiscal years and the total amount of stock-based compensation cost or expense that would have been deducted for the computation of its qualifying income or loss in those previous fiscal years if the election had been made in such fiscal years shall be included in the computation of the qualifying income or loss of the qualifying entity for that fiscal year.
(4)
The election shall be made in accordance with section 44(1) and shall apply consistently to all qualifying entities located in the same jurisdiction for all years in which the election is applicable.
(5)
In the fiscal year in which the election is revoked, the amount of unpaid stock-based compensation cost or expense deducted pursuant to the election that exceeds the financial accounting expense accrued shall be included in the computation of the qualifying income or loss of the qualifying entity.
Arm’s Length Principle adjustment to determine qualifying income or loss
12.(1) Any transaction between constituent entities
(a)
located in Barbados; or
(b)
not located in Barbados,
that is not recorded in the same amount in the financial accounts of both constituent entities, that is not consistent with the arm’s length principle, shall be adjusted so as to be in the same amount and consistent with the arm’s length principle.
(2)
Where a loss from a sale or other transfer of an asset arises between 2 constituent entities that is not recorded consistently with the arm’s length principle, that loss shall be adjusted based on the arm’s length principle if the loss is included in the computation of the qualifying income or loss.
(3)
For the purposes of this section, “arm’s length principle” means the principle under which transactions between constituent entities are to be recorded by reference to the conditions that would have been obtained between independent enterprises in comparable transactions and under comparable circumstances.
Tax credit adjustment to determine qualifying income or loss
13.(1) A qualified refundable tax credit shall be treated as income for the computation of the qualifying income or loss of a qualifying entity.
(2) A non-qualified refundable tax credit shall not be treated as income for the computation of the qualifying income or loss of a qualifying entity.
Fair value or impairment adjustment to determine qualifying income or loss
14.(1) At the election of the filing entity, gains and losses in respect of assets and liabilities that are subject to fair value or impairment accounting in the consolidated financial statements for a fiscal year may be determined on the basis of the realisation principle for the computation of the qualifying income or loss.
(2)
Gains or losses which result from applying fair value or impairment accounting in respect of an asset or a liability shall be excluded from the computation of the qualifying income or loss of a qualifying entity under the subsection (1).
(3)
The carrying value of an asset or a liability for the purpose of determining a gain or a loss under the subsection (1) shall be the carrying value at the time the asset was acquired or the liability was incurred, or on the first day of the fiscal year in which the election is made, whichever date is the latest.
(4)
The election shall be made in accordance with section 44(1) and shall apply to all qualifying entities located in the jurisdiction to which the election is made, unless the filing entity chooses to limit the election to the tangible assets of the qualifying entities or to investment entities.
(5)
In the fiscal year in which the election is revoked, an amount equal to the difference between the fair value of the asset or liability and the carrying value of the asset or liability on the first day of the fiscal year in which the revocation is made, determined pursuant to the election, shall be included, if the fair value exceeds the carrying value, or deducted, if the carrying value exceeds the fair value, for the computation of the qualifying income or loss of the qualifying entities.
Tangible asset gain or loss adjustment to determine qualifying income or loss
15.(1) At the election of the filing entity, the qualifying income or loss of a qualifying entity arising from the disposal of tangible assets by the qualifying entity to third parties, other than a member of the group, for a fiscal year may be adjusted as set out in this section.
(2)
The net gain shall be offset first against the net loss, if any, that has arisen in the earliest fiscal year of the five-year period.
(3)
Any residual amount of net gain shall be carried forward and offset against any net losses that have arisen in subsequent fiscal years of the five-year period.
(4)
Any residual amount of net gain that remains shall be spread evenly over the five-year period for the computation of the qualifying income or loss of each qualifying entity located in that jurisdiction that has made a net gain from the disposal of tangible assets as referred to in the subsection (1) in the fiscal year in which the election is made.
(5)
The residual amount of net gain allocated to a qualifying entity shall be proportionate to the net gain of that qualifying entity divided by the net gain of all qualifying entities.
(6)
Where no qualifying entity has made a net gain from the disposal of tangible assets as referred to in subsection (1) in the fiscal year in which the election is made, the residual amount of net gain as referred to subsections (4) and (5) shall be allocated equally to each qualifying entity and spread evenly over the five-year period for the computation of the qualifying income or loss of each of those qualifying entities.
(7)
Any adjustment under this section for the fiscal years preceding the fiscal year in which the election is made shall be subject to adjustments in accordance with section 32.
(8)
The election shall be made annually in accordance with section 44(2).
(9) For the purposes of this section,
“tangible assets” means immovable property located in the same jurisdiction as the constituent entity;
“five-year period” means the period in which the net gain arising from the disposal of tangible assets as referred to in the subsection (1), in the fiscal year in which the election is made, shall be offset against any net loss of a qualifying entity located in that jurisdiction arising from the disposal of tangible assets
(a)
in the fiscal year in which the election is made; and
(b)
in the 4 fiscal years prior to that fiscal year.
Intra-group financing arrangement adjustment to determine qualifying income or loss
16.(1) Any expense related to a intra-group financing arrangement shall not be taken into consideration in the computation of the qualifying income or loss of a qualifying entity if the following conditions are met:
(a)
it can reasonably be anticipated that, the intra-group financing arrangement will, over its expected duration, increase the amount of expenses taken into account in the computation of the qualifying income or loss of that qualifying entity;
(b)
it can reasonably be anticipated that the intra-group financing arrangement would not result in a commensurate increase in the taxable income of the counter party;
(c)
the counterparty is located in a jurisdiction that is not a low-tax jurisdiction or in a jurisdiction that would not have been low-taxed if the income related to the expense had not been accrued by the counterparty; and
(d) the qualifying entity has an ETR below 15 per cent or an ETR that would have been below 15 per cent if the expense had not been accrued by the qualifying entity.
(2) For the purposes of this section
“intra-group financing arrangement” means a financing arrangement whereby
one or more constituent entities provides credit to or otherwise makes an
investment in one or more other constituent entities of the same group;
“counter party” means the constituent entity providing the credit.
Election to consolidate transactions in the same jurisdiction
17.(1) An ultimate parent entity may elect to apply its consolidated accounting treatment to eliminate income, expense, gains, and losses from transactions between qualifying entities and included in a tax consolidation group for the purpose of computing the net qualifying income or loss of those qualifying entities.
(2)
The election shall be made in accordance with section 44.
(3)
In the fiscal year in which the election is made or revoked, appropriate adjustments shall be made so that items of qualifying income or loss are not taken into consideration more than once or omitted as a result of such election or revocation.
Insurance companies adjustment to determine qualifying income or loss
18.(1) An insurance company shall exclude from the computation of its qualifying income or loss any amount charged to policyholders for taxes paid by the insurance company in respect of returns to the policyholders.
(2) An insurance company shall include in the computation of its qualifying income or loss any returns to policyholders that are not reflected in its financial accounting net income or loss to the extent that the corresponding increase or decrease in liability to the policyholders is reflected in its financial accounting net income or loss.
Additional tier one capital adjustment to determine qualifying income or loss
19.(1) An amount recognised as a decrease to the equity of a qualifying entity attributable to distributions paid or payable in respect of additional tier one capital issued by the qualifying entity shall be treated as an expense in the computation of its income or loss.
(2) An amount recognised as an increase to the equity of a qualifying entity attributable to distributions received or receivable in respect of additional tier one capital held by the qualifying entity shall be included in the computation of its income or loss.
International shipping income exclusion
International shipping income exclusion
20.(1) The international shipping income and the qualified ancillary international shipping income of a qualifying entity shall be excluded from the computation of its qualifying income or loss, provided that the qualifying entity demonstrates that the strategic or commercial management of all ships concerned is effectively carried on from within Barbados.
(2)
Where the computation of a qualifying entity’s international shipping income and qualified ancillary international shipping income results in a loss, such loss shall be excluded from the computation of the qualifying entity’s qualifying income or loss.
(3)
The aggregated qualified ancillary international shipping income of all qualifying entities shall not exceed 50 per cent of those qualifying entities’ international shipping income.
(4) The costs incurred by a qualifying entity that are directly attributable to its
(a)
international shipping activities listed in the definition of international shipping income referred to in subsection (7); and
(b)
qualified ancillary international shipping activities listed in the definition of qualified ancillary international shipping income referred to in subsection (7)
shall be allocated to such activities for the purpose of computing the net international shipping income and the net qualified ancillary international shipping income of the qualifying entity.
(5)
The costs incurred by a qualifying entity that indirectly result from its international shipping activities and qualified ancillary international shipping activities shall be deducted from the qualifying entity’s revenues from such activities to compute the international shipping income and qualified ancillary international shipping income of the constituent entity on the basis of its revenues from such activities in proportion to its total revenues.
(6)
All direct and indirect costs attributed to a qualifying entity’s international shipping income and qualified ancillary international shipping income in accordance with subsections (4) and (5) shall be excluded from the computation of its qualifying income or loss.
(7)
For the purposes of this section,
“international shipping income” means net income obtained from the following activities, provided that the transportation is not carried out via inland waterways within the same jurisdiction
(a)
transportation of passengers or cargo by ship in international traffic, whether the ship is owned, leased or otherwise at the disposal of the qualifying entity;
(b)
transportation of passengers or cargo by ship in international traffic under slot-chartering arrangements;
(c)
leasing of a ship to be used for the transportation of passengers or cargo in international traffic on charter fully equipped, crewed and supplied;
(d)
leasing of a ship used for the transportation of passengers or cargo in international traffic, on a bare-boat charter basis, to another qualifying entity;
(e)
participation in a pool, a joint business or an international operating agency for the transportation of passengers or cargo by ship in international traffic; and
(f)
sale of a ship used for the transportation of passengers or cargo in international traffic, provided that the ship has been held for use by the qualifying entity for a minimum of one year;
“qualified ancillary international shipping income” means net income obtained by a qualifying entity from the following activities, provided that such activities are performed primarily in connection with the transportation of passengers or cargo by ships in international traffic
(a)
leasing of a ship, on a bare-boat charter basis, to another shipping enterprise that is not a qualifying entity, provided that the duration of the charter does not exceed 3 years;
(b)
sale of tickets issued by other shipping enterprises for the domestic leg of an international voyage;
(c)
leasing and short-term storage of containers or detention charges for the late return of containers;
(d)
provision of services to other shipping enterprises by engineers, maintenance staff, cargo handlers, catering staff and customer services personnel; and
(e)
investment income, where the investment that generates the income is made as an integral part of the carrying on of the business of operating ships in international traffic.
Allocation of qualifying income or loss
Allocation of qualifying income or loss between a main entity and a permanent establishment
21.(1) A permanent establishment’s financial accounting net income or loss shall be the net income or loss reflected in the separate financial accounts of that permanent establishment.
(2)
Where a permanent establishment does not have separate financial accounts, its financial accounting net income or loss shall be the amount that would have been reflected in its separate financial accounts if they had been prepared on a standalone basis and in accordance with the accounting standard used in the preparation of the consolidated financial statements of the ultimate parent entity.
(3)
A permanent establishment’s financial accounting net income or loss shall be adjusted to reflect only the amounts and items of income and expense that are attributable to it in accordance with the applicable tax treaty or enactment, regardless of the amount of income subject to tax and the amount of deductible expenses.
(4)
The financial accounting net income or loss of a permanent establishment shall not be taken into account in determining the qualifying income or loss of the main entity, except as provided in subsection (5).
(5)
A loss of a permanent establishment shall be treated as an expense of the main entity (and not of the permanent establishment) for purposes of computing its qualifying income or loss to the extent that the loss of the permanent establishment is treated as an expense in the computation of the domestic taxable income of such main entity and is not set off against an item of income that is subject to tax under the laws of both the jurisdiction of the main entity and the jurisdiction of the permanent establishment.
(6)
Qualifying income that is subsequently arising in the permanent establishment shall be treated as qualifying income of the main entity (and not
of the permanent establishment) up to the amount of the qualifying loss that was previously treated as an expense of the main entity under the subsection (5).
Allocation of qualifying income or loss from a flow-through entity
22.(1) The financial accounting net income or loss of a constituent entity that is a flow-through entity shall be reduced by the amount allocable to its owners that are not constituent entities and that hold their ownership interest in such flow-through entity directly or through one or more of the tax transparent entities, unless
(a)
the flow-through entity is an ultimate parent entity; or
(b)
the flow-through entity is held, directly or through a tax transparent structure by an ultimate parent entity referred to in paragraph (a).
(2)
The financial accounting net income or loss of a constituent entity that is a flow-through entity shall be reduced by the financial accounting net income or loss that is allocated to another constituent entity.
(3)
Where a flow-through entity wholly or partially carries out business through a permanent establishment, its financial accounting net income or loss which remains after applying the formulae referred to in subsection (1) shall be allocated to that permanent establishment.
(4)
Where a flow-through entity is a tax transparent entity that is not the ultimate parent entity, the financial accounting net income or loss of the flow-through entity which remains after applying the formulae set out subsection (1) and (3) shall be allocated to its constituent entity-owners in accordance with their ownership interests in the flow-through entity.
(5)
Where a flow-through entity is a tax transparent entity that is the ultimate parent entity, any financial accounting net income or loss of the flow-through entity which remains after applying the allocation to any permanent establishment shall be allocated to the ultimate parent entity.
(6)
Where a flow-through entity is a reverse hybrid entity, any financial accounting net income or loss of the flow-through entity which remains after
applying the formulae set out in subsections (1) and (3) shall be allocated to the reverse hybrid entity.
(7) Subsections (3), (4) and (5) shall be applied separately with respect to each ownership interest in the flow-through entity.
PART IV
COMPUTATION OF ADJUSTED COVERED TAXES
Covered taxes 23.(1) The covered taxes of a qualifying entity shall include
(a)
taxes recorded in the financial accounts of a qualifying entity with respect to its income or profits, or its share of the income or profits of a qualifying entity in which it owns an ownership interest;
(b)
taxes imposed in lieu of a generally applicable corporate income tax.
(2)
The covered taxes of a qualifying entity shall not include
(a)
the top-up tax accrued by a parent entity under a qualified IIR;
(b)
the top-up tax accrued by a constituent entity under a qualified domestic top-up tax;
(c)
taxes attributable to an adjustment made by a constituent entity as a result of the application of a qualified UTPR;
(d)
disqualified refundable imputation tax; and
(e)
taxes paid by an insurance company in respect of returns to policyholders.
(3)
The covered taxes in respect of any net gain or loss, arising from the disposal of tangible assets as referred to in section 13, in the fiscal year in which the election referred to in that section is made, shall be excluded from the computation of the covered taxes.
