Barbados in global minimum tax race as filing deadline approaches

The Institute of Chartered Accountants of Barbados and the Association for Global Business in Barbados have stepped up the urgency for multinational enterprises and advisers to complete their first global minimum tax filings before the June 30 deadline, as authorities warned that penalties will apply for late or non-compliance.

ICAB teamed up with the BBA to host a critical joint workshop aimed at preparing multinational enterprises, tax practitioners and legal professionals for the island’s rapidly approaching global minimum tax deadlines.

ICAB Chief Executive Officer Lisa Padmore emphasised the urgency of the session. She told Barbados TODAY of a race against the clock to meet the compliance standards established by the island’s overhauled international tax regime.

Padmore said: “We are aware of the upcoming deadlines for filings for those entities that are scoped into the global minimum tax and the top-up tax.”

She explained that the educational initiative was a collaborative effort drawing on expertise from across the professional services sector to ensure that affected entities are fully equipped to navigate the complex compliance requirements.

“We reached out to our partners in the firms to assist us in providing facilitators for our workshop today to take persons who work for multinationals, practitioners who provide tax services, and even lawyers through the regime,” Padmore said. “There are some lawyers in the audience as well to talk them through, again, the regime.”

According to the ICAB chief, while many financial professionals have already sought out international training to understand the broader implications of the global minimum tax, the workshop provided a unique opportunity to address the specific, localised technicalities of domestic implementation.

“I have found that a lot of persons have done their own education, they’ve done their own training, whether it’s going overseas or online, so a lot of them are coming today to actually hear, I think, also from the Barbados Revenue Authority about how they will file. 

“They have already been making prepayments, monthly prepayments since the regime was adopted through the 2024 income tax amendments. So today is really about that for those first-time filers and what do they need to do to make sure that they are filing on time before the deadline of June 30.”

Reinforcing the critical nature of the upcoming deadlines, Barbados Revenue Authority revenue commissioner Jason King outlined the structural changes that have reshaped the Barbadian fiscal landscape over the last 24 months.

King told Barbados TODAY that the session was of paramount importance to the economic future of Barbados as the island transitions into operationalising its new corporate framework.

King said: “We have within the last two years changed our taxation regime and our main corporation tax rate is now nine percent. Except for small businesses, as well as some entities that are out of scope, being shipping companies, patent boxes, as well as insurance companies who have other rates.”

The revenue commissioner detailed how the global minimum tax framework, born out of international Pillar 2 regulations originally released in 2022, intersects with the newly adjusted domestic rate. Because Barbados positioned itself as an early adopter, it holds a specific status that allows the jurisdiction to protect its tax base.

“The Pillar 2 rules were first released in 2022. It’s just we are now at the point where execution is taking place,” King explained. “Barbados was an early adopter. We are classified as a qualifying domestic minimum top-up tax jurisdiction because our rate is lower than the global minimum tax rate of fifteen percent. So it means, if you use it simply, there’s movement between that nine per cent  and 25 per cent within our jurisdiction, we would collect on that difference between those two amounts.”

The top-up tax is universally applicable to all multinational enterprise groups operating within the country, bringing with it an entirely new layer of standardised international reporting.

“The top-up tax applies to all multinational enterprise groups with entities in Barbados,” King said. “There’s a requirement for them to file a global international return. It can be filed either here or in another jurisdiction in which the group operates depending on certain criteria.”

For those companies managing operations here, the commissioner said exact mathematical determinations are necessary to ensure compliance, utilising foundational tax records that are already on file with the revenue authority.

“Regarding the payment, once you have entities in Barbados, a calculation needs to be done to determine whether you have a liability for the top-up tax in Barbados,” King said.

“That calculation has certain inclusions and exclusions. The base does involve the corporation tax return which they would have filed just under eighteen months ago for the first set who are at December, who would have had year ends at December 2024. And once that calculation is done, one payment is made on behalf of the group in Barbados.”

He confirmed that the authorities are working to ensure maximum readiness as the definitive filing window arrives. He clarified that the timeline dictates that registration should have concluded at the end of last year, despite minor initial technical hurdles.

“We are making sure that we are ready,” King said. “The first filings for those entities are eighteen months after the first period in which they’re in scope. And that first in-scope period is December 2024. So eighteen months after that is June 2026. Registration was to be done already, that was to be done twelve months after the first year end in scope, and that would have been the end of 2025. 

“We did have some challenges with the system for registration, but we had that done early in the year, so many, many of the groups have registered. Now is the time for them to complete their filings and to make the payments.”

King warned that the Barbados Revenue Authority would enforce standard fiscal penalties.

“Well, if you don’t complete filings or payments, as is usually the case from a tax perspective, there are penalties and associated interests as a result,” King cautioned.

Despite the compliance challenges for the private sector, King concluded that the implementation of the top-up tax marks a historic fiscal milestone that will inject vital new funding into the public purse, yielding long-term benefits for the society.

“Well, it’s a benefit to the country as a whole because it’s a different area of tax revenue, which we didn’t have access to before,” King said. “So everybody in the country will benefit from it.”

(RR)