AUSTRIA•BOTSWANA•CANADA•CHINA•CUBA•CZECH REPUBLIC•FINLAND•ICELAND LUXEMBOURG•MALTA•MAURITIUS•MEXICO•NETHERLANDS•NORWAY•PANAMA SEYCHELLES•SPAIN•SWEDEN•SWITZERLAND•UK•USA•VENEZUELA CARICOM (ANTIGUA AND BARBUDA.BELIZE.DOMINICA.GRENADA.GUYANA.JAMAICA.ST KITTS AND NEVIS ST LUCIA. ST VINCENT AND THE GRENADINES. TRINIDAD AND TOBAGO) Barbados – Innovative Solutions for International Business Expansion4 Welcome to the 2013 Edition 5 Message from the Minister 7 International Business: a Key Driver for Future Growth 8 Barbados’ new Non-Dom Programme for High Net Worth Individuals 9 Investment Strategies for a Low Yield Environment 10 The Barbados-Luxembourg Treaty: an Investment Springboard 12 Global Trends in Wealth Management: the New Paradigm 14 The Role of the Bank and the Investment Manager 16 The Rise and Rise of RBC Wealth Management in the Caribbean 17 Why Barbados is the Place for You and Your International Business 18 Why Barbados as a Domicile: a Latin American Perspective 19 The LatAm Domicile of Choice 20 The Latin American Connection ... using Barbados’ Treaty Network to become more Globally Competitive 21 Expanding Barbados’ Medical Training Facilities Sponsors 21 Uses, Benefits and Competitive Advantages of Barbados as a Jurisdiction for Canadian Investors 22 Why Lenstec Chose Barbados 23 The Financial Services Commission 24 Why a Captive Rating Makes Sense 26 Segregated Cell Insurance Companies – a Barbados Perspective 27 Captives in Barbados ... Step by Step 29 Risk Financing Solutions using Barbados as a Domicile 30 Barbados is Captivating! 31 Fulfilling the Complex Needs of International Clients 32 Barbados: Forging new Middle Eastern Connections 33 Tax Residency 34 ... And So Much More 36 Barbados as a Trust Jurisdiction 38 What's New and What’s Next in International Business in Barbados? Barbados International Finance & Business magazine is a publication of Invest Barbados. Invest Barbados is grateful to the international business community and the service providers for their support on the editorial committee and in contributing articles. We also thank the following sponsors: Wealth Management CIBC FirstCaribbean International Bank Cidel Bank & Trust DGM Bank & Trust RBC Wealth Management, Caribbean Scotiabank International Insurance AON Insurance Managers (Barbados) Ltd. CGE International Services Ltd. Global Re SCC Marsh Canada Limited International Business BDO Barbados Brookfield International Bank Inc. CIBC Offshore Bank Chancery Chambers Deloitte & Touche Ernst and Young First Provider Goldstream Management Services Limited JLT Towner KPMG Lexis Nexis Meridian Law Platinum Offshore Management Services Inc. PricewaterhouseCoopers Contents Barbados is Captivating – see page 30A special welcome to the fifth anniversary edition of Barbados International Finance & Business (BIF&B). Since its genesis in 2009, BIF&B has become an important part of marketing Barbados as a domicile for international companies and investors seeking to make their businesses more internationally competitive. The selection of articles in the 2013 edition – covering international trade, business and investment – plus case studies outlining the continuing successes achieved by some of those already domiciled here, together highlight the particular strengths of Barbados as a domicile, and clearly demonstrate why Barbados must be at the top of any list of jurisdictions for companies looking to take their operations overseas. Last year, the Barbados Government introduced amendments to the International Business Companies Act, the Societies with Restricted Liability Act, and the International Financial Services Act, which cover changes in the corporate tax rate for entities licensed under those respective pieces of legislation. In addition, the Private Trust Companies Bill and the Trustee (Amendment) Bill were introduced. The Foundations Bill will be introduced this year. All further enhancing Barbados’ ability to offer a selection of legal entities, right-size regulation and a network of Double Tax Treaties allowing tax efficient structures. Barbados is unique! We offer innovative solutions for international business expansion. Why not consider Barbados as your international domicile of choice? We invite you to send any comments and suggestions to bifb@investbarbados.org. James Gardiner Welcome to the 2013 Edition ... the Barbados Government introduced amendments to the International Business Companies Act, the Societies with Restricted Liability Act, and the International Financial Services Act 4 BARBADOS INTERNATIONAL FINANCE & BUSINESS 2013MESSAGE FROM SENATOR THE HON. DARCY BOYCE MINISTER IN THE PRIME MINISTER’S OFFICE It is my pleasure to introduce the fifth edition of Barbados International Finance & Business magazine! Since the 2008 crisis, even though countries and companies have been especially focused on achieving sustainable growth and zealous about improving competitive advantage, the persistent uncertain climate has triggered cautious investment decisions worldwide. According to recent International Monetary Fund (IMF) forecasts, the world economy is expected to grow at 3.6% in 2013, with growth in Barbados’ traditional markets, namely Canada, the United Kingdom and the United States, projected to be moderate at 2.0%, 1.1% and 2.1% respectively. The IMF outlook for emerging markets and developing countries is average growth of 5.6% in 2013. The past five years, though challenging, have been characterised by steady consolidation for Barbados, and the international business sector has continued to be one of the top performing sectors with a number of entities being added to the expanding roster of investors choosing Barbados. In line with this, Government has been implementing policies and programmes designed to enhance Barbados’ attractiveness as a location for foreign direct investment for investors from our traditional markets, as well as those from the emerging markets and developing countries, and generally to inspire confidence. In this regard, preparations are well advanced for the Phase 2 Review by the Global Forum, scheduled for the first half of 2013, as well as for the IMF’s Financial Sector Assessment Programme, scheduled for the latter half of the year. Both of these reviews will assess Barbados’ observance and implementation of agreed international best practices. Barbados will also enter an intergovernmental agreement with the USA in 2013, relating to the Foreign Account Tax Compliance Act. Efforts to expand our treaty network are continuing to gather momentum. Currently, treaties with five countries are awaiting signature (namely Belgium, Italy, Singapore, Slovak Republic and Vietnam) and three (Bahrain, Qatar and San Marino) have very recently been signed. Accession to these agreements, as well as the successful completion of our Phase 2 Review and Financial Sector Assessment Programme, will provide increased certainty for current and prospective investors, while reinforcing the credibility of our commitment to being a transparent, responsive and well regulated jurisdiction. In addition, Barbados is also updating and expanding the range of solutions offered to international businesses. New products coming on stream during the year include provisions for Private Trust Companies, Foundations, High Net Worth Individuals, Limited Partnerships and Incorporated Cell Companies. Efforts to broaden the sources of inflows are also increasing, with newer market opportunities in Brazil, Colombia, Panama, Mexico and Venezuela being explored. These initiatives, together with our exceptional record of social, political and economic stability, an available and intelligent workforce, excellent service providers and professional services, world class infrastructure, direct accessibility from advanced world economies, idyllic climate, and enviable quality of life, combine to make Barbados a compelling choice for international investors. Our continued success as a jurisdiction demands consistency, creativity, innovation, responsiveness, flexibility and excellent client service. The Government of Barbados is committed to providing a globally competitive and transparent business environment. If you are exploring legitimate ways of achieving sustainable growth while maximising your global competitive advantage, I invite you to experience the Barbados business brand in 2013 and beyond! Senator the Hon. Darcy Boyce Minister in the Prime Minister's Office 2013 BARBADOS INTERNATIONAL FINANCE & BUSINESS 5 Contributors © Copyright Invest Barbados 2013. All rights reserved. No part of this publication may be reproduced or transmitted in any form or any means, or stored in any retrieval system of any nature without prior written permission of the copyright holder. The views expressed in this magazine are those of the contributors, and not necessarily those of Invest Barbados. The information provided in this magazine is meant as a guide only and does not amount to professional advice. Barbados International Finance & Business 2013 Edition Published by Invest Barbados | www.investbarbados.org Barbados: (246) 626-2000, Toronto: (416) 214-9919, New York: (212) 551-4375, London: 44 0207 299 7195. Email: bifb@investbarbados.org Technical Review: Ben Arrindell Editorial Committee: James Gardiner Caroline Gardiner Wayne Kirton Sandra Payne Sub Committee: Emeline Taitt Dawn Williams Dominique Pepin Authors: Emeline Taitt Invest Barbados etaitt@investbarbados.org Wayne Kirton Wayne H. Kirton & Associates waynek@caribsurf.com Gordon Anderson Cidel Bank & Trust ganderson@cidel.com Ryle Weekes Cidel Bank & Trust rweekes@cidel.com Maria Robinson Ernst and Young, Barbados maria.robinson@bb.ey.com Raffaele Gargiulo Ernst and Young, Luxembourg raffaele.gargiulo@lu.ey.com Paul Jenkins Scotiabank paul.jenkins@scotiabank.com Mark St. Hill CIBC FirstCaribbean International Bank mark.st.hill@cibcfcib.com Marcia Cyrus CIBC FirstCaribbean International Bank marcia.cyrus@cibcfcib.com Wayne Lovell KPMG