Adjusted covered taxes
24.(1) The adjusted covered taxes of a qualifying entity for a fiscal year shall be determined by adjusting the sum of the current tax expense accrued in its financial accounting net income or loss with respect to covered taxes for the fiscal year, by
(a)
the net amount of its additions and reductions to covered taxes for the fiscal year as set out in subsections (2) and (3);
(b)
the total deferred tax adjustment amount as set out in section 25; and
(c)
any increase or decrease in covered taxes recorded in equity or other comprehensive income relating to amounts included in the computation of qualifying income or loss that will be subject to tax under the Income Tax Act, Cap. 73.
(2)
The additions to the covered taxes of a qualifying entity for a fiscal year shall include:
(a)
any amount of covered taxes accrued as an expense in the profit before taxation in the financial accounts;
(b)
any amount of qualifying loss deferred tax asset that has been used pursuant to section 25(2);
(c)
any amount of covered taxes relating to an uncertain tax position previously excluded under subsection (3)(d), that is paid in the fiscal year; and
(d)
any amount of credit or refund in respect of a qualified refundable tax credit that was accrued as a reduction to the current tax expense.
(3)
The reductions to the covered taxes of a qualifying entity for the fiscal year shall include
(a) the amount of current tax expense with respect to income excluded from the computation of qualifying income or loss under Part III;
(b)
any amount of credit or refund in respect of a non-qualified refundable tax credit that was not recorded as a reduction to the current tax expense;
(c)
any amount of covered taxes refunded or credited to a qualifying entity that was not treated as an adjustment to current tax expense in the financial accounts, unless it relates to a qualified refundable tax credit;
(d)
the amount of current tax expense that relates to an uncertain tax position; and
(e)
any amount of current tax expense that is not expected to be paid within 3 years after the end of the fiscal year.
(4)
An amount referred to in subsections (1), (2) and (3) shall only be taken into account once for the purpose of computing adjusted covered taxes
(5)
Where, in a fiscal year, there is no net qualifying income and the amount of adjusted covered taxes is negative and less than an amount equal to the net qualifying loss multiplied by the minimum tax rate, the amount equal to the difference between the amount of adjusted covered taxes and the amount of expected adjusted covered taxes shall be treated as an additional current top-up tax for that fiscal year.
(6)
The amount of additional current top-up tax shall be allocated to each qualifying entity in the jurisdiction in accordance with section 31.
Total deferred tax adjustment amount
25.(1) Where the tax rate applied for the purpose of computing the deferred tax expense is equal or below the minimum tax rate, the total deferred tax adjustment amount to be added to the adjusted covered taxes of a qualifying entity for a fiscal year pursuant to section 24(1)(b), shall be the deferred tax expense accrued in its financial accounts with respect to covered taxes, subject to the adjustments under subsections (3) to (6).
(2) Where the tax rate applied for the purpose of computing the deferred tax expense is above the minimum tax rate, the total deferred tax adjustment amount to be added to the adjusted covered taxes of a qualifying entity for a fiscal year pursuant to section 24(1)(b), shall be the deferred tax expense accrued in its financial accounts with respect to covered taxes recast at the minimum tax rate, subject to the adjustments under subsections (3) to (6).
(3)
The total deferred tax adjustment amount shall be increased by:
(a)
any amount of unclaimed accrual paid during the fiscal year; and
(b)
any amount of recaptured deferred tax liability determined in a preceding fiscal year that has been paid during the fiscal year.
(4)
Where, in a fiscal year, a loss deferred tax asset is not recognised in the financial accounts because the recognition criteria are not met, the total deferred tax adjustment amount shall be reduced by the amount that would have reduced the total deferred tax adjustment amount if a loss deferred tax asset for the fiscal year had been accrued.
(5)
The total deferred tax adjustment amount shall not include
(a)
the amount of deferred tax expense with respect to items excluded from the computation of qualifying income or loss under Part III;
(b)
the amount of deferred tax expense with respect to disallowed accruals and unclaimed accruals;
(c)
the impact of a valuation adjustment or accounting recognition adjustment with respect to a deferred tax asset;
(d)
the amount of deferred tax expense arising from a re-measurement with respect to a change in the applicable domestic tax rate; and
(e)
the amount of deferred tax expense with respect to the generation and use of tax credits.
(6)
Where a deferred tax asset that is attributable to a qualifying loss of a qualifying entity has been recorded in a fiscal year at a rate lower than the minimum tax rate, it may be recast at the minimum tax rate in the same fiscal
year, provided that the taxpayer is able to demonstrate that the deferred tax asset is attributable to a qualifying loss.
(7)
Where a deferred tax asset is increased pursuant to the subsection (6), the total deferred tax adjustment amount shall be reduced accordingly.
(8)
A deferred tax liability that is not reversed and whose amount is not paid within the 5 subsequent fiscal years shall be recaptured to the extent it was taken into account in the total deferred tax adjustment amount of a qualifying entity.
(9)
The amount of the recaptured deferred tax liability determined for the current fiscal year shall be treated as a reduction to the covered taxes in the fifth fiscal year preceding the current fiscal year, and the effective tax rate and top-up tax of that fiscal year shall be recomputed in accordance with section 31.
(10)
The recaptured deferred tax liability in the current fiscal year shall be the amount of the increase in the category of deferred tax liability that was included in the total deferred tax adjustment amount in the fifth fiscal year preceding the current fiscal year that has not reversed by the end of the last day of the current fiscal year.
(11)
Notwithstanding subsection (7), where a deferred tax liability is a recapture exception accrual, it shall not be recaptured even if it is not reversed or paid within the 5 subsequent years.
(12)
A recapture exception accrual shall be the amount of tax expense accrued that is attributable to changes in associated deferred tax liabilities, in respect of the following items
(a)
cost recovery allowances on tangible assets;
(b)
cost of a licence or similar arrangement from a government for the use of immovable property or exploitation of natural resources which entails significant investment in tangible assets;
(c)
research and development expenses;
(d)
decommissioning and remediation expenses;
(e)
fair value accounting on unrealised net gains;
(f)
foreign currency exchange net gains;
(g)
insurance reserves and insurance policy deferred acquisition costs;
(h)
gains from the sale of tangible property located in the same jurisdiction as the qualifying entity that are reinvested in tangible property in the same jurisdiction; and
(i)
additional amounts accrued as a result of accounting principal changes with respect to items listed in paragraphs (a) to (h).
(13) For the purposes of this section, “disallowed accrual” means
(a)
any movement in deferred tax expense accrued in the financial accounts of a qualifying entity which relates to an uncertain tax position; and
(b)
any movement in deferred tax expense accrued in the financial accounts of a qualifying entity which relates to distributions from a qualifying entity;
“unclaimed accrual” means any increase in a deferred tax liability recorded in the financial accounts of a qualifying entity in a fiscal year that is not expected to be paid within the time period set out in subsections (8), (9) and
(10) and which the filing entity annually elects, in accordance with section 44 not to include in the total deferred tax adjustment amount for such fiscal year.
Qualifying loss election
26.(1) Notwithstanding section 25, a filing entity may make a qualifying loss election according to which a qualifying loss deferred tax asset shall be determined in each fiscal year in which there is a net qualifying loss.
(2)
Pursuant to subsection (1), the loss deferred tax asset shall be equal to the net qualifying loss in a fiscal year multiplied by the minimum tax rate.
(3)
The qualifying loss deferred tax asset determined pursuant to subsection
(1)
shall be used in any subsequent fiscal year in which there is net qualifying income is an amount equal to the net qualifying income multiplied by the minimum tax rate or, if lower, the amount of qualifying loss deferred tax asset that is available.
(4)
The qualifying loss deferred tax asset determined pursuant to subsection
(1)
shall be reduced by the amount that is used in a fiscal year and the balance shall be carried forward to subsequent fiscal years.
(5)
Where a qualifying loss election is revoked, any remaining qualifying loss deferred tax asset determined pursuant to subsection (1) shall be reduced to zero as of the first day of the first fiscal year in which the qualifying loss election is no longer applicable.
(6)
The qualifying loss election shall be filed with the first top-up tax information return, referred to in section 45, of the qualifying entity.
(7)
Where a flow-through entity which is the ultimate parent entity of a qualifying entity makes a qualifying loss election under this section, the qualifying loss deferred tax asset shall be computed by reference to the qualifying loss of the flow-through entity after reduction pursuant to section 41.
Specific allocation of covered taxes incurred by certain types of constituent entities
27.(1) A permanent establishment shall be allocated the amount of any covered taxes that are included in the financial accounts of a constituent entity and that relate to qualifying income or loss of that permanent establishment excluding main entity taxes.
(2) The covered taxes of a constituent entity shall exclude the amount of
(a) any main entity taxes relating to a permanent establishment;
(b)
any taxes charged under a controlled foreign company tax regime in respect of the income of the constituent entity;
(c)
any covered taxes included in the financial accounts of a constituent entity owner relating to the qualifying income of a hybrid entity;
(d)
any covered taxes accrued in the financial accounts of a constituent entity’s direct constituent entity owners in respect of distributions from the constituent entity, except for withholding tax levied on such distributions.
(3)
A constituent entity owner shall be allocated the amount of any covered taxes that are included in the financial accounts of a tax transparent entity and that relate to qualifying income or loss allocated to the constituent entity-owner in accordance with section 22(4).
(4)
A constituent entity that made a distribution during the fiscal year shall be allocated the amount of any withholding tax levied on such distribution.
(5)
Where the qualifying income of a permanent establishment is treated as qualifying income of the main entity in accordance with section 21, any covered taxes arising in the jurisdiction where the permanent establishment is located and associated with such income shall be treated as covered taxes of the main entity for an amount not exceeding such income multiplied by the highest tax rate on ordinary income in the jurisdiction where the main entity is located.
(6)
For the purposes of this section
“hybrid entity” means an entity treated as a separate person for income tax purposes in the jurisdiction where it is located but as fiscally transparent in the jurisdiction in which its owner is located;
“main entity taxes” means any covered taxes that are included in the financial accounts of a constituent entity and that relate to the qualifying income or loss of a permanent establishment and which were imposed by the jurisdiction in which that permanent establishment’s main entity is located.
Post-filing adjustments and tax rate changes
28.(1) Where a qualifying entity records an adjustment to its covered taxes in a previous fiscal year in its financial accounts, such adjustment shall be treated as an adjustment to covered taxes in the fiscal year in which the adjustment is made, unless the adjustment relates to a fiscal year in which there is a decrease in covered taxes.
(2)
Where there is a decrease in covered taxes that were included in the qualifying entity’s adjusted covered taxes for a previous fiscal year, the effective tax rate and top-up tax for such fiscal year shall be recomputed in accordance with section 32(1) and (2) by reducing adjusted covered taxes by the amount of the decrease in covered taxes and the qualifying income for the fiscal year and any previous fiscal years shall be adjusted accordingly.
(3)
At the annual election of the filing entity, made in accordance with section 44, an immaterial decrease in covered taxes may be treated as an adjustment to covered taxes in the fiscal year in which the adjustment is made.
(4)
An immaterial decrease in covered taxes shall be an aggregate decrease of less than €1 000 000 in the adjusted covered taxes determined for the jurisdiction for the fiscal year.
(5)
Where the applicable domestic tax rate is reduced below the minimum tax rate and such reduction results in a deferred tax expense, the amount of the resulting deferred tax expense shall be treated as an adjustment to the qualifying entity’s liability for covered taxes that are taken into consideration pursuant to section 24 for a previous fiscal year.
(6)
Where a deferred tax expense was taken into account at a rate lower than the minimum tax rate and the applicable tax rate is later increased, the amount of deferred tax expense that results from such increase shall be treated upon payment as an adjustment to a qualifying entity’s liability for covered taxes claimed for a previous fiscal year in accordance with section 24.
(7)
The adjustment under subsection (6) shall not exceed an amount equal to the deferred tax expense recast at the minimum tax rate.
(8)
Where more than €1 000 000 of the amount accrued by a qualifying entity as current tax expense and included in adjusted covered taxes for a fiscal year is not paid within 3 years after the end of that fiscal year, the effective tax rate and top-up tax for the fiscal year in which the unpaid amount was claimed as a covered tax shall be recomputed in accordance with section 32(1) and (2) by excluding such unpaid amount from the adjusted covered taxes.
PART V
COMPUTATION OF THE EFFECTIVE TAX RATE AND TOP-UP TAX
Determination of the effective tax rate
29.(1) The effective tax rate of a DMTT Group shall be computed, for each fiscal year, provided that there is net qualifying income, in accordance with the following formula:
Effective = adjusted covered taxes of qualifying entities tax rate net qualifying income of qualifying entities
where the adjusted covered taxes of the DMTT Group are the sum of the adjusted covered taxes of all the qualifying entities located in the jurisdiction determined in accordance with Part IV.
(2) The net qualifying income or loss of the DMTT Group in the jurisdiction for a fiscal year shall be determined in accordance with the following formula:
Net qualifying income or loss = qualifying income of the qualifying entities — qualifying losses of qualifying entities
where
(a)
the qualifying income of the DMTT Group is the positive sum, if any, of the qualifying income of all qualifying entities located in the jurisdiction determined in accordance with Part III;
(b)
the qualifying losses of the DMTT Group are the sum of the qualifying losses of all qualifying entities determined in accordance with Part III.
(3)
Adjusted covered taxes and qualifying income or loss of qualifying entities to which section 40 applies shall be excluded from the computation of the effective tax rate in accordance with subsection (1) and the computation of the net qualifying income in accordance with subsection (2).
(4)
The effective tax rate of each stateless constituent entity shall be computed, for each fiscal year, separately from the effective tax rate of all other constituent entities.
Computation of top-up tax
30.(1) Where the effective tax rate of a DMTT Group is below the minimum tax rate for an income year, the qualifying entities in that DMTT Group that have qualifying income shall be liable to top-up tax.
(2) The top-up tax for a fiscal year shall be the positive amount, if any, computed in accordance with the following formula:
Jurisdictional top-up tax=(top-up tax percentage x excess profit) + additional current top-up tax
where the additional current top-up tax is the amount of tax as determined in accordance with section 32 for the fiscal year.
(3) The top-up tax percentage for a fiscal year shall be the positive percentage point difference, if any, computed in accordance with the following formula:
Top-up tax percentage = minimum tax rate — effective tax rate
where the effective tax rate is the rate computed in accordance with section 29.
(4) The excess profit for the jurisdiction for the fiscal year referred to in subsection (3) shall be the positive amount, if any, computed in accordance with the following formula:
Excess profit = net qualifying income — substance-based income exclusion
where the net qualifying income is the net qualifying income or loss determined in accordance with section 29(2).
(5) The top-up tax of a qualifying entity that is part of a DMTT Group for the current fiscal year shall be computed in accordance with the following formula:
Top-up tax of a qualifying entity = jurisdictional top-up tax
x qualifying income of the qualifying entity
aggregate qualifying income of all qualifying entities
where:
(a)
the qualifying income of the qualifying entity for a fiscal year is the income determined in accordance with Part III;
(b)
the aggregate qualifying income of all qualifying entities for a fiscal year is the sum of the qualifying income of all the qualifying entities for the fiscal year.
