4 Welcome to the 2016 Edition 5 Message from the Prime Minister 7 A Bright Future for the International Business Sector 8 Double Taxation Agreements and Bilateral Investment Treaties ... the Barbados Advantage 8 Making Things Happen – Manufacturing in Barbados 10 Opportunities to Issue Securities under the Private Placement Regime in Barbados 10 From Script to Screen 11 The Future of Double Taxation and Tax Information Exchange Agreements – a Barbados Perspective 12 Residence for High Net Worth Individuals ... What Barbados Offers 13 Transfer Pricing in Barbados Today and in the Future 14 Domestic Tax Laws Can Work Well for Foreign Investors 15 Award Winning Architect Chooses Barbados 16 The Changing Environment of Cross-Jurisdictional Business 17 Ten Reasons to Choose Barbados 18 A New Take on 'Substance' 19 Opportunities for Combined Barbados-Panama Solutions Sponsors 20 The Changing Tide of Cuba- USA Relations and Resulting Opportunities for Barbados 21 Corporate Social Responsibility in Barbados – How it Makes a Difference 22 Trust – The Key to Barbados' Success as a Financial Centre 23 The Rise of the Independent Asset Manager 24 Why Form a Captive Insurance Company in Barbados? 25 Chinese Medicine and Acupuncture in Barbados 26 Strategic Captive Management Using Analytics 28 Barbados' Financial Services Commission – a Credit to the Sector 30 Building Wealth – the Benefits of Global Diversification in Investment Portfolios 32 Reserved Powers Trusts and Private Trust Companies in Barbados 33 The Benefits of the Family Office 34 ... and so much More 36 International Banking – Full Transparency Required 37 Adding Value to Captives whilst Retaining Liquidity in a Low Interest Rate Environment 38 Managing Wealth 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: International Business Brookfield International Bank Inc. Chancery Chambers Delany Law Deloitte & Touche Ernst and Young First Provider Goldstream Management Services Ltd. KPMG PricewaterhouseCoopers International Insurance CGE International Services Ltd. Global Re SCC Marsh Canada Limited USA Risk Group Wealth Management CIBC FirstCaribbean International Bank Cidel Bank & Trust DGM Financial Group J&T Bank and Trust Inc. Scotiabank ContentsW elcome to Barbados International Finance and Business 2016. As we complete our 8 th year of publication, the magazine continues its mandate to promote Barbados as the domicile of choice for potential international investors. As an international business centre, Barbados continues to maintain its competitive advantage as a well-regulated, low-cost jurisdiction. Our principal market remains Canada and in the provision of financial services; however we are seeing investors from a wider range of countries. On 29 October 2015, Barbados welcomed more than 200 international delegates to participate in the Organisation for Economic Co-operation and Development’s Global Forum 8 th plenary meeting. The Global Forum is the world’s largest network for international co-operation in the field of taxation and financial information exchange. During the Forum, Barbados signed a Multilateral Convention on Mutual Administrative Assistance in Tax Matters and the Multilateral Competent Authority Agreement. Barbados is also at an advanced stage in implementing the standard on Automatic Exchange of Information, with legislation recently passed to give effect to the Foreign Accounts Tax Compliance Act, paving the way for Barbados to automatically exchange tax information with the USA. Barbados continues to negotiate, and has a growing number of double taxation agreements (DTAs) – those with Canada and the USA, in particular, being favourable for certain types of investors. Recently, Barbados signed a DTA with the Slovak Republic. Barbados is very much open for international business and we eagerly invite prospective investors to consider choosing Barbados as their domicile of choice. With very best wishes, James Gardiner Welcome to the 2016 Edition Barbados is very much open for international business and we eagerly invite prospective investors to consider choosing Barbados ... BARBADOS INTERNATIONAL FINANCE & BUSINESS 2016MESSAGE FROM THE RT. HON. FREUNDEL J. STUART, Q.C., M.P., PRIME MINISTER OF BARBADOS I t gives me great pleasure to welcome you to this year’s edition of our Barbados International Finance and Business magazine, for this is a special year, in which Barbados celebrates its 50 th year of nationhood. Throughout these fifty years, our leaders have pursued a deliberate and focused strategy for the diversification of our economy, away from a mono-crop economy and towards one in which the development of tourism and hospitality, light manufacturing industries and the international business and financial services sector has been