wlovell@kpmg.bb Ikins Clarke Deloitte & Touche idclarke@deloitte.com Jerome Dwight Royal Bank of Canada (Caribbean) Corporation jerome.dwight@rbc.com Ben Arrindell Cidel Bank & Trust ben.arrindell@cidel.com Dr. Gurmohan Brar American University of Barbados dr.gary@aubmed.org Gloria Eduardo PricewaterhouseCoopers gloria.eduardo@bb.pwc.com Alexander Johnstone PricewaterhouseCoopers alexander.johnstone@ca.pwc.com Ian Hickling Lenstec Inc. ihickling@Lenstec.com Alan Kandel A.M. Best alan.kandel@ambest.com Martin Hole USA Risk Group (Barbados) Ltd. mhole@usarisk.bb Kirk Cyrus JLT Towner Insurance Management (Barbados) Ltd. kirk_cyrus@jlttowner.bb Robert Landolt Marsh Canada Limited robert.landolt@marsh.com Trevor Mapplebeck Marsh Canada Limited trevor.mapplebeck@marsh.com Dr. Trevor A. Carmichael, Q.C. Chancery Chambers chancery@chancerychambers.com Joseph Ward BDO Barbados jward@bdo.bb Françoise Hendy Invest Barbados fhendy@investbarbados.org Liza Harridyal-Sodha Harridyal Sodha & Associates liza@lizalaw.com Lynn Garner DGM Bank & Trust lgarner@dgmgroup.com Melanie Jones Lex Caribbean, Barbados melanie.jones@bb.lexcaribbean.com Design, Layout & Printing: EVillages Risk. Reinsurance. Human Resources. Empower Results™ Does risk management really make a difference to the bottom line? Early findings drawn from the Aon Risk Maturity Index indicate a positive relationship between the maturity of an organization’s risk management framework and its financial performance. What’s your organization’s risk maturity rating? Find out more on how to participate at aon.com/riskmaturityindex Vinston Hampden Managing Director Aon Insurance Managers (Barbados) Ltd +1.246 436 4895 vin.hampden@aon.com 6 BARBADOS INTERNATIONAL FINANCE & BUSINESS 2013O n behalf of the board and staff of Invest Barbados (IB), I am especially pleased to welcome our current and potential investors, as well as our clients and stakeholders to the 2013 edition of Barbados International Finance & Business magazine. As a key economic development agency of the Government, the team at IB is focused on the development of Barbados as the international financial and wealth management centre of choice in the Western Hemisphere. Essentially, our mandate requires us to secure and facilitate foreign direct investment and international business that result in increased jobs, technology and skills transfer, foreign exchange and tax revenues for Barbados. Given Barbados’ development agenda, as well as the constantly increasing competition for global investment flows, IB has made as its priority the enhancement of the Barbados value proposition. Barbados is committed to the Organisation for Economic Co-operation and Development’s information exchange requirements within an expanding treaty network environment, governed by high quality and right-sized regulation. It also offers the unique mix of a strong services-based economy, well educated and knowledgeable human resources, excellent business and professional infrastructure, competitive costs, and an enviable quality of life - all in a low tax, transparent, safe and stable environment. We have been working, and will continue to collaborate with our stakeholders to facilitate excellent customer experiences, each and every day. Our aim to achieve excellence in customer service delivery is central to our brand and our business culture. This is pivotal to our continued success. Advances in telecommunications have redefined and revolutionised the global landscape of business, introducing hitherto unparalleled ways and speeds for staying connected. Broadband connectivity is non-negotiable for international investors, and the provision of world class telecommunications services has become a strategic imperative for the sustenance of a vibrant international business sector. Recently, Barbados attracted new entrants to its telecoms market. We are fully confident that the expanded and improved service offerings, coupled with more competitively priced products, will further enhance Barbados’ appeal as the domicile of choice for savvy investors. According to the 2012 World Economic Forum Global Information Technology Report, Barbados currently ranks 35th in the world and first in the Caribbean and Latin America for Networked Readiness. Notably too, Barbados’ steady progress toward providing free Wi-Fi access across the island adds to its capability to keep investors constantly connected, wherever situated on the island. In the face of tough external economic conditions, Barbados continues to register growth in registrations of new captive insurance businesses and international business companies. Ongoing success in winning new business, as well as in facilitating the expansion of existing clients, fuels our efforts to expand market share in Canada, as well as in select industry verticals in the United States and the United Kingdom. We are also encouraged by the response to our marketing initiatives in China and in select Latin American countries. The addition of new products and international business solutions, together with the entry into force of additional double taxation and investment protection treaties, can be expected to fuel further growth in 2013 and beyond. IB will continue to encourage investors engaged in businesses of substance to take advantage of the opportunities our island affords, and is committed to developing an innovative business environment to encourage the further development and expansion of Barbados’ international business sector. We envision a prosperous future for Barbados, with the international business sector being one of its main drivers. We invite you to make Barbados a part of your future success by utilising the many asset maximisation solutions that Barbados provides. Contact us today, and let’s discuss how Barbados can work to your advantage. Emeline Taitt Chief Executive Officer (Ag) Invest Barbados International Business: a Key Driver for Future Growth ... our mandate requires us to secure and facilitate foreign direct investment and international business that result in increased jobs, technology and skills transfer, foreign exchange and tax revenues for Barbados 2013 BARBADOS INTERNATIONAL FINANCE & BUSINESS 7 B arbados has long been a much sought after destination for High Net Worth Individuals (HNWI) looking for a place with a high quality lifestyle in which to retire, but in the latter half of 2012, the Barbados Cabinet approved the final elements of a ‘Non-Domiciled’ programme that will make Barbados an even more attractive prospect for HNWI, whether retired or not. A Non-Dom programme essentially allows the taxpayer to elect to be considered resident for tax purposes in the country, but not domiciled. Any good Non-Dom programme needs three principal elements in evidence – an attractive tax rate, freedom from exchange controls, and certainty of immigration status. Barbados changed its tax laws in 2011 to provide for an attractive tax rate (more later), and exemption from foreign exchange controls has been possible in certain cases for many years, so that Cabinet’s approval of the changes to the immigration rules completed the trinity. Taxation – how the programme works HNWI seeking to become resident for tax purposes, but not domiciled in Barbados, should apply in writing to the Commissioner of Inland Revenue to be regarded as tax residents of Barbados. Barbados has a simplified tax residency test, designed with HNWI in mind, which seeks to establish that the individual intends to make Barbados their residence for at least two consecutive income tax years, and accepts, as evidence of that intention, property ownership, or at least a two- year lease on a local property, once that property is not a vacation home. HNWI who are resident, but not domiciled in Barbados, are taxed at a maximum tax rate of 35% on any income originating in Barbados, as well as any foreign income remitted to Barbados. Since Barbados values foreign exchange earnings highly, Barbados residents are granted a tax credit in respect of their foreign currency earnings, which can reduce the effective tax rate on these remitted earnings down to 2.45%. Freedom from exchange control Barbadian residents are currently subject to exchange controls. However, the dispensation in respect of the ability to hold foreign currency accounts that is available to International Business Companies has been extended to HNWI applying under the Non-Dom programme, so that exchange controls might only arise if the individual converts foreign currency to Barbados dollars, and then seeks to reconvert to a foreign currency – but that is hardly likely or necessary. Immigration HNWI under the Non-Dom programme are accommodated through a special entry permit (SEP), which is issued for the number of years needed to reach 60 years of age, and thereafter (on renewal) on an indefinite basis, allowing SEP holders to come and go as they please. To be eligible for the programme, applicants must provide: • A certificate of good character (if the home country of the applicant has a national fingerprints database, like Canada or the US, a certificate based on a fingerprints database search would be required); • A certified statement from the applicant’s bank, attorney or accountant showing net global assets in excess of US$5M (which status must be maintained, and evidence thereof may be requested from time to time); • Evidence of health insurance in excess of US$500K. • The applicant may be asked to provide copies of annual tax returns to the Chief Immigration Officer. SEP fees are between US$3K-$5K, and from January 2013 will apply to each adult covered under the application, while minor dependents will only have to pay a small processing fee. Applications are already being processed, and SEPs will also be available to expatriate property owners, regardless of whether or not they intend to apply under the Non-Dom scheme. An attractive choice The combination of the enviable lifestyle – low crime, wonderful weather, good infrastructure, friendly and educated population, great dining choices and lots of things to do (and now a tax efficient retirement planning option) - will present an attractive choice for the many Non-Doms looking to relocate as a result of adverse changes to the tax regime applicable to such individuals in the United Kingdom, and increased taxation in other European countries. F Barbados’ new Non-Dom Programme for High Net Worth Individuals BY WAYNE KIRTON The combination of the enviable lifestyle ... (and now a tax efficient retirement planning option) will present an attractive choice for the many Non-Doms looking to relocate 8 BARBADOS INTERNATIONAL FINANCE & BUSINESS 2013 Wealth ManagementT he credit and liquidity crises of 2008/2009 and the continuing sovereign debt problems of peripheral Europe, have presented investors with a challenging environment in which to generate returns. The absolute yield from short term money market rates to long term government bonds has fallen dramatically, and the credit quality of many developed market sovereigns has been lowered in recent years. For conservative, fixed income-oriented investors, this environment is conducive to an active management approach. As money market rates sit near zero in the U.S., and around 1% in Canada, simply parking capital in cash to generate returns no longer results in sufficient yield for the majority of investors. An active approach to fixed income management will allow investors to allocate to undervalued sectors and/or securities and add incremental yield to the portfolio. The potential of adding another 50 to 100 basis points in return in this environment is a valuable proposition. It is also important for investors to think about making use of other asset classes that have a similar volatility or risk profile to bonds, but are impacted by things other than the direction of interest rates. Utilising low volatility, alternative investment strategies can lower risk and increase returns. A similar case can be made for equity investors. With global growth slowing down, particularly with the ongoing need for ‘austerity measures’ being forced upon developed countries, our expectation is a moderating in corporate profits over the next several years and, consequently, a more muted environment for equity returns. In this type of environment, a focus on higher quality companies, with strong fundamentals, strong balance sheets and stable dividends is expected to outperform. While we believe in active management in the fixed income space, in equity markets there is value in both active and passive management. In the passive space, we favour fundamental indexing as the best way to gain broad exposure to equity market performance in a liquid, diversified manner. At the same time, the fundamental index approach (developed by Research Affiliates out of California) has historically delivered excess returns of approximately 2% per annum over traditional, market cap weighted benchmarks. If equity markets deliver mid-single- digit returns, then the addition of another 200 basis points, which is the average long-term added value of the fundamental indexing approach, is another meaningful addition to returns. We also believe in allocating to active managers in the equity space. One key attribute they must possess, however, is to actually be true active managers. The most active form of equity management is 'long/short' equity management. Long/short managers have the most flexibility and can vary their overall exposure to markets. They can hold high levels of cash, they can earn profits both from owning or being 'long' on companies they believe are underpriced and will go up in value, as well as sell or be 'short' on companies they believe are overvalued and will decline in value. The best thing investors can do for themselves is to expand their toolkit. This is an approach large institutional investors have been exploiting for years, while most individual investors have focused on the more traditional equity/bond portfolio mix. In an environment that's hostile towards bonds, investors have the ability to shift money to low volatility alternative strategies. While in a volatile, negative equity environment, investors can benefit from the better capital protection afforded by long/short equity strategies. Utilising all these strategies together allows investors to take advantage of the market's one free lunch - diversification - and provides a higher likelihood of sticking to one's long term investment plan and achieving one's investment goals. F Investment Strategies for a Low Yield Environment BY GORDON ANDERSON & RYLE WEEKES The best thing investors can do for themselves is to expand their toolkit It is also important for investors to think about making use of other asset classes that have a similar volatility or risk profile to bonds, but are impacted by things other than the direction of interest rates 2013 BARBADOS INTERNATIONAL FINANCE & BUSINESS 9 Wealth ManagementNext >