(6) If the top-up tax results from a recomputation pursuant to section 32(1) and (2) and there is no net qualifying income in the jurisdiction for the fiscal year, the top-up tax shall be allocated to each qualifying entity using the formula set out in subsection (5), based on the qualifying income of the qualifying entities in the fiscal years for which the recomputations pursuant to section 32(1) and (2) are performed.
(7) The top-up tax of each stateless constituent entity shall be computed, for each fiscal year, separately from the top-up tax of all other constituent entities.
Substance-based income exclusion
31.(1) Unless a filing entity of MNE group elects, in accordance with section 44, not to apply the substance-based income exclusion for the fiscal year, the net qualifying income for a jurisdiction shall be reduced, for the purpose of computing the top-up tax, by an amount equal to the sum of the payroll carve-out referred to in subsection (2) and the tangible asset carve-out referred to in subsection (3) for each qualifying entity.
(2)
The payroll carve-out of a qualifying entity shall be equal to 5 per cent of its eligible payroll costs of eligible employees who perform activities for the MNE group, with the exception of eligible payroll costs that are:
(a)
capitalised and included in the carrying value of eligible tangible assets;
(b)
attributable to income that is excluded in accordance with section 20.
(3)
The tangible asset carve-out of a qualifying entity shall be equal to 5 per cent of the carrying value of the eligible tangible assets located in the jurisdiction, with the exception of
(a)
the carrying value of property, including land and buildings, that is held for sale, lease or investment;
(b)
the carrying value of tangible assets used to derive income that is excluded in accordance with section 20.
(4)
For the purposes of subsection (3)(b), the carrying value of eligible tangible assets shall be the average of the carrying value of eligible tangible assets at the beginning and end of the fiscal year, as recorded for the purpose of
preparing the consolidated financial statements of the ultimate parent entity, reduced by any accumulated depreciation, amortisation and depletion and increased by any amount attributable to the capitalisation of payroll expenses.
(5)
For the purposes of subsections (2) and (3), eligible payroll costs and eligible tangible assets of a qualifying entity which is a permanent establishment shall be those that are included in its separate financial accounts in accordance with section 21, provided that the eligible payroll costs and eligible tangible assets are located in the same jurisdiction as the permanent establishment.
(6)
The eligible payroll costs and eligible tangible assets of a permanent establishment shall not be taken into account for the eligible payroll costs and eligible tangible assets of the main entity.
(7)
Where the income of a permanent establishment was wholly or partially excluded pursuant to section 21(1) and section 38, the eligible payroll costs and eligible tangible assets of such permanent establishment shall be excluded in the same proportion from the computation under this section for the MNE group.
(8)
Eligible payroll costs of eligible employees paid by, and eligible tangible assets owned by, a flow-through entity that are not allocated under paragraph 6 shall be allocated to:
(a)
the constituent entity-owners of the flow-through entity, in proportion to the amount allocated to them pursuant to section 22(4), provided that the eligible employees and eligible tangible assets are located in the jurisdiction of the constituent entity-owners; and
(b)
the flow-through entity if it is the ultimate parent entity, reduced in proportion to the income excluded from the computation of the qualifying income of the flow-through entity pursuant to section 41(1) and (2), provided that the eligible employees and eligible tangible assets are located in the jurisdiction of the flow-through entity.
(9)
All other eligible payroll costs and eligible tangible assets of the flow-through entity shall be excluded from the substance-based income exclusion computations of the MNE group.
(10)
The substance-based income exclusion of each stateless constituent entity shall be computed, for each fiscal year, separately from the substance-based income exclusion of all other constituent entities.
(11)
The substance-based income exclusion computed under this section shall not include the payroll carve-out and the tangible asset carve-out of constituent entities that are investment entities in that jurisdiction.
(12)
For the purpose of applying subsection (2), the value of 5 per cent shall be replaced by the values set out in column II of Part I of the First Schedule, for each fiscal year beginning from the 31st of December of the calendar years set out in column I of Part I of the First Schedule.
(13)
For the purpose of applying subsection (3), the value of 5 per cent shall be replaced by the values set out in column II of Part II of the First Schedule, for each fiscal year beginning from the 31st of December of the calendar years set out in column I of Part II of the First Schedule.
(14)
For the purposes of this section,
“eligible employees” means full-time or part-time employees of a qualifying entity and independent contractors participating in the ordinary operating activities of the MNE group under the direction and control of the MNE group;
“eligible payroll costs” means employee compensation expenditures, including salaries, wages and other expenditures that provide a direct and separate personal benefit to the employee, such as health insurance and pension contributions, payroll and employment taxes, and employer social security contributions;
“eligible tangible assets” means
(a)
property, plant and equipment located in the jurisdiction;
(b)
natural resources located in the jurisdiction;
(c)
a lessee’s right of use of tangible assets located in the jurisdiction; and
(d) a licence or similar arrangement from the government for the use of immovable property or exploitation of natural resources that entails significant investment in tangible assets.
Additional current top-up tax
32.(1) Where, pursuant to sections 15, 25(6), 28(1) and (8) and 41(8) and (10), an adjustment to covered taxes or qualifying income or loss results in the re-computation of the effective tax rate and top-up tax of the DMTT Group for a prior fiscal year, the effective tax rate and top-up tax shall be re-computed in accordance with the rules set out in sections 29, 30 and 31.
(2)
Any amount of incremental top-up tax arising from such re-computation shall be treated as an additional current top-up tax for the purposes of section 30(3) for the fiscal year during which the re-computation is made.
(3)
Where an amount of additional current top-up tax is due pursuant to section 24(5) it shall be allocated pro-rata to each qualifying entity, based on the following formula:
(Qualifying income or loss x minimum tax rate) — adjusted covered taxes
(4)
The additional current top-up tax shall only be allocated to qualifying entities that record an amount of adjusted covered tax that is less than zero and less than the qualifying income or loss of such qualifying entities multiplied by the minimum tax rate.
(5)
Where a qualifying entity is allocated additional current top-up tax in accordance with this section and section 30(5) and (6), such qualifying entity shall be treated as a low-taxed constituent entity for the purposes of this Act.
De minimis exclusion
33.(1) Notwithstanding sections 29 to 31 and section 35, at the election of the filing entity, the top-up tax due for the constituent entities shall be equal to zero for a fiscal year if, for such fiscal year:
(a)
the average qualifying revenue of the DMTT Group is less than €10 000 000; and
(b)
the average qualifying income or loss of the DMTT Group is a loss or is less than €1 000 000.
(2)
The election referred to in subsection (1) shall be made annually in accordance section 44.
(3)
The average qualifying revenue or average qualifying income or loss referred to subsection (1) shall be the average of the qualifying revenue or qualifying income or loss of the DMTT Group for the fiscal year and the 2 preceding fiscal years.
(4)
If there are no qualifying entities with qualifying revenue or qualifying loss in the first or second preceding fiscal year, or both, such fiscal year or years shall be excluded from the computation of the average qualifying revenue or qualifying income or loss.
(5)
The qualifying revenue of the DMTT Group for a fiscal year shall be the sum of all the revenues of the qualifying entities, reduced or increased by any adjustment carried out in accordance with Part III.
(6)
The qualifying income or loss of the qualifying entities for a fiscal year shall be the net qualifying income or loss as computed in accordance with section 30(2).
(7)
The de minimis exclusion set out in subsections (1) to (4) shall not be applicable to stateless constituent entities and investment entities.
(8) The revenue and qualifying income or loss of stateless constituent entities and investment entities shall be excluded from the computation of the de minimis exclusion.
Minority-owned constituent entities
34.(1) The computation of the effective tax rate and the top-up tax applicable to members of a minority-owned subgroup shall apply as if each minority-owned subgroup were a separate MNE group.
(2)
The adjusted covered taxes and qualifying income or loss of members of a minority-owned subgroup shall be excluded from
(a)
the determination of the residual amount of the effective tax rate of the DMTT Group computed in accordance with section 29(1);
(b)
the net qualifying income computed in accordance with section reference is made to the section 29(2).
(3)
The effective tax rate and top-up tax of a minority-owned constituent entity that is not a member of a minority-owned subgroup shall be computed on an entity basis in accordance with Parts III to VII.
(4)
The adjusted covered taxes and qualifying income or loss of the minority-owned constituent entity shall be excluded from the determination of the residual amount of the effective tax rate of the DMTT Group computed in accordance with section 29(1) and from the net qualifying income computed in accordance with section 29(2).
(5)
This section shall not apply to a minority-owned constituent entity that is an investment entity referred to in section 42.
(6)
For the purposes of this section,
“minority-owned constituent entity” means a constituent entity in which the ultimate parent entity has a direct or indirect ownership interest of 30 per cent less;
“minority-owned parent entity” means a minority-owned constituent entity that holds, directly or indirectly, the controlling interests of another minority-owned constituent entity, except where the controlling interests of the former entity are held, directly or indirectly, by another minority-owned constituent entity;
“minority-owned subgroup” means a minority-owned parent entity and its minority-owned subsidiaries; and
“minority-owned subsidiary” means a minority-owned constituent entity whose controlling interests are held, directly or indirectly, by a minority-owned parent entity.
PART VI
SPECIAL RULES FOR CORPORATE RESTRUCTURING AND HOLDING STRUCTURES
Application of the consolidated revenue threshold to group mergers and demergers
35.(1) Where 2 or more groups merge to form a single group in any of the last 4 consecutive fiscal years immediately preceding the tested fiscal year, the consolidated revenue threshold of the MNE group shall be deemed to be met for any fiscal year prior to the merger if the sum of the revenue included in each of their consolidated financial statements for that fiscal year is €750 000 000 or more.
(2) Where an entity that is not a member of a group, referred to as the ‘target’, merges with an entity or a group, referred to as the ‘acquiring entity’, in the tested fiscal year, and either the target or the acquiring entity did not have consolidated financial statements in any of the last 4 consecutive fiscal years immediately preceding the tested fiscal year, the consolidated revenue threshold of the MNE group shall be deemed to be met for that year if the sum of the revenue included in each of their financial statements or consolidated financial statements for that fiscal year is €750 000 000 or more.
(3)
Where a single MNE group under this Act, demerges into 2 or more groups, each referred to as a ‘demerged group’, the consolidated revenue threshold shall be deemed to be met by a demerged group where:
(a)
with respect to the first tested fiscal year ending after the demerger, the demerged group has an annual revenue of €750 000 000 or more in that fiscal year;
(b)
with respect to the second to fourth tested fiscal years ending after the demerger, the demerged group has an annual revenue of €750 000 000 or more in at least 2 of those fiscal years.
(4)
For the purposes of this section, “merger” means any arrangement where:
(a)
all or substantially all of the group entities of 2 or more separate groups are brought under common control in a way that they constitute entities of a combined group; or
(b)
an entity that is not a member of any group is brought under common control with another entity or group in a way that they constitute entities of a combined group;
“demerger” means any arrangement where the group entities of a single group are separated into 2 or more different groups that are no longer consolidated by the same ultimate parent entity.
Constituent entities joining and leaving an MNE group
36.(1) Where an entity, referred to as the “target’, becomes or ceases to be a constituent entity of an MNE group, as a result of a transfer of direct or indirect ownership interests in the target, or where the target becomes the ultimate parent entity of a new group during a fiscal year, referred to the ‘acquisition year’, the target shall be treated as a member of the MNE group for the purposes of this Act provided that a portion of its assets, liabilities, income, expenses and cash flows is included on a line-by-line basis in the consolidated financial statements of the ultimate parent entity in the acquisition year.
(2)
The effective tax rate and top-up tax of the target, referred to in subsection (1), shall be computed in accordance with subsections (3) to (9).
(3)
In the acquisition year, referred to in subsection (1), an MNE group shall take into account only the financial accounting net income or loss and adjusted covered taxes of the target, referred to in subsection (1), that are included in the consolidated financial statements of the ultimate parent entity for the purposes of this Act.
(4)
In the acquisition year, referred to in subsection (1), and in each subsequent fiscal year, the qualifying income or loss and adjusted covered taxes of the target, referred to in subsection (1), shall be based on the historical carrying value of its assets and liabilities
(5)
In the acquisition year, referred to in subsection (1), the computation of the eligible payroll costs of the target, referred to in subsection (1), pursuant to section 31(2) shall take into account only the costs that are reflected in the consolidated financial statements of the ultimate parent entity.
(6)
The computation of the carrying value of the eligible tangible assets of the target, referred to in subsection (1), pursuant to section 31(3) shall be adjusted, where applicable, in proportion to the period of time in which the target was a member of the MNE group during the acquisition year referred to in subsection (1).
(7)
With the exception of the qualifying loss deferred tax asset as referred to in section 26, the deferred tax assets and deferred tax liabilities of a target, referred to in subsection (1), that are transferred between MNE groups shall be taken into account by the acquiring MNE group and to the same extent as if the acquiring MNE group controlled the target when such assets and liabilities arose.
(8)
Deferred tax liabilities of the target, referred to in subsection (1), that have previously been included in its total deferred tax adjustment amount shall be
treated as reversed, for the purposes of section 25(8), (9) and (10), by the disposing MNE group and as arising from the acquiring MNE group in the acquisition year, except that in such a case any subsequent reduction of covered taxes pursuant to section 25(8), (9) and (10) shall have effect in the year in which the amount is recaptured.
(9) Notwithstanding subsections (1) to (8), in the case of a disposition or acquisition of assets and liabilities, a disposing qualifying entity shall include the gain or loss on disposition in the computation of its income or loss and an acquiring qualifying entity shall determine its income or loss using the acquiring qualifying entity’s carrying value of the acquired assets and liabilities determined under the accounting standard used in preparing the consolidated financial statements of the ultimate parent entity.
Transfer of assets and liabilities
37.(1) A disposing qualifying entity shall include the gain or loss arising from such disposal in the computation of its qualifying income or loss.
(2)
An acquiring qualifying entity shall determine its qualifying income or loss on the basis of its carrying value of the acquired assets and liabilities determined under the financial accounting standard used in preparing consolidated financial statements of the ultimate parent entity.
(3)
Notwithstanding subsection (2), where a disposal or acquisition of assets and liabilities is performed in the context of a reorganisation
(a)
the disposing qualifying entity shall exclude any gain or loss arising from such disposal from the computation of its qualifying income or loss; and
(b)
the acquiring qualifying entity shall determine its qualifying income or loss on the basis of the carrying value of the acquired assets and liabilities of the disposing qualifying entity upon disposal.
(4)
Notwithstanding subsections (2) and (3), where the disposal of assets and liabilities is performed in the context of a reorganisation which results, for the disposing qualifying entity, in a non-qualifying gain or loss
(a)
the disposing qualifying entity shall include the gain or loss on the disposal in the computation of its qualifying income or loss to the extent of the non-qualifying gain or loss; and
(b)
the acquiring qualifying entity shall determine its qualifying income or loss after the acquisition using the disposing qualifying entity’s carrying value of the acquired assets and liabilities upon disposal, as adjusted consistently with local tax rules of the acquiring qualifying entity to account for the non-qualifying gain or loss.
(5)
At the election of the filing entity, where a qualifying entity is required or permitted to adjust the basis of its assets and the amount of its liabilities to fair value for tax purposes in the jurisdiction where it is located, such qualifying entity may
(a)
include, in the computation of its qualifying income or loss, an amount of gain or loss in respect of each of its assets and liabilities, which shall be
(i)
equal to the difference between the carrying value for financial accounting purposes of the asset or liability immediately before the date of the event that triggered the tax adjustment (the ‘triggering event’) and the fair value of the asset or liability immediately after the triggering event; and
(ii)
decreased (or increased) by the non-qualifying gain or loss, if any, arising in connection with the triggering event;
(b)
use the fair value for financial accounting purposes of the asset or liability immediately after the triggering event to compute qualifying income or loss in the fiscal years ending after the triggering event; and
(c) include the net total of the amounts determined in paragraph (a) in the qualifying entity’s qualifying income or loss in one of the following ways:
(i)
the net total of those amounts is included in the fiscal year in which the triggering event occurs; or
(ii)
an amount equal to the net total of those amounts divided by 5 is included in the fiscal year in which the triggering event occurs and in each of the immediate 4 subsequent fiscal years, unless the qualifying entity leaves the MNE group in a fiscal year within this period, in which case the remaining amount will be wholly included in that fiscal year.
(6)
For the purposes of this section,
“acquiring qualifying entity” means a qualifying entity that acquires assets and liabilities
“disposing qualifying entity” means a qualifying entity that disposes of assets and liabilities;
“reorganisation” means a transformation or transfer of assets and liabilities such as in a merger, demerger, liquidation or similar transaction where:
(a)
the consideration for the transfer is, in whole or in significant part, equity interests issued by the acquiring qualifying entity or by a person connected with the acquiring qualifying entity, or, in the case of a liquidation, equity interests of the target, or, when no consideration is provided, where the issuance of an equity interest would have no economic significance;
(b)
the disposing qualifying entity’s gain or loss on those assets is not subject to tax, in whole or in part; and
(c)
the tax laws in which the acquiring qualifying entity is located require the acquiring qualifying entity to compute taxable income after the disposal or acquisition using the disposing qualifying entity’s tax basis
in the assets, adjusted for any non-qualifying gain or loss on the
disposal or acquisition;
“non-qualifying gain or loss” means the lesser of the gain or loss of the disposing qualifying entity arising in connection with a reorganisation that is subject to tax in the disposing qualifying entity’s location and the financial accounting gain or loss arising in connection with the reorganisation.
Joint ventures
38.(1) The computation of the top-up tax on a joint venture and its joint venture subsidiaries located in Barbados shall be made in accordance with Parts III to VII, as if they were qualifying entities of a separate MNE group and the joint venture was the ultimate parent entity of that group.
(2) For the purposes of this section, “joint venture group” means a joint venture and its joint venture subsidiaries.
PART VII
TAX NEUTRALITY AND DISTRIBUTION REGIMES
Ultimate parent entity that is a flow-through entity
39.(1) The qualifying income of a flow-through entity that is an ultimate parent entity shall be reduced, for the fiscal year, by the amount of qualifying income that is attributable to the ownership holder, provided that:
(a)
the ownership holder is subject to tax on such income for a taxable period that ends within 12 months after the end of that fiscal year at a nominal rate that equals or exceeds the minimum tax rate; or
(b)
it can be reasonably expected that the aggregated amount of adjusted covered taxes of the ultimate parent entity and taxes paid by the ownership holder on such income within 12 months after the end of
the fiscal year equals or exceeds an amount equal to that income
multiplied by the minimum tax rate.
(2)
The qualifying income of a flow-through entity that is an ultimate parent entity shall also be reduced, for the fiscal year, by the amount of qualifying income that is allocated to the ownership holder in the flow-through entity provided that the ownership holder is
(a)
a natural person that is tax resident in the jurisdiction where the ultimate parent entity is located and that holds ownership interests representing a right to 5 per cent or less of the profits and assets of the ultimate parent entity; or
(b)
a governmental entity, an international organisation, a non-profit organisation or a pension fund that is tax resident in the jurisdiction where the ultimate parent entity is located and that holds ownership interests representing a right to 5 per cent or less of the profits and assets of the ultimate parent entity.
(3)
The qualifying loss of a flow-through entity that is an ultimate parent entity shall be reduced, for the fiscal year, by the amount of qualifying loss that is attributable to the ownership holder.
(4)
Subsection (3) shall not apply to the extent the ownership holder is not allowed to use such loss for the computation of its taxable income.
(5)
Subsections (1) to (4) shall apply to a permanent establishment through which a flow-through entity that is an ultimate parent entity wholly or partly carries out its business or through which the business of a tax transparent entity is wholly or partly carried out, provided that the ultimate parent entity’s ownership interest in that tax transparent entity is held directly or through one or more tax transparent entities.
(6)
For the purposes of this section, “ownership holder” means the holder of an ownership interest in the flow-through entity.
Ultimate parent entity subject to a deductible dividend regime
40.(1) An ultimate parent entity of an MNE group that is subject to a deductible dividend regime shall reduce, up to zero, for the fiscal year, its qualifying income by the amount that is distributed as deductible dividend within 12 months after the end of the fiscal year, provided that:
(a)
the dividend is subject to tax in the hands of the recipient for a taxable period that ends within 12 months after the end of the fiscal year at a nominal rate that equals or exceeds the minimum tax rate; or
(b)
it can be reasonably expected that the aggregate amount of adjusted covered taxes of the ultimate parent entity and taxes paid by the recipient on such dividend equals or exceeds that income multiplied by the minimum tax rate.
(2)
An ultimate parent entity of an MNE group that is subject to a deductible dividend regime shall also reduce, up to zero, for the fiscal year, its qualifying income by the amount that it distributes as deductible dividend within 12 months after the end of the fiscal year, provided that the recipient is:
(a)
a natural person, and the dividend received is a patronage dividend from a supply cooperative;
(b)
a natural person that is tax resident in the same jurisdiction where the ultimate parent entity is located and that holds ownership interests representing a right to 5 per cent or less of the profits and assets of the ultimate parent entity; or
(c)
a governmental entity, an international organisation, a non-profit organisation or a pension fund other than a pension services entity, that is a tax resident in the jurisdiction where the ultimate parent entity is located.
(3)
The covered taxes of an ultimate parent entity, other than the taxes for which the dividend deduction was allowed, shall be reduced proportionally to
the amount of qualifying income reduced in accordance with subsection (1) and (2).
(4)
Where the ultimate parent entity holds an ownership interest in another constituent entity that is subject to a deductible dividend regime, directly or through a one or more such constituent entities, subsections (1), (2) and (3) shall apply to any other constituent entity located in the jurisdiction of the ultimate parent entity that is subject to the deductible dividend regime, to the extent that its qualifying income is further distributed by the ultimate parent entity to recipients that meet the requirements set out in subsections (1) and (2).
(5)
For the purposes of subsection (1), a patronage dividend distributed by a supply cooperative shall be treated as subject to tax in the hands of the recipient insofar as such dividend reduces a deductible expense or cost in the computation of the recipient’s taxable income or loss.
(6)
For the purposes of this section,
“deductible dividend” means, with respect to a qualifying entity that is subject to a deductible dividend regime
(a)
a distribution of profits to the holder of an ownership interest in the qualifying entity that is deductible from the taxable income of the qualifying entity under the laws of the jurisdiction in which it is located; or
(b)
a patronage dividend to a member of a cooperative; and
“deductible dividend regime” means a tax regime that applies a single level of taxation on the income of the owners of an entity by deducting or excluding from the income of the entity the profits distributed to the owners or by exempting a cooperative from taxation;
“cooperative” means an entity that collectively markets or acquires goods or services on behalf of its members and that is subject to a tax regime in the jurisdiction where it is located that ensures the tax neutrality in respect of goods or services that are sold or acquired by its members through the cooperative;
“patronage dividend” means a distribution by a cooperative to its members.
Determination of the effective tax rate and top-up tax of an investment entity
41.(1) Where a qualifying entity of an MNE group is an investment entity that is not a tax transparent entity and that has not made an election in accordance with sections 42 and 43, the effective tax rate of such investment entity shall be computed separately from the effective tax rate of the jurisdiction in which it is located.
(2)
The effective tax rate of the investment entity as referred to in subsection
(1)
shall be equal to its adjusted covered taxes divided by an amount equal to the allocable share of the MNE group in the qualifying income or loss of that investment entity.
(3)
Where more than one investment entity is located in a jurisdiction, their effective tax rate shall be computed by combining their adjusted covered taxes as well as the allocable share of the MNE group in their qualifying income or loss.
(4)
The adjusted covered taxes of an investment entity as referred to in subsections (1) and (2) shall be the adjusted covered taxes that are attributable to the allocable share of the MNE group in the qualifying income of the investment entity and the covered taxes allocated to the investment entity in accordance with section 27.
(5)
The investment entity’s adjusted covered taxes shall not include any covered taxes accrued by the investment entity attributable to income that is not part of the MNE group’s allocable share of the investment entity’s income.
(6)
The top-up tax of an investment entity as referred to in subsection (1) shall be an amount equal to the top-up tax percentage of the investment entity multiplied by an amount equal to the difference between the allocable share of the MNE group in the qualifying income of the investment entity and the substance-based income exclusion computed for the investment entity.
(7)
The top-up tax percentage of an investment entity shall be a positive amount equal to the difference between the minimum tax rate and the effective tax rate of such investment entity.
(8)
The substance-based income exclusion of an investment entity shall be determined in accordance with section 31(1) to (7), subject to the adjustments in subsection (9).
(9)
The eligible payroll costs of eligible employees and eligible tangible assets taken into account for such investment entity shall be reduced in proportion to the allocable share of the MNE group in the qualifying income of the investment entity divided by the total qualifying income of such investment entity.
(10)
For the purposes of this section, the allocable share of the MNE group in the qualifying income or loss of an investment entity for a fiscal year is the ratio of
(a)
the qualifying income or loss of the investment entity for the fiscal year reduced by the amount of such income attributable to ownership interests held by other owners; to
(b)
qualifying income or loss of the investment entity for the fiscal year taking into account only interests that are not subject to an election in accordance with sections 42 or 43.
Election to treat an investment entity as a tax transparent entity
42.(1) At the election of the filing entity, a qualifying entity that is an investment entity or an insurance investment entity may be treated as a tax transparent entity if the qualifying entity-owner is subject to tax in the jurisdiction in which it is located under a fair market value or a similar regime based on the annual changes in the fair value of its ownership interests in such entity and the tax rate applicable to the qualifying entity-owner on such income equals or exceeds the minimum tax rate.
(2)
At the election of the filing entity, a qualifying entity that is an investment entity or an insurance investment entity may be treated as a tax transparent entity if the qualifying entity-owner is subject to tax in the jurisdiction in which it is located under a fair market value or a similar regime based on the annual changes in the fair value of its ownership interests in such entity and the tax rate applicable to the qualifying entity-owner on such income equals or exceeds the minimum tax rate.
(3)
A qualifying entity that indirectly owns an ownership interest in an investment entity or in an insurance investment entity through a direct ownership interest in another investment entity or an insurance investment entity shall be considered to be subject to tax under a fair market value or similar regime with respect to its indirect ownership interest in the first-mentioned investment entity or insurance investment entity if it is subject to a fair market value or similar regime with respect to its direct ownership interest in the second-mentioned investment entity or insurance investment entity.
(4)
The election under subsection (2) shall be made in accordance with section 44(1).
(5)
If the election is revoked, any gain or loss from the disposal of an asset or a liability held by the investment entity or an insurance investment entity shall be determined on the basis of the fair market value of the asset or liability on the 1st day of the year the revocation is made.
Election to apply a taxable distribution method
43.(1) At the election of the filing entity, a qualifying entity-owner may apply a taxable distribution method with respect to its ownership interest in the investment entity, provided that the qualifying entity-owner is not an investment entity and can be reasonably expected to be subject to tax on distributions from the investment entity at a tax rate that equals or exceeds the minimum tax rate.
(2) Under the taxable distribution method, distributions and deemed distributions of the qualifying income of an investment entity shall be included in the qualifying income of the qualifying entity-owner that received the distribution, provided that it is not an investment entity.
(3)
The amount of covered taxes incurred by the investment entity that is creditable against the tax liability of the qualifying entity-owner arising from the distribution of the investment entity shall be included in the qualifying income and adjusted covered taxes of the qualifying entity-owner that received the distribution.
(4)
The share of the qualifying entity-owner in the undistributed net qualifying income of the investment entity referred to in subsection (3) arising in the third year preceding the fiscal year, the ‘tested year’, shall be treated as qualifying income of that investment entity for the fiscal year.
(5)
The amount equal to such qualifying income multiplied by the minimum tax rate shall be treated as top-up tax of a qualifying entity for the fiscal year.
(6)
The qualifying income or loss of an investment entity and the adjusted covered taxes attributable to such income for the fiscal year shall be excluded from the computation of the effective tax rate in accordance with Part V and with section 41(1) to (4), except for the amount of covered taxes referred to in subsection (3).
(7)
The undistributed net qualifying income of an investment entity for the tested year, referred to in subsection (4), shall be the amount of qualifying income of that investment entity for the tested year reduced, up to zero, by:
(a)
the covered taxes of the investment entity;
(b)
distributions and deemed distributions to shareholders that are not investment entities during the period starting with the first day of the third year preceding the fiscal year and ending with the last day of the reporting fiscal year in which the ownership interest was held referred to as the ‘testing period’;
(c)
qualifying losses arising during the testing period referred to in paragraph (b); and
(d) any residual amount of qualifying losses that has not already reduced the undistributed net qualifying income of that investment entity for a previous tested year, namely the investment loss carry-forward.
(8)
The undistributed net qualifying income of an investment entity shall not be reduced by distributions or deemed distributions that already reduced the undistributed net qualifying income of that investment entity for a previous tested year in application of the subsection (7)(b).
(9)
The undistributed net qualifying income of an investment entity shall not be reduced by the amount of qualifying losses that already reduced the undistributed net qualifying income of that investment entity for a previous tested year in application of the subsection (7)(c).
(10)
For the purposes of this section, a deemed distribution shall arise when a direct or indirect ownership interest in the investment entity is transferred to an entity that does not belong to the MNE group and is equal to the share of the undistributed net qualifying income attributable to such ownership interest on the date of such transfer, determined without regard to the deemed distribution.
(11)
The election under subsection (1) shall be made in accordance with section 44.
(12)
If the election is revoked, the share of the qualifying entity-owner in the undistributed net qualifying income of the investment entity for the tested year at the end of the fiscal year preceding the fiscal year the revocation is made shall be treated as qualifying income of the investment entity for the fiscal year.
(13)
The amount equal to such qualifying income multiplied by the minimum tax rate shall be treated as top-up tax of qualifying entity for the fiscal year.
PART VIII
ADMINISTRATIVE PROCEDURES AND ENFORCEMENT
Elections
44.(1) The elections referred to in section 11(1) and (4), section 42 and section 43 shall be valid for a period of 5 years, starting from the year in which the election is made.
(2)
The election referred to in subsection (1) shall be renewed automatically unless the filing entity revokes the election at the end of the 5 year period.
(3)
A revocation of the election pursuant to subsection (2) shall be valid for a period of 5 years, starting from the end of the year in which the revocation is made.
(4)
The elections referred to in section 15(1) and (8), section 25(13), section 28(3), section 31(1), section 33(1) shall be valid for a period of one year.
(5)
The election referred to in subsection (4) shall be made each fiscal year and can be revoked by the filing entity at the end of the fiscal year.
(6)
Any election made under this Act shall be made to the Authority.
Filing obligations
45.(1) A qualifying entity shall give notice to the Commissioner, in the form and manner specified by the Commissioner, that it is such an entity, not later than 12 months after the last day of the first fiscal year that it is a qualifying entity, immediately following a fiscal year for which it was not a qualifying entity.
(2) A notice under subsection (1) shall contain
(a)
the name of the entity;
(b)
the TIN of the entity;
(c)
the tax or taxes in respect of which the entity is registering,
(d)
where the entity is a member of an MNE group
(i)
the name of the ultimate parent entity;
(ii)
the location of the ultimate parent entity;
(iii) the TIN of the ultimate parent entity;
(e)
details of the first fiscal year that the entity is a qualifying entity;
(f)
where an entity has been appointed as the filing entity on behalf of the MNE group of which the qualifying entity is a member
(i)
the name of the filing entity;
(ii)
the location of the filing entity;
(iii) the TIN of the filing entity;
(g)
such other information as the Commissioners may reasonably require for the purposes of this Part.
(3)
Where there is any change to the information provided under subsection
(2)
the entity shall notify the Commissioner of the change within 12 months of the end of the fiscal year in which the change occurred.
(4)
Where an entity ceases to be a qualifying entity, the entity shall notify the Commissioner of the cessation within 12 months of the end of the first fiscal year in which the entity is not such an entity immediately following a fiscal year in which the entity was such an entity.
(5)
Where an entity fails to give notice to the Commissioner in accordance with subsection (1) the entity shall be liable to a penalty of $10,000.
(6)
Where an entity fails to comply with subsection (3) or (4) that entity shall be liable to a penalty of $10,000.
Return and self-assessment
46.(1) An entity that is a qualifying entity for a fiscal year shall prepare and deliver to the Commissioner a full and true return for the fiscal year, in the form and with such content and in the manner specified by the Commissioner taking into account the GloBE Model Rules on filing obligation, on or before the specified return date.
(2)
The DMTT Group shall prepare and deliver to the Commissioner a return in the form and with such content and in the manner specified by the Commissioner taking into account the GloBE Model Rules on filing obligation, on or before the specified return date.
(3)
The DMTT Group may elect a qualifying entity to prepare and deliver to the Commissioners a return on behalf of the relevant qualifying entities on or before the specified return date for a fiscal year.
(4)
The DMTT Group may withdraw the election of a qualifying entity under subsection (3) and where such a withdrawal is made
(a)
the DMTT Group shall elect another qualifying entity group to prepare and deliver the return in accordance with subsection (2); or
(b)
each qualifying entity shall prepare and deliver a return in accordance with subsection (1).
(5)
Notwithstanding subsection (4), a DMTT Group is still required to prepare and deliver a return in accordance with subsection (2).
(6)
A return required under subsections (1) and (2) shall include
(a)
a self-assessment;
(b)
a declaration to the effect that the return is full and true;
(c)
the name of the entity;
(d)
the TIN of the entity;
(e)
the tax or taxes in respect of which the entity is registering,
(f)
where the entity is a member of an MNE group
(i)
the name of the ultimate parent entity;
(ii)
the location of the ultimate parent entity;
(iii) the TIN of the ultimate parent entity;
(g)
details of the first fiscal year that the entity is a qualifying entity;
(h)
where an entity has been appointed as the designated filing entity on behalf of the MNE group of which the entity is a member
(i)
the name of the designated filing entity;
(ii)
the location of the designated filing entity;
(iii) the TIN of the designated filing entity;
(i)
such further particulars as the Commissioner may reasonably require for the purposes of this Part.
(7)
A return required to be prepared and delivered under this section may be amended only where such an amendment is necessary to
(a)
correct either an error or mistake; or
(b)
comply with any other provision of this Part.
(8)
Where an entity fails to file the relevant return in accordance with this Act, that entity shall pay a penalty of $1000 to the Commissioner in addition to interest at the rate of one per cent calculated for each month during which any part of that amount was not paid on the largest amount of the top-up tax and interest that was due and unpaid at any time in that month.
Payment
47.(1) The top-up tax payable by an qualifying entity in respect of a fiscal year shall be due and payable to the Commissioner on or before the specified return date in respect of the fiscal year.
(2) Where a qualifying entity prepares and delivers a return pursuant to section 46(3) for a fiscal year on or before the specified return date
(a) section 43(1) shall not apply to the qualifying entities other than the qualifying entity elected pursuant section 48(3);
(b)
the qualifying entities other than the qualifying entity elected pursuant to section 48(3), shall not be chargeable to domestic top-up tax in respect of the fiscal year; and
(c)
the qualifying entity elected pursuant section 46(3) shall be chargeable to an amount of domestic top-up tax in respect of all of the relevant qualifying entities, in respect of whom the return is prepared and delivered, for the fiscal year and such an amount shall be equal to the jurisdictional top-up tax for the qualifying entities for the fiscal year, as would be determined in accordance with sections 29, 30, 31 and 32 when calculating the top-up tax of the relevant qualifying entities.
(3)
A payment made in respect of a top-up tax that a qualifying entity would have been chargeable to in respect of a fiscal year, if subsection (2) did not apply, shall not
(a) be taken into account in calculating profits or losses of either qualifying entity elected pursuant section 46(3) or the other relevant qualifying entities referred to in subsection (2)(a); and
(b)
be regarded as a distribution or a charge on income, for the purposes of the corporation tax purposes the Income Tax Act, Cap. 73.
(4)
Where an entity fails to
(a)
pay the top-up tax imposed under this Act; or
(b)
pay the top-up tax after date specified by this Act
that entity shall pay a penalty of $1000 to the Commissioner in addition to interest at the rate of one per cent calculated for each month during which any part of that amount was not paid on the largest amount of the top-up tax and interest that was due and unpaid at any time in that month.
Audit and investigations
- For the purposes of the conducting audit and investigations under this Act, Division AB of the Income Tax Act, Cap. 73 applies mutatis mutandis.
Assessment and determinations by Commissioner
49.(1) A top-up tax assessment may be conducted by the Commissioner and shall involve an assessment of
(a)
the amount of top-up tax payable for the fiscal year; and
(b)
the balance of top-up tax, taking account of any amount of top-up tax paid directly by the qualifying entity to the Commissioner for the fiscal year, which under this Part
(i)
is due and payable by the qualifying entity to the Commissioner for the fiscal year; or
(ii)
is overpaid by the qualifying entity for the fiscal year and which, subject to this Part, is available for offset or repayment by the Commissioner.
(2)
A top-up tax assessment shall include the amount of the surcharge due for the fiscal year.
(3)
In making an assessment under subsection (1), the Commissioner is not bound by the information contained in a return submitted under section 46 in respect of the qualifying entity or by any other information supplied by, on behalf of, or in respect of that qualifying entity.
(4)
Where the Commissioner makes a top-up tax assessment, any self-assessment made under section 46 shall, for the purposes of determining the qualifying entity’s liability to tax for the fiscal year, be treated as if it had not been made and shall be void for such purposes.
(5)
Where a self-assessment has been made pursuant to section 46, the Commissioner may make an assessment of the top-up tax for the applicable period
(a) at any time, where the qualifying entity has made any misrepresentation or has failed to disclose any material fact in making the return or in
supplying information required to be supplied in accordance with this
Act; or
(b) in any other case, within 5 years after the end of applicable payment period of the top-up tax.
Objection
- Division X of the Income Tax Act, Cap. 73 applies mutatis mutandis in relation to the procedure for objecting to an assessment or a part of an assessment under this Act.
Appeal to Tribunal
51.(1) Any person who has objected to an assessment and who received a notice of confirmation or redetermination, may appeal from the decision of the Commissioner to the Tribunal, within 30 days after the day on which the notice of assessment or redetermination, as the case may be, was delivered to him.
(2)
Where a person has filed a notice of objection under this Act and the Commissioner has not, within 12 months thereafter, delivered to the person a notice of confirmation or redetermination, the person may appeal to the Tribunal in respect of the objection.
(3)
Where the Commissioner delivers to a person, a notice of confirmation or redetermination respecting an objection after the expiration of the period of 6 months referred to in subsection (2), the person may appeal to the Tribunal within 30 days after the delivery of the notice.
(4)
An appeal under this section shall be instituted by filing a notice of appeal with the Tribunal together with such copies thereof as the Tribunal may require, and such notice shall, as far as possible, state the precise grounds of appeal.
(5)
Where the Tribunal is satisfied that there is good reason for the failure of a person to object or appeal within 21 days of the date of notice of confirmation, reassessment or redetermination, or in subsections (1), (2) or (3), the Tribunal may allow the person such further time as the Tribunal thinks fit.
(6)
In disposing of an appeal under this section in respect of an assessment or determination, the Tribunal may
(a)
confirm or vacate the assessment or determination;
(b)
make an order referring the assessment or determination back to the Commissioner for reassessment or redetermination in accordance with the directions of the Tribunal; or
(c)
make such order as the Tribunal thinks fit.
(7)
Where the Tribunal has referred an assessment or determination back to the Commissioner with directions for reassessment or redetermination by him
(a)
the Commissioner shall make a reassessment or redetermination in accordance with those directions and shall deliver to the appellant a notice of reassessment or notice of redetermination, as the case may be; and
(b)
if the appellant believes that such notice of reassessment or notice of redetermination is not in accordance with the directions of the Tribunal, he may apply to the Tribunal for an order determining the content of the notice of reassessment or notice of redetermination, as the case may be, which shall then be delivered by the Commissioner to the appellant.
Appeal to the High Court
52.(1) Any party to an appeal to the Tribunal may appeal from the decision of the Tribunal to the High Court on a point of law.
(2) In disposing of an appeal under this section in respect of an assessment or determination, the High Court may
(a)
confirm or set aside the assessment or determination;
(b)
make an order referring the assessment or determination back to the Commissioner for reassessment or redetermination in accordance with the directions of the Court; or
(c) make such other order as it thinks fit.
Enforced collection
- Division AA of the Income Tax Act, Cap. 73 applies mutatis mutandis in relation to the procedure for the collection of top-up tax, interest, penalties and other amounts payable under this Act.
PART XI
TRANSITIONAL RELIEF
Tax treatment of deferred tax assets, deferred tax liabilities and transferred assets upon transition
54.(1) When determining the effective tax rate for a jurisdiction in a transition year, and for each subsequent fiscal year, the MNE group shall take into account all the deferred tax assets and deferred tax liabilities reflected or disclosed in the financial accounts of all the qualifying entities in a jurisdiction for the transition year.
(2)
Deferred tax assets and deferred tax liabilities shall be taken into account at the lower of the minimum tax rate and the applicable domestic tax rate.
(3)
Notwithstanding subsection (2), a deferred tax asset that has been recorded at a tax rate lower than the minimum tax rate may be taken into account at the minimum tax rate if the taxpayer is able to demonstrate that the deferred tax asset is attributable to a qualifying loss.
(4)
The impact of any valuation adjustment or accounting recognition adjustment with respect to a deferred tax asset shall be disregarded.
(5)
Deferred tax assets arising from items excluded from the computation of qualifying income or loss in accordance with Part III shall be excluded from the computation referred to in subsection (2) when such deferred tax assets are generated in a transaction that takes place after 30th November, 2021.
(6) In the case of a transfer of assets between constituent entities after 30th November, 2021 and before the commencement of a transition year, the basis in the acquired assets, other than inventory, shall be based upon the disposing qualifying entity’s carrying value of the transferred assets upon disposal with deferred tax assets and liabilities determined on that basis.
Transitional relief for filing obligations
- Notwithstanding section 45, the notifications referred to in section 45 and the return referred to in section 46 shall be filed with the Commissioner no later than 3 months after the specified return date of the reporting fiscal year that is the transition year referred to in section 54.
Exclusion from the top-up-tax of MNE groups in the initial phase of their international activity
56.(1) Subject to section 55, the top-up-tax that would otherwise be taken into account under section 30 shall be reduced to zero during the initial phase of an MNE group’s international activity, where none of the ownership interest in the qualifying entities are held by parent entities subject to an IIR, notwithstanding the requirements otherwise provided in Part V.
(2)
For the purposes of this section, an MNE group is in its initial phase of its international activity if, for a fiscal year
(a)
it has constituent entities in no more than 6 jurisdictions; and
(b)
the sum of the net book values of tangible assets of all constituent entities located in all jurisdictions other than the referenced jurisdiction does not exceed €50 000 000.
(3)
For the purposes of subsection (2)
(a) the referenced jurisdiction of an MNE group is the jurisdiction where the MNE group has the highest total value of tangible assets for the fiscal year in which the MNE group originally comes within the scope of the GloBE Model Rules;
(b) the total value of tangible assets in a jurisdiction is the sum of the net book values of all tangible assets of all constituent entities of the MNE group that are located in that jurisdiction.
(4) For the purposes of subsection (3)
“ net book values of tangible assets” means the average of the beginning and end values of tangible assets after taking into account accumulated depreciation, depletion, and impairment, as recorded in the financial statements;
“tangible assets” means tangible assets of all constituent entities resident for tax purposes in the relevant tax jurisdiction and does not include cash or cash equivalents, intangibles, or financial assets;
(5)
In respect of permanent establishments, tangible assets should be allocated to the tax jurisdiction in which the permanent establishment is located provided those tangible assets are included in the separate financial accounts of that permanent establishment as determined by section 21 and the tangible assets allocated to the tax jurisdiction of a permanent establishment shall not be taken into account for the tangible assets of the tax jurisdiction of the main entity.
(6)
This section shall not apply for any fiscal year that starts later than 5 years after the first day of the first fiscal year when the MNE group originally came within the scope of the GloBE Model Rules.
PART X
TRANSITIONAL SAFE HARBOUR
Transitional safe harbour election
57.(1) The filing entity of a DMTT Group may make a transitional safe harbour election for a fiscal year.
(2) The effect of the election is that all of the qualifying entities of the DMTT Group are to be treated as not having top-up amounts for the purpose of determining the liability of any qualifying entities of the DMTT Group to domestic top-up tax.
(3)
An election may only be made for a fiscal year if
(a)
the fiscal year commences on or before 31st December, 2026 and ends on or before 30th June, 2028;
(b)
a qualifying country-by-country report has been prepared in relation to Barbados for the fiscal year;
(c)
the election has been made in respect of Barbados for each preceding fiscal year that commenced on or after 31st December, 2023 in which any member of the group was a qualifying entity;
(d)
at least one of the following tests are met for Barbados in the fiscal year:
(i)
the threshold test in section 62;
(ii)
the simplified effective tax rate test in see section 63;
(iii) the routine profits test in section 64.
(4)
An election may not be made if Barbados is the territory of the ultimate parent entity of a MNE group for a fiscal year and the ultimate parent entity is a flow-through entity unless
(a)
its qualifying income would be nil as a result of the application of the adjustments for an ultimate parent entity that is a flow-through entity; or
(b)
all of its qualifying income would be attributable to one or more permanent establishments and no amount of income or expense of any permanent establishment would be treated, as a result of the attribution of losses between permanent establishment and main entity, as income or expense of the ultimate parent entity.
(5)
An election to which this Part applies
(a)
must specify the fiscal year for which it is to have effect;
(b)
must be made no later than the date by which the information return or overseas return notification in respect of that fiscal year is due; and
(c)
must be included in an information return submitted to the Authority in respect of that fiscal year.
(6)
The information return in which the election is made must set out which of the tests referred to in susbsection (3)(d) are being relied on and include evidence of how any that is relied on is met.
(7)
For the purposes of this Part, a country-by-country report in relation to a territory is “qualifying” if the information relating to the territory is prepared on the basis of qualified financial statements of the MNE group in accordance with section 58.
Qualified financial statements and basis of calculations
58.(1) For the purposes of this Part “qualified financial statements” of a MNE group means
(a)
the accounts used to prepare the consolidated financial statement of the ultimate parent entity; or
(b)
financial statements of constituent entities prepared in accordance with acceptable financial accounting standards.
(2) Where a constituent entity is not included in consolidated financial statements of any other constituent entity on a line-by-line basis solely due to size or materiality grounds, the financial accounts of that member that are used for preparation of the group’s country-by-country report are to be regarded as forming part of the qualified financial statements of the MNE group.
(3)
For the purposes of establishing whether the tests in sections 62 to 64 are met in relation to qualifying entities, the basis for that determination is to be the information derived from qualified financial statements as to
(a)
revenue;
(b)
profit (loss) before income tax; and
(c)
qualifying income tax expense.
(4)
Information derived from qualified financial statements as to revenue or profit (loss) before income tax must be adjusted
(a)
as the information was adjusted for the purposes of its inclusion in a qualifying country-by-country report in relation to Barbados; or
(b)
if the information was not included in such a report, as it would have been adjusted had it been included in such a report.
(5)
The information described in subsection (3)(a) to (c) that must be used to determine whether the tests in sections 62 to 64 are met in relation to qualifying entities must be derived from whichever of the following was used to prepare the qualifying country-by-country report in relation to Barbados
(a)
qualified financial statements falling within subsection (1)(a), along with any financial accounts treated as qualified financial statements as a result of subsection (2); or
(b)
qualified financial statements falling within subsection (1)(b), along with any financial accounts treated as qualified financial statements as a result of subsection (2).
(6)
Where that information in respect of Barbados is not available in qualified financial statements of a MNE group, no election may be made.
Application in the case of a joint venture group
59.(1) For the purpose of applying Part X to a joint venture group, this has effect as if
(a)
section 57(3)(b)were omitted;
(b)
the reference in section 58(2) to the financial accounts of that member that are for preparation of the groups’s country-by-country report was to the financial accounts that would be used if a qualifying country-by country report had been prepared in respect of the joint venture group;
(c)
the words “qualified substance-based income exclusion amount” referred to in section 64(2) means that the qualified substance-based income exclusion amount for Barbados, for a fiscal year, is the substance-based exclusion determined for Barbados for the period.
(2) The filing entity may make a separate transitional safe harbour election in respect of joint venture members of a joint venture group in Barbados.
Qualifying income tax expense
- In this Part, “qualifying income tax expense” means income tax expense adjusted to exclude
(a)
any amount that does not relate to covered taxes, and
(b)
any amount that relates to an uncertain tax position.
Adjustments 61.(1) Subsection (2) applies where
(a)
qualifying entities other than investment entities have a net unrealised fair value loss for a fiscal year; and
(b)
that loss exceeds 50 million euros.
(2)
Where this subsection applies, those losses are to be excluded from the aggregate profit (loss) before income tax of those qualifying entities.
(3)
For the purposes of subsection (2), the relevant qualifying entities have a net unrealised fair value loss for a fiscal year to the extent their losses that arise from changes in fair value of relevant ownership interests exceed gains arising from changes in fair value of relevant ownership interests.
(4)
An ownership interest in a qualifying entity is relevant unless, at the end of the fiscal year, the qualifying entities do not between them have ownership interests that entitle them to 10 per cent or more of the qualifying entity’s
(a)
profits;
(b)
capital;
(c)
reserves; and
(d)
voting rights.
(5)
Amounts of profits and qualifying tax expense allocated to a qualifying entity from an investment entity as a result of an investment entity tax transparency election are to be reflected (to the extent they are not already) in the qualifying entity’s profit (loss) before income tax and qualifying tax expense used for the purposes of applying the tests in sections 62 to 64.
(6)
Amounts that are to be included or otherwise taken account of in the adjusted profits and covered tax balance of a qualifying entity as a result of a taxable distribution method election are to be reflected (to the extent they are not already) in the qualifying entity’s profit (loss) before income tax and qualifying tax expense used for the purposes of applying the tests in sections 62 to 64.
Threshold test 62.(1) The threshold test is met in a fiscal year if
(a) the revenue of the qualifying entities other than investment entities for the period is less than 10 million euros; and
(b) the aggregate profit (loss) before income tax of those qualifying entities for that period is less than 1 million euros.
(2) Where one or more of those qualifying entities are held for sale and the revenue of those qualifying entities is not otherwise included in the amount determined for the purposes of subsection (1)(a), that revenue is to be so included.
Simplified effective tax rate test
63.(1) The simplified effective tax rate test is met in a fiscal year if the simplified effective tax rate of the qualifying entities other than investment entities is
(a)
in the case of a fiscal year beginning before 1 January 2025, at least 15 per cent;
(b)
in the case of a fiscal year beginning in 2025, at least 16 per cent; or
(c)
in the case of a fiscal year beginning on or after 1 January 2026, at least 17 per cent.
(2) The simplified effective tax rate of the qualifying entities other than investment entities in a fiscal year is the amount (expressed as a percentage) given by dividing
(a)
the aggregate qualifying income tax expense of those qualifying entities for that period; by
(b)
the aggregate profit (loss) before income tax of those qualifying entities for that period.
Routine profits test 64.(1) The routine profits test is met in a fiscal year if
(a) the qualified substance-based income exclusion amount for Barbados for that period is equal to or greater than the aggregate profit (loss) before income tax for that period of the qualifying entities other than investment entities; or
(b) the aggregate profit (loss) before income tax of those qualifying entities for that period is nil or reflects an overall loss.
(2) The “qualified substance-based income exclusion amount” for Barbados for a fiscal year is the substance-based exclusion determined for Barbados for the period ignoring any payroll carve-out amount or tangible asset carve-out amount of any qualifying entities other than investment entities
(a)
that is not regarded as a constituent entity of the MNE group for the purposes of the group’s country-by-country report; or
(b)
that is not regarded as located in Barbados for the purposes of that report.
PART XI
MISCELLANEOUS
Administrative Directions and Guidelines
- The Commissioner may issue administrative directions and guidelines, generally, to provide information and guidance in relation to the compliance with this Act or any statutory instruments made thereunder.
Regulations
- The Minister may make regulations generally for carrying out the provisions of this Act.
Amendment of Schedule - The Minister may by order amend the First Schedule.
Consequential amendments
- The enactments set out in the first column of the Second Schedule are amended to the extent set out in the second column opposite thereto.
FIRST SCHEDULE
(Section 31) Transitional relief for the substance-based income exclusion PART I Payroll carve-out
Column I-Years Column II- Values
2024 2025 2026 2027 2028 2029 2030 2031 2032 9.8% 9.6% 9.4% 9.2% 9.0% 8.2% 7.4% 6.6% 5.8%
PART II
Tangible assets carve-out
Column I-Years Column II- Values
2024 2025 2026 2027 2028 2029 7.8 % 7.6% 7.4% 7.2% 7.0% 6.6%
Column I-Years
2030
2031
2032
Column II- Values
6.2%
5.8%
5.4%
SECOND SCHEDULE
(Section 68) Consequential Amendments
Column I Column II
Enactment Amendment
Barbados Revenue Act, 2014 In the First Schedule insert the following new
(Act 2014-1) paragraph after paragraph 12: “13. Corporation Top-up Tax Act, 2024 (Act 2024- ).”.
Read three times and passed the House of Assembly this day of , 2024.
Speaker
Read three times and passed the Senate this day of , 2024.
President
INCOME TAX (AMENDMENT) ACT, 2024
OBJECTS AND REASONS
This Bill would amend the Income Tax Act, Cap. 73 to make provision for the reform of corporation tax in Barbados and other related matters.
INCOME TAX (AMENDMENT) ACT, 2024
Arrangement of Sections
- Short title
- Amendment of section 10 of Cap. 73
- Insertion of Division JA into Cap. 73
- Amendment of section 23 of Cap. 73
- Insertion of sections 23M to 23X into Cap. 73
- Amendment of section 43 of Cap. 73
- Insertion of section 43B into Cap. 73
- Insertion of new section 46G into Cap. 73
- Insertion of new section 64B.1 into Cap. 73
- Insertion of sections 65H and 65I into Cap. 73
- Amendment of section 67 of Cap. 73
- Insertion of new Part IVA into Cap. 73
- Amendment of section 85 of Cap. 73
- Insertion of Eighth Schedule into Cap. 73
BARBADOS
A Bill entitled
An Act to amend the Income Tax Act, Cap. 73 to make provision for the reform of corporation tax in Barbados and other related matters. ENACTED by the Parliament of Barbados as follows:
Short title - This Act may be cited as the Income Tax (Amendment) Act, 2024.
Amendment of section 10 of Cap. 73
- Section 10(1) of the Income Tax Act, Cap. 73, in this Act referred to as the principal Act, is amended by inserting immediately after paragraph (s) the following:
“(t) amounts paid to a tertiary institution approved by the Minister by order for the purpose of enabling the institution to undertake research and development activities or engage in the teaching of educational programmes involving the research and development activities as defined in section 65I where such activities are of use or benefit to the company.”.
Insertion of Division JA into Cap. 73 - The principal Act is amended by inserting immediately after Division J the following:
“DIVISION JA
CALCULATION OF ASSESSABLE INCOME FROM QUALIFYING INTELLECTUAL PROPERTY
Income arising from the exploitation of intellectual property
22A.(1) With effect from income year 2024, in calculating the assessable income of a person for an income year, the income of that person earned in Barbados from qualifying intellectual property shall
be determined according to the following formula:
(2)
Subject to this Act, overall income for an income year from qualifying intellectual property is the profit derived from qualifying intellectual property for that income year.
(3)
Where an expenditure is not fully deductible in the income year in which it is incurred because it is capitalised or otherwise, such expenditure shall be included in full in the nexus ratio starting in the income year in which it is incurred.
(4)
In calculating income from qualifying intellectual property, a person may apply “up-lift” expenditures which shall be qualifying expenditures increased by 30 per cent but only to the extent that the person has non-qualifying expenditures.
(5)
Notwithstanding subsection (1), a person may apply to the Commissioner in writing for permission to replace the nexus ratio with a “replacement ratio” which is in accordance with the arm’s length principle.
(6)
The Commissioner may grant the permission referred to in subsection (5) only when
(a)
the nexus ratio referred to in subsection (1) is greater than
32.5 per cent; and
(b)
the replacement ratio is significantly greater than the nexus ratio because of exceptional circumstances beyond the control of the company.
(7)
The permission referred to in subsection (5) shall be valid for a period of 5 income years, provided that the conditions mentioned in
subsection (6) continue to be met at the close of each of the income years concerned.
(8)
The arm’s length principle referred to in subsection (5), shall be deemed to have been met where the conditions made or imposed between the two associated enterprises in their commercial or financial relations do not differ from those which would be made between independent enterprises.
(9)
In addition to records and books of accounts required to be kept under section 75, for the purposes of determining income from qualifying intellectual property, a company shall maintain all records, books and documents evidencing
(a)
ownership and the right to exploit the qualifying intellectual property;
(b)
qualifying expenditures and overall expenditures incurred;
(c)
overall income derived from the qualifying intellectual property;
(d)
the correlation between the qualifying expenditures and overall expenditures and overall income derived from qualifying intellectual property; and
(e)
where the replacement ratio under subsection (5) applies
(i)
qualifying intellectual property benefiting from the replacement ratio; and
(ii)
overall income derived from qualifying intellectual property benefiting from the replacement ratio.
(10)
Where from the records kept by a company it is not possible to determine the income or loss from qualified intellectual property, the company shall pay tax at the rate specified under section 43 or 43A.
(11)
For the purposes of this section
“associated enterprises” means a company or enterprise
(a)
which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other company or enterprise; or
(b)
in respect of which one or more persons who participate, directly or indirectly, or through one or more intermediaries, in its management or control or capital, are the same persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other company or enterprise;
“copyrighted software” means any copyright subsisting in software granted under any enactment in Barbados or granted under the relevant law of a foreign jurisdiction;
“overall expenditures” means total expenditures incurred to fund activities to develop, enhance, protect, maintain and exploit qualifying intellectual property that are carried out by the company including qualifying expenditures, acquisition costs, and expenditures for outsourcing that do not count as qualifying expenditures;
“overall income” means royalties or any other income derived from qualifying intellectual property, including
(a)
fees or charges arising from the licence for qualified intellectual property;
(b)
compensation for infringement of qualified intellectual property rights if obtained in litigation proceedings, including court proceedings or arbitration;
(c)
income from the disposal of qualifying intellectual property excluding profit of a capital nature; and
(d) embedded intellectual property income derived from the sale of products and the use of processes directly related to the qualifying intellectual property as determined in accordance with the arm’s length principle;
“patents” means any patent granted under any enactment in Barbados or granted under the relevant law of a foreign jurisdiction;
“qualifying expenditures” means expenditures incurred to fund activities to develop, enhance, protect, maintain and exploit qualifying intellectual property that are carried out by the company, outsourced to any person in Barbados, or outsourced to a person outside Barbados that is not a related party and does not include interest payments, building costs, acquisition costs, or any costs that could not be directly linked to a specific intellectual property asset;
“qualifying intellectual property” means
(a)
rights to an invention patents;
(b)
copyrighted software;
(c)
additional protection rights for the invention;
(d)
rights from the registration of an industrial design;
(e)
rights from the registration of integrated circuit topography;
(f)
additional protection rights for a patent for medicinal product or plant protection product;
(g)
rights from the registration of medicinal or veterinary product;
(h)
rights from the registration of new plant varieties
and any other right functionally equivalent to a patent that is both legally protected and subject to a similar approval and registration
process to a patent under any enactment in Barbados or under the
relevant law of a foreign jurisdiction.”.