carefully nurtured. At Independence in 1966, the sugar industry accounted for almost 40% of domestic output, 66% of foreign exchange earnings and 33% of the employed workforce. Today the international business and financial services sector stands second only to tourism as a leading contributor of foreign exchange earnings. Importantly, too, the sector contributes approximately 54% of corporate tax revenues and provides direct employment for over 4,500 persons. Our strategic thinking and action have formed the bedrock of a stable yet dynamic country that offers investors several advantages. These include a well-developed, cost-effective, pro-business environment, consisting of modern infrastructure, cutting-edge telecommunications, an ever-expanding network of tax and investment treaties, an educated workforce and an overall excellent quality of life. In many ways the international business and financial services sector has played a key role in transforming our social, economic and physical landscape, providing the opportunity for hundreds of persons to work in modern offices that are in many cases fully integrated into global value chains. The passage of the International Business Companies Act in 1965 was our first effort at encouraging foreign investors to establish operations in Barbados. Since then we have diversified our product offering and have been steadily expanding the number of foreign entities that have chosen to improve their competitive advantage by establishing operations in Barbados. Activities include international trade, commerce, manufacturing, banking, insurance and wealth management. This diverse product mix bears testimony to the confidence which investors continue to place in our nation, our economy and our people. Barbados’ success has resulted largely from the value proposition that characterises the island as a unique domicile of choice for treaty-based businesses of substance, rather than as a high volume, no-tax domicile like many others. Transparency, disclosure and regulation are among the essential tenets of treaty-based business and these elements have become international standard bearers in the inter-connected, global economy. We are committed to sustaining this rich heritage. Barbados has set itself several goals: to become a developed country; to become the most environmentally advanced green country in Latin America and the Caribbean; to become the International Financial and Wealth Management Centre of Choice in the Western Hemisphere, and also to be the entrepreneurial capital of the Caribbean. A vibrant and dynamic international business and financial services sector that generates knowledge-based jobs, high levels of professionalism and service excellence, the transfer of skills, and overall added value, will be key to the realisation of our vision. We remain confident that our past experiences, achievements and our unique brand, have prepared us for the more complex, competitive and challenging circumstances that surround our achieving these goals. We are thankful for the investors and stakeholders who have partnered with us to this stage of our development. With these valued partners at our side, we have a bright future to transform into reality. We were happy to host the 8 th Meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes in Barbados, from 29-30 October 2015, and to show the world the benefits of our jurisdiction. The international business and financial services sector will undoubtedly see us through to another fifty successful years and beyond. Already, additional opportunities are beckoning, particularly in business process outsourcing, cultural industries, educational services, health tourism, mediation and arbitration, and also in renewable energy ... to name a few areas. We invite you to come to Barbados and to let your business be part of our exciting future together! 2016 BARBADOS INTERNATIONAL FINANCE & BUSINESS Contributors © Copyright Invest Barbados . 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 Edition Published by Invest Barbados Barbados: ( ) - , Toronto: ( ) - , New York: ( ) -. Email: bifb@investbarbados.org | www.investbarbados.org Technical Review: Ben Arrindell Editorial Committee: James Gardiner Caroline Gardiner Sandra Payne Wayne Kirton Jannette Babb Authors: Sandra Payne Invest Barbados spayne@investbarbados.org Gloria Eduardo PricewaterhouseCoopers gloria.eduardo@bb.pwc.com Ronaele Dathorne-Bayrd PricewaterhouseCoopers ronaele.dathorne-bayrd@bb.pwc.com Jim Reid Caribbean LED Lighting Inc. jreid@caribbeanledlighting.com Mary Mahabir LexCaribbean mary.mahabir@bb.lexcaribbean.com Lynette Eastmond Belgrave Eastmond Associates lynette@eastmondlaw.com Ben Arrindell Cidel Bank & Trust barrindell@cidel.com Liza Harridyal-Sodha Harridyal Sodha & Associates liza@lizalaw.com Dale Hill Gowlings dale.hill@gowlings.com Dominique Pepin Tailored Tax Ltd. dominique.pepin@tailored.com David Campion ARGO Development Studio dc@argo-ds.com Ikins Clarke Deloitte & Touche idclarke@deloitte.com Andrew Alleyne Argentum Asset Management Inc. aalleyne@argentummgmt.com Françoise Hendy-Yarde Government of Barbados fh@francoisehendy.com Maria Robinson Ernst & Young maria.robinson@bb.ey.com Dustin Delany Delany & Associates dd@delanylaw.com Kynara Roett-Banfield Roett-Banfield Law kirb@roettbanfieldlaw.com Sir Trevor Carmichael, Q.C. Chancery Chambers chancery@chancerychambers.com Michael Berry Pencarrek Limited michael.berry@pencarrek.com Gregory Smith Amphora Captive Insurance Managers greg.smith@amphoracaptive.com Renata Roett Bai Feng Huang TCM Clinic renataroett@yahoo.com Jason Keyfitz Marsh Canada jason.keyfitz@marsh.com Randy Graham Financial Services Commission rhgraham@fsc.gov.bb Kevin Armstrong RBC Wealth Management kevin.armstrong@rbc.com Elliott Barrow RBC Wealth Management elliott.barrow@rbc.com Roland Jones The Axebridge Group roland.jones@axebridge.com John Howard Summit Asset Management jhoward@summitassetmgmt.com Christian Paul CIBC FirstCaribbean International Bank christian.paul@cibcfcib.com Gordon Anderson Cidel Bank & Trust ganderson@cidel.com Ryle Weekes Cidel Bank & Trust rweekes@cidel.com Paul Jenkins Scotiabank paul.jenkins@scotiabank.com Design, Layout & Printing: EVillages Ltd. BARBADOS INTERNATIONAL FINANCE & BUSINESS 2016Barbados has distinguished itself as a premier international business domicile. The achievements of our International Business and Financial Services (IB&FS) sector over the last 50 years have been significant, characterised by growth, consolidation and resilience. Looking ahead, government and its strategic partners are focused on realising the vision of our nation becoming the International Financial Wealth and Management Centre of Choice in the Western Hemisphere. The foresight which led to the formation of the Barbados Development Board in 1956 and its subsequent investment promotion agencies has been pivotal to our nation’s progress. Barbados commenced purpose- ful efforts to attract foreign direct investment and international businesses during the 1960’s and opened investment promotion offices in New York and Toronto. Since then, the country has attracted a steady flow of investors from North America and the United Kingdom. Fuelled by the leadership and support of successive governments, the sector continues to thrive. Today, Barbados is still a preferred choice of several global inves- tors. The IB&FS sector is now more sophisticated, mature and service-oriented. There are over 4,000 international business enti- ties, offering higher-end value-added products and services in the areas of niche manufacturing; software development; business process outsourcing; wealth management; international trade and commerce; international insurance and banking, among a range of other business activities. More and more, investors are attracted to Barbados because of the country’s proven record of being an efficiently regulated, modern, transparent, treaty-based, stable and cost-effective jurisdiction. Added to these, its responsiveness to attaining ever evolving international standards, sound legislative framework, world-class infrastructure, excellent educational system, intelligent workforce as well as its outstanding quality of life, all combine to provide a unique appeal. Latin American investors have also been discovering the compel- ling Barbados business case. In fact, positive response from this region has provided additional impetus for Barbados’ heightened engagement with the Americas. Both the private and public sectors have been seeking to strengthen Barbados’ position as the gateway to the Americas with increasing focus on facilitating cross-border trade among multinationals and offering attractive wealth manage- ment options. The country’s expanding network of double taxation agreements (36 presently in force) and nine investment treaties, offer an efficient platform from which Latin American investors can access external markets while other investors can engage in inbound investment opportunities in the Latin American region. Recently, Invest Barbados together with stakeholders, participated in promotional activities in Colombia, Cuba and Brazil. Several encouraging outcomes emanated from these initiatives. The com- mencement of direct, weekly flights from Bogota to Bridgetown via Avianca Airlines facilitates easier market access for both investors and service providers. The response to promotional efforts in Canada and the United States of America continue to be encouraging. In addition to the Americas, plans are in train to