Amendment of section 23 of Cap. 73
- Section 23 of the principal Act is amended
(a) in subsection (2) by deleting paragraph (b) and substituting the
following:
With effect from income year 2025, no loss or part of a loss“(b)
shall be carried forward beyond the fifth income year
following the income year in which the loss was
sustained;”;
(b) by deleting subsection (3) and substituting the following:
With effect from income year 2025, notwithstanding“(3)
subsections (1) and (2), in calculating the assessable income of a person
for an income year in respect of residential property, a loss sustained
by that person in respect of residential property in an income year shall
be deducted from the assessable income in respect of rent from
residential property in that income year; and where that loss exceeds
the assessable income in respect of rent from residential property of that
person, the amount of the excess shall be carried forward and shall be
deducted in computing the assessable income from residential property
of that person for the ensuing 5 income years.”;
(c) by inserting immediately after subsection (5) the following:
With effect from income year 2024, notwithstanding“(6)
subsections (1) and (2) in calculating the assessable income of a person
for an income year in respect of qualifying intellectual property, a loss
sustained by that person in respect of qualifying intellectual property
in an income year shall be deducted from the assessable income in respect of income from qualifying intellectual property in that income year; and where that loss exceeds the assessable income in respect of income from qualifying intellectual property of that person, the amount of the excess shall be carried forward and shall be deducted in computing the assessable income from qualifying intellectual property of that person for the ensuing five income years.”.
Insertion of sections 23M to 23X into Cap. 73
- The principal Act is amended by inserting immediately after section 23 the following:
“Interpretation in respect of sections 23M to 23X 23M.(1) For the purposes of sections 23M to 23X “accounting period” means the period in respect of which corporation
tax is chargeable;
“capital allowances” means the allowances specified in sections 12 and 13 of the Act;
“claimant company” means a company which utilises the trading loss of a surrendering company;
“75 per cent subsidiary” means a body corporate of which
(a)
75 per cent or more of the ordinary share capital of that body corporate is beneficially owned, whether directly or indirectly, by another body corporate; and
(b)
75 per cent or more of the voting rights are attached to its share capital;
“surrendering company” means a company which suffers a trading loss and surrenders this loss to another company for the purposes of group relief;
“trading losses” means the losses referred to in section 23 but does not include capital allowances and expenses payable to a group member and claimed as a deduction if corresponding amounts have not been included in the income of the group member for the income year.
(2)
Group relief is a relief that allows the current trading losses of a surrendering company to be set off, by way of relief from corporation tax, against the profits of a claimant company whether in whole or in part, if, throughout their respective accounting periods both companies satisfy the provisions of the group test set out in subsections (3) and (4).
(3)
Group relief is available where a surrendering company and a claimant company are members of the same group.
(4)
For the purposes of subsection (3), two companies are regarded as being members of the same group where
(a)
one company is a 75 per cent subsidiary of the other company; or
(b)
both companies are 75 per cent subsidiaries of a third company.
(5)
Every company engaged in group relief must be resident in Barbados.
(6)
This section and sections 23N to 23X apply to and take effect in respect of income year 2025.
Determination of subsidiary company
23N.(1) In determining, for the purposes of group relief, whether a company is a 75 per cent subsidiary of another, the other company shall be treated as not being the owner
(a)
of any share capital which it owns directly in a body corporate if a profit on a sale of the shares would be treated as a trading receipt of its trade;
(b)
of any share capital which it owns indirectly and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt; or
(c)
of any share capital which it owns directly or indirectly in a body corporate not resident in Barbados.
(2) Notwithstanding that any time a company is a 75 per cent subsidiary of another company the former company shall not be treated at that time as such a subsidiary with respect to group relief unless, additionally at that time
(a)
the parent company is beneficially entitled to not less than 75 per cent of any profits available for distribution to equity holders of the subsidiary company; and
(b)
the parent company would be beneficially entitled to not less than 75 per cent of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.
Claim for group relief
23O.(1) A claim for group relief shall specify the following:
(a) the name of the claimant company;
(b)
the accounting period for which relief is claimed by the claimant company;
(c)
the name of the surrendering company;
(d)
the accounting period for which relief is claimed by the surrendering company;
(e)
the amount claimed in respect of the surrendering company; and
(f)
the total amount of profits of the claimant company to be covered by group relief.
(2) A claim for group relief
(a)
shall not be allowed unless the profits of the claimant company are first applied against any previous years’ losses of that company;
(b)
need not be for the full amount available to the claimant company;
(c)
shall require the consent of the surrendering company which shall be submitted to the Commissioner in the form prescribed by the Commissioner;
(d)
must be made within 2 years of the date of the end of the surrendering company’s accounting period to which the claim relates; and
(e)
shall only be allowed by the Commissioner after all taxes due to the State and all national insurance contributions have been satisfied by both the claimant company and the surrendering company.
Losses which may be surrendered 23P.(1) Where a surrendering company
(a)
incurs a trading loss in income year 2024 or subsequent income years, or
(b)
has trading losses brought forward from income years prior to income year 2024 and such losses are in excess of $100 000 000,
the loss may be set off against the total profits of the claimant company for the corresponding accounting periods of the claimant company.
(2)
Notwithstanding subsection (1), where a surrendering company has trading losses arising from qualifying intellectual property in income year 2024 or subsequent income years, the loss may be set off against the total profits arising from qualifying intellectual property of a claimant company for the corresponding accounting periods of the claimant company.
(3)
The reduction, by means of group relief, of tax payable by a claimant company in an income year shall not exceed 50 per cent of the amount of tax which would have been payable had the relief not been granted.
(4)
The accounting period of a company, for the purpose of corporation tax, shall begin whenever the company not then being within the charge to corporation tax comes within the charge, whether by the company becoming resident in Barbados or acquiring a source of income, or otherwise.
(5)
An accounting period of a company shall end for the purpose of corporation tax on the first occurrence of any of the following:
(a) the expiration of 12 months from the beginning of the accounting period;
(b)
the end of the fiscal period of the company; or
(c)
the company ceasing to be within the charge to corporation tax.
Corresponding accounting periods
23Q.(1) For the purposes of group relief an accounting period of the claimant company which falls wholly or partly within an accounting period of the surrendering company corresponds to that accounting period.
(2) For the purposes of group relief an accounting period is calculated in the manner specified in the Eighth Schedule.
Companies joining or leaving group
23R.(1) Group relief shall be given only if the surrendering company and the claimant company are members of the same group throughout the whole of the surrendering company’s accounting period to which the claim relates and throughout the whole of the corresponding accounting period of the claimant company.
(2) Where on any occasion two companies become or cease to be members of the same group then for the purposes of subsection (4), it shall be assumed as respects each company that
(a)
on that occasion, unless a true accounting period of the company begins or ends then, an accounting period of the company ends and a new one begins, the new accounting period to end with the end of the true accounting period, unless before then there is a further break under this subsection; and
(b)
the losses of the true accounting period are apportioned to the component accounting periods referred to in paragraph (a); and
(c) the amount of total profits for the true accounting period of the company against which group relief may be allowed is also apportioned to the component accounting periods.
(3)
An apportionment under subsection (2) shall be on a time basis according to the respective lengths of the component accounting periods except that, if it appears that that method would work unreasonably or unjustly, such other methods shall be used as appears to the Commissioner just and reasonable.
(4)
Where the one company is the surrendering company and the other company is the claimant company references in subsection (1) to accounting periods shall be so construed, so that if the two companies are members of the same group in the surrendering company’s accounting period, they must under that section also be members of the same group in any corresponding accounting period of the claimant company.
Relief obtainable once for the same amount
23S.(1) Relief shall not be given more than once in respect of the same amount, whether by giving group relief or by giving some other relief, in any accounting period, to the surrendering company, or by giving group relief more than once.
(2) In accordance with subsection (1), two or more claimant companies cannot, in respect of any one loss or other amount for which group relief may be given, and whatever their accounting periods corresponding to that of the surrendering company, obtain in all more relief than could be obtained by a single claimant company whose corresponding accounting period coincided with the accounting period of the surrendering company.
Aggregate of claim
23T.(1) Subject to subsection (2), two or more claimant companies may make claims relating to the same surrendering company, and to the same accounting period of that surrendering company
(2) Notwithstanding subsection (1) where the claimant companies referred to in subsection (1) make claims, the aggregate of the claims shall not exceed the amount of the loss surrendered by the surrendering company.
Capital allowances
23U. A claimant company shall only be eligible to claim group relief where that company, has first claimed all its available capital allowances.
Tax recovery
23V. Where the Commissioner discovers that any group relief which has been given is or has become excessive, he may make an assessment to corporation tax in the amount which ought in his opinion to be charged.
Exempt companies 23W.(1) Group relief is not available to
(a)
any company registered under the Small Business Development Act, Cap. 318C;
(b)
any other company which has been granted tax concessions or exemptions under any other enactment including companies operating under the Tourism Development Act, Cap. 341;
(c)
any other company that is an authorised or exempt mutual
fund under the Mutual Funds Act, Cap. 320B;
(d)
any other company carrying on international shipping activities;
(e)
any other company carrying on insurance business; or
(f)
a company to whom section 43(10) and (11) applies.
(2) For the avoidance of doubt, group relief shall be available only to a company which is subject to a 9 per cent corporation tax rate pursuant to section 43(8).
Profits and losses and distribution or charge on income vis-a-vis group relief
23X.(1) A payment for group relief
(a)
shall not be taken into account in computing profits or losses of either company for corporation tax purposes; and
(b)
shall not for the purposes of the Income Tax Act, Cap. 73, be regarded as a distribution or charge on income.
(2) In subsection (1)(a) “payment for group relief” means a payment made by the claimant company to the surrendering company in pursuance of an agreement between them as respects an amount surrendered by way of group relief, being a payment not exceeding that amount.”.
Amendment of section 43 of Cap. 73
- Section 43 of the principal Act is amended by inserting immediately after subsection (7) the following:
“(8) With effect from income year 2024, commencing 1st January, 2024, the tax payable by a company upon its taxable income shall be 9 per cent.
(9) Notwithstanding subsection (8), with effect from income year 2024, commencing 1st January, 2024
(a) the tax payable by a company,
(i)
the gross income of which is $2 000 000 or less; and
(ii)
which is registered as an approved small business under the Small Business Development Act, Cap. 318C,
shall be 5.5 per cent upon its taxable income
(b) the tax payable by a company on income earned from international shipping shall be as follows:
(i)
5.5 per cent on all taxable income up to $1 000 000;
(ii)
3 per cent on all taxable income exceeding $1 000 000 but not exceeding $20 000 000;
(iii) 2.5 per cent on all taxable income exceeding $20 000 000 but not exceeding $30 000 000;
(iv) 1 per cent on all taxable income exceeding $30 000 000.
(10) Notwithstanding subsection (8), with effect for income year 2024, commencing 1st January 2024, where a company is part of an in-scope MNE group, the tax payable by that company shall be in accordance with subsection (11) where the ultimate parent entity or intermediate parent entity of the company is located in a jurisdiction that has not implemented top-up tax legislation which provides for in-scope MNE groups to pay at least a 15 per cent effective tax rate in each jurisdiction where such groups operate.
(11) The tax payable by a company referred to in subsection (10)
shall be as follows:
(a)
5.5 per cent on all taxable income up to $1 000 000;
(b)
3 per cent on all taxable income exceeding $1 000 000 but not exceeding $20 000 000;
(c)
2.5 per cent on all taxable income exceeding $20 000 000 but not exceeding $30 000 000;
(d)
1 per cent on all taxable income exceeding $30 000 000.
(12) For the avoidance of doubt, the tax payable pursuant to subsections (8), (9) and (10) shall only be applicable to the portion of the taxable income which is earned on and after 1st January, 2024.”.
Insertion of section 43B into Cap. 73
- The principal Act is amended by inserting immediately after section 43A the following:
“Rate of tax on income from intellectual property
43B.(1) Notwithstanding section 43, with effect from income year 2024, the tax payable by a person on income from qualifying intellectual property, calculated in accordance with section 22A, may be 4.5 per cent, subject to an election made by the company.
(2) Subject to subsection (1), the rate of 4.5 per cent shall apply to qualifying intellectual property that have been created, developed, or improved by a person with respect to the corresponding research and development.”.
Insertion of new section 46G into Cap. 73
- The principal Act is amended by inserting immediately after section 46F the following:
“Amendment of Division S
46G.(1) The Minister may by order amend the rate of tax as specified in Division S.
(2) An order referred to in subsection (1) is subject to negative resolution.”.
Insertion of new section 64B.1 into Cap. 73
- The principal Act is amended by inserting immediately after section 64B the following:
“Prepayment of corporation tax
64B.1.(1) For income year 2024, commencing 1st January, 2024, a company to whom this subsection applies shall pay to the Commissioner, on or before the 15th January, 2024, and thereafter no later than the 15th day of each calendar month a prepayment of corporation tax an amount equal to one-twelfth of the tax payable on its taxable income calculated in accordance with subsection (4).
(2) Subsection (1) shall only apply to a company which is part of an in-scope MNE Group, the ultimate parent entity or intermediate parent entity of which is located in a jurisdiction that has implemented top-up tax legislation which provides for in-scope MNE groups to pay at least a 15 per cent effective tax rate in each jurisdiction where such groups operate.
(3)
With effect from income year 2025 and every subsequent income year, every company shall pay to the Commissioner no later than the 15th day of each calendar month as a prepayment of corporation tax an amount equal to one-twelfth of the tax payable on its taxable income calculated in accordance with subsection (4).
(4)
For the purposes of subsections (1) and (3) the taxable income of any company for an income year shall be taken to be the taxable income for the income year before the preceding income year as disclosed in its return filed in accordance with section 52.
(5)
The prepayments shall be calculated based on the taxable income multiplied by the applicable corporation tax rate as specified in section 43, net of tax credits other than the tax credits referred to in sections 65H and 65I, divided by 12.
(6)
The balance of tax payable under subsections (1) and (3), if any, shall be payable, on or before the date that the company is due to file a return as required under section 52.
(7)
Where a company referred to in subsections (1) or (3)
(a)
was not liable to tax in the income year before the preceding income year;
(b)
is of the opinion that the taxable income in respect of the current income year may be less than the taxable income for the income year before the preceding income year
that company shall, not later than 15th July apply in writing to the Commissioner for a determination or reduction, as the case may be, of the amount payable under subsections (1) or (3).
(8) On an application made under subsection (7), the Commissioner may,
(a) in the case of an application under paragraph (a) of subsection (7), determine; or
(b) in the case of an application under paragraph (b) of subsection (7), if he is satisfied that the taxable income in respect of the current income year is likely to be less than that of the preceding income year, reduce
the amount payable under subsections (1) or (3).
(9) This section shall not apply to a company referred to in section 43(9)(a), but such company shall pay the corporation tax payable under section 43(9)(a) in accordance with section 64B.”.
Insertion of sections 65H and 65I into Cap. 73
- The principal Act is amended by inserting immediately after section 65G the following:
“Jobs credit
65H.(1) With effect from income year 2024, a jobs credit may be claimed by an eligible company, at the credit amount specified in subsection (2), that incurs eligible payroll expenditure after 1st January, 2024, where that company engages the number of employees specified in subsection (2).
(2) Pursuant to subsection (1) the number of employees and the jobs credit amount is set out as follows:
(a)
for up to 50 employees, a credit equal to 25 per cent of eligible payroll expenditure;
(b)
51 to 100 employees, a credit equal to 50 per cent of eligible payroll expenditure;
(c)
101 to 150 employees, a credit equal to 75 per cent of eligible payroll expenditure;
(d) more than 151 employees, a credit equal to 100 per cent of eligible payroll expenditure.
(3)
An eligible company shall not be permitted to include in a claim for a jobs credit expenditure that was not incurred in the income year to which the eligible payroll expenditure relates.
(4)
An eligible company shall not receive a jobs credit
(a)
unless that company has paid
(i)
national insurance contributions payable by the company for all periods before 1st January, 2024;
(ii)
amounts deducted or withheld from emoluments to employees in respect of their income; or
(b)
where the eligible payroll expenditure can reasonably be considered by the Commissioner to be excessive and unreasonable in relation to the company’s business.
(5)
Pursuant to subsection 4(b), eligible payroll expenditure shall not be deemed excessive and unreasonable if it is an ordinary and necessary business expense incurred primarily for producing assessable income.
(6)
Where a jobs credit becomes payable to a company, the Commissioner may
(a) in the first instance, provide an offset of the amount to be paid by the Commissioner against
(i)
the national insurance contributions payable by the company as an employer;
(ii)
corporation tax payable; and
(iii) value added tax payable, and the surplus, if any, shall be refunded to the company in cash or cash equivalent;
(b)
in the second instance, satisfy the jobs credit in the form of bonds, debenture or other long term or short-term government debt instruments and the surplus, if any, shall be refunded to the company in cash or cash equivalent; and
(c)
if (a) or (b) is not appropriate, refund to the company the jobs credit in cash or cash equivalent,
within 4 years from the date in which the company satisfies the condition for receiving the credit.
(7) Where the Commissioner seeks to satisfy the jobs credit in the form of bonds pursuant to subsection (6)(b), he shall first seek to obtain the consent of the company to do so and where the company
(a)
gives its consent to the receipt of the jobs credit in the form of bonds, the bonds shall be issued in the form and on such terms and conditions as the Minister determines; or
(b)
does not give its consent, the Commissioner shall pay the jobs credit in cash,
within 4 years from the date in which the company satisfies the condition for receiving the credit.
(8) For the purposes of this section,
“cash equivalent” includes cheques and anything else treated as a cash equivalent under the financial accounting standard used in the consolidated financial statements;
“eligible company” means a company that
(a) carries on business, in an income year, in the following sectors:
(i) financial technology, provided that it is the principal business of the company;
(ii) wholesale trade and distribution of goods, without physical inventory or storage in the State;
(b)
employs the number of employees referred to in subsection (2); and
(c)
is subject to tax under this Act;
“eligible payroll expenditure” means the aggregate expenditure for salary, wages, overtime remuneration, bonus, commission, retirement plan benefits and retiring allowances, medical insurance, benefit of a rent free residence or any sum paid in lieu thereof, or directors’ fees payable to eligible employees;
“employee” means an individual who has entered into or, works under, or where the employment has ceased worked under, a contract of employment and that individual must be working or worked full-time for a minimum period of 12 months;
“jobs credit” means a credit claimed on the eligible payroll expenditure by an eligible company in an income year.
Research and development credit
65I.(1) With effect from income year 2024, a company may claim a research and development credit of 50 per cent of eligible expenditure incurred after 1st January, 2024 in relation to qualifying research and development activities.
(2)
A company shall not be permitted to include in a claim for a research and development credit on eligible expenditure on qualified research and development activities not incurred in the income year to which the expenditure relates.
(3)
A company shall qualify for a research and development credit where the company is
(a) subject to corporation tax; and
(b) carrying out qualifying research and development activities.
(4)
Qualifying research and development activities for the purposes of this section shall be systematic, investigative or experimental activities which
(a)
are carried on wholly or mainly in Barbados;
(b)
involve innovation and technical risk; and
(c)
are carried on for the purpose of
(i)
acquiring new knowledge with a view to that knowledge having a specific commercial application;
(ii)
developing enhancing, protecting, maintaining, and exploiting intellectual property assets;
(iii) creating new or improved materials, products, devices, processes or services.
(5)
Qualified research and development activities for the purposes of this section shall not include any of the activities specified in section 12D and Part I of the Second Schedule.
(6)
Where a research and development credit becomes payable to a company, the Commissioner may
(a) in the first instance, provide a refundable offset of the amount to be paid by the Commissioner against
(i)
the national insurance contributions payable by the company as an employer;
(ii)
corporation tax payable; and
(iii) value added tax payable, and the surplus, if any, shall be refunded to the company in cash or cash equivalent;
(b) where there is no refundable offset as referred to in (a), refund to the company the research and development credit in cash or cash equivalent,
within 4 years from the date in which the company satisfies the condition for receiving the credit.
(7)
A company shall not receive a research and development credit where the eligible expenditure can reasonably be considered by the Commissioner to be excessive and unreasonable in relation to the company’s business.
(8)
Pursuant to subsection (7), an eligible expenditure shall not be deemed excessive and unreasonable if it is an ordinary and necessary business expense incurred primarily for producing accessible income.
(9)
Where the Commissioner determines that
(a)
the dominant purpose of a company making a claim under subsection (1) is to
(i)
enable it to get the refundable offset referred to in subsection (6)(a); or
(ii)
get a refund pursuant to subsection (6)(b); or
(b)
a company has at any time entered into an arrangement or engaged in a transaction
(i)
which lacks any substantial business purpose, other than increasing the credit to which it or any other company may claim under subsection (1); or
(ii)
to artificially increase the credit that may be claimed by it or any other qualified company under subsection (1),
any tax benefit obtained from subsection (6) can be disallowed.
(10) The expenditure, in this section, shall not be taken into account for the purposes of determining any other credit under section 65H.
(11) For the purposes of this section,
“cash equivalent” includes cheques and anything else treated as a cash equivalent under the financial accounting standard used in the consolidated financial statements;
“eligible employee” means an individual who has entered into or, works under, or where the employment has ceased worked under, a contract of employment and that individual must be working or worked fulltime for a minimum period of 12 months;
“eligible expenditure” means
(a)
a sum paid to another person, not being a person connected with the company, in order that such person may carry out research and development activities related to the company’s trade or business;
(b)
non-capital expenditure incurred by a company which is
(i)
an amount equal to 50 per cent of the aggregate of the amounts of such part of the emoluments paid by the company to employees of the company engaged in the carrying out of research and development activities related to the company’s trade as is laid out for the purposes of those activities; and
(ii)
expenditure incurred by the company on materials or goods used solely by the company in the carrying out of research and development activities related to the company’s trade,
but where expenditure referred to in paragraphs (b)(i) and (ii) is incurred by a company which is a member of a group on behalf of another company which is a member of the group, the other company shall be treated for the purposes of the corporation tax as having incurred the expenditure and the first mentioned company shall be treated for those purposes as not having incurred the expenditure;
“research and development activities” means
(a)
an activity undertaken in the field of medical sciences, namely
(i)
basic medicine, including anatomy, cytology, physiology, genetics, pharmacy, pharmacology, toxicology, immunology and immunohaematology, clinical chemistry, clinical microbiology and pathology;
(ii)
clinical medicine, including anaesthesiology, paediatrics, obstetrics and gynaecology, internal medicine, surgery, dentistry, neurology, psychiatry, radiology, therapeutics, otorhinolaryngology and ophthalmology, or
(iii) health sciences, including public health services, social medicine, hygiene, nursing and epidemiology;
(b)
an activity undertaken in the field of engineering and technology, namely
(i)
civil engineering, including architecture engineering, building science and engineering, construction engineering, municipal and structural engineering and other allied subjects;
(ii)
electrical engineering, electronics, including communication engineering and systems, computer engineering (hardware) and other allied subjects;
(iii) other engineering sciences such as chemical, aeronautical and space, mechanical, metallurgical and materials engineering, and their specialised subdivisions, forest products, applied sciences such as geodesy and industrial chemistry, the science and technology of food production, specialised technologies of interdisciplinary fields, for example, systems analysis, metallurgy, mining, textile technology and other allied subjects;
(c)
an activity undertaken in the field of natural sciences, namely
(i)
mathematics and computer sciences, including mathematics and other allied fields, computer sciences and other allied subjects and software development;
(ii)
physical sciences, including astronomy and space sciences, physics, and other allied subjects;
(iii) chemical sciences, including chemistry and other allied subjects;
(iv)
earth and related environmental sciences, including geology, geophysics, mineralogy, physical geography and other geosciences, meteorology and other atmospheric sciences, including climatic research, oceanography, volcanology, palaeoecology, and other allied sciences; or
(v)
biological sciences, including biology, botany, bacteriology, microbiology, zoology, entomology, genetics, biochemistry, biophysics and other allied sciences, excluding clinical and veterinary sciences;
(d)
an activity undertaken in the field of financial technology namely
(i) code for new financial technologies and financial software applications or platforms;
(ii) functional enhancements and new capabilities for existing applications, designed to create a competitive advantage;
(iii) flexible, high-quality, and scalable rule engines to manage and automate complex business structures and data models;
(iv)
specialized technologies which seek to enhance the safety, security, and efficiency of the financial service industry, such as artificial intelligence, voice recognition applications, or liveliness recognition software;
(v)
cybersecurity enhancements for existing financial technology applications.”.
Amendment of section 67 of Cap. 73
- Section 67 of the principal Act is amended in
(a)
in subsection (2) by inserting immediately after the words “64B” the words “64B.1”;
(b)
in subsection (3) by inserting immediately after the words “64B” the words “64B.1”; and
(c)
in subsection (3A) by inserting immediately after the words “64B” the words “64B.1”.
Insertion of new Part IVA into Cap. 73
- The principal Act is amended by inserting immediately after Part IV the following:
“PART IVA
ADMINISTRATIVE DIRECTIONS AND GUIDELINES
Administrative Directions and Guidelines
83B. The Commissioner may issue administrative directions and guidelines, generally, to provide information and guidance in relation to compliance with
(a)
this Act or any statutory instruments made thereunder; or
(b)
double taxation agreements, multilateral instruments on taxation, bilateral agreement or any international agreement related to taxation.”.
Amendment of section 85 of Cap. 73
- Section 85 of the principal Act is amended by inserting, in the appropriate alphabetical order, the following:
“ “consolidated financial statements” means financial statements, prepared by an entity in accordance with an acceptable financial accounting standards, in which the assets, liabilities, income, expenses and cash flows of the members of a group are presented as those of a single economic entity;
“entity” means a company, a partnership, a trust or any other arrangement, association, organization or body for which separate financial accounts or statements are prepared, but shall not include central government, or their administration or agencies that carry out government functions;
“financial technology” means technology-enabled innovation in financial services that result or may result in new business models, applications processes or products with an associated material effect on the provision of financial services;
“group” means
(a)
a collection of entities which are related through ownership or control as defined by the acceptable financial accounting standard for the preparation of consolidated financial statements by the ultimate parent entity, including any entity that may have been excluded from the consolidated financial statements of the ultimate parent entity solely based on its small size, on materiality grounds or on the grounds that it is held for sale; or
(b)
an entity that has one or more permanent establishments, provided that it is not part of another group as defined in paragraph (a),
and includes associated or related companies as defined under section 8(2);
“in-scope MNE group” means an MNE Group with a consolidated revenue of Euro 750 000 000 or more in the consolidated financial statements of the ultimate parent entity in at least two of the four income years immediately preceding the tested income year which is income year 2024;
“intermediate parent entity” means a entity that owns, directly or indirectly, an ownership interest in another entity in the same MNE group and that does not qualify as an ultimate parent entity, a partially owned parent entity, a permanent establishment or an investment entity;
“international shipping” means the operation of a ship owned or leased by an entity that is engaged primarily in transporting passengers or goods in international traffic;
“MNE” means multinational enterprise;
“MNE group” means any group that includes at least one entity or permanent establishment which is not located in the jurisdiction of the ultimate parent entity;
“parent entity” means an ultimate parent entity which is not an excluded entity, an intermediate parent entity or a partially-owned parent entity;
“permanent establishment” means
(a)
a company with a fixed place of business through which the business is wholly or partly carried on, including
(i)
a branch;
(ii)
a place of management;
(iii) an office;
(iv)
a factory;
(v)
a workshop;
(vi)
a warehouse;
(vii) a building site or construction or assembly project;
(viii) quarry or place of extraction of natural resources; or
(b)
where the company does not have a fixed place of business, the principal place in which the company’s business is conducted;
“ultimate parent entity” means
(a)
an entity that owns, directly or indirectly, a controlling interest in any other entity and that is not owned, directly or indirectly, by another entity with a controlling interest in it; or
(b)
the entity of a group as defined in paragraph (b) of the definition of “group”.”.
Insertion of Eighth Schedule into Cap. 73
- The principal Act is amended by inserting immediately after the Seventh Schedule the following:
“EIGHTH SCHEDULE
(Section 23Q) Method of Calculating Accounting Period
- Where an accounting period of a surrendering company and a corresponding accounting period of a claimant company do not coincide
(a) the amount which may be set off against the total profits of the claimant company for the corresponding accounting period shall be reduced by applying the fraction
A
B
where that fraction is less than unity; and
(b) the total profits of the claimant company for the corresponding accounting period shall be reduced by applying the fraction
A
C
where that fraction is less than unity.
- For the purpose of calculation
(a) “A” is the length of the period common to the two accounting
periods;
(b) “B” is the length of the accounting period of the surrendering
company;
(c) “C” is the length of the corresponding accounting period of
the claimant company. ”.
Read three times and passed the House of Assembly this day of , 2024.
Speaker
Read three times and passed the Senate this day of , 2024.
President