nurture investor interest from countries in Africa, Asia, Europe and the Middle East. In response to market dynamics and demand, a number of new products will be introduced in 2016. Barbados’ product mix will therefore be expanded to include an International Securities Market, as well as Incorporated Cell Companies, Private Trust Companies and Foundations. These new products will enhance Barbados’ position as a preferred domicile for international business. Invest Barbados will continue to focus on attracting, winning and sustaining international business for Barbados, particularly in the areas of niche manufacturing, ICT and financial services. We will work to effect continuous improvements in our business climate. The principles of pride and industry will continue to guide our approach. We envisage a bright and vibrant future for our international business and financial services sector. We invite you to peruse this publication which highlights some of the investment opportunities and advantages that Barbados offers. If you are looking for a domicile that enhances your competitiveness, let’s discuss how Barbados can give you that global advantage! Sandra Payne Chief Executive Officer (Ag) Invest Barbados A Bright Future for the International Business Sector Invest Barbados will continue to focus on attracting, winning and sustaining international business for Barbados ... 2016 BARBADOS INTERNATIONAL FINANCE & BUSINESS B arbados concluded its first double taxation agreement (DTA) with the UK in 1970, and, over the last 45 years, has maintained the tradition of concluding comprehensive DTAs. Double taxation is widespread today because many jurisdictions, in addition to levying taxes on domestic assets and economic transac- tions, levy taxes on assets situated, and transactions carried out, in other countries, to the extent that they benefit resident taxpayers. Barbados, as a developing country, recognised that it had to be proactive and has successfully concluded comprehensive DTAs in order to position itself as an international financial and business centre of choice in the region. This has continued, even in the face of constant pressure, over the last few years, to conclude tax information exchange agreements (TIEAs). Comprehensive DTAs offer considerably more benefits to the country and to investors as a whole than TIEAs. One significant benefit of concluding a DTA is the removal of Barbados from the other country’s “black list”, as was recently the case with Spain. At the latest count, there are 36 DTAs in force (counting the CARICOM DTA as 10) and six awaiting ratification, the DTA with the Slovak Republic being the latest to be signed in October 2015. DTAs generally provide important benefits to an investor, including: • reduced withholding tax rates • protection from being deemed permanent establishments in high tax countries • protection from double taxation • exemption from capital gains • a mutual agreement procedure for resolution of disputes. Double Taxation Agreements and Bilateral Investment Treaties – the Barbados Advantage BY GLORIA EDUARDO & RONAELE DATHORNEBAYRD … Barbados continues to position itself as the jurisdiction of choice for investment into Latin America … Making Things Happen – Manufacturing in Barbados! Caribbean LED Lighting Inc's owner Jim Reid believes his manufacturing company is making an important contribution to a green culture, protecting the environment and saving money for clients and governments. He explains, “We chose the Caribbean because our research showed the region had the highest electricity costs in the world with the exception of Denmark. That meant there was a real need for the latest energy ecient technology and there was huge potential. The existing market also depended heavily on imported products and we knew we could achieve better results from manufacturing our products locally. We visited several other Caribbean locations, but the main reasons we settled on Barbados were the stable political climate, the good infrastructure and the availability of talented labour. Also, it’s a great place to live and do business! Within four and a half years, we have established an impressive factory base which produces a variety of high quality LED products. We are currently exporting to 16 countries, including 14 countries of CARICOM and South America. We started with two employees, presently have 45 and continue to recruit. Our employees have been sent to various parts of the world to be professionally trained and as technology and business opportunities develop, we will continue this strategy to ensure they are experts in their field. Investment in training is essential to our success and enables us to adapt quickly to business opportunities.” CASE STUDY CASE STUDY BARBADOS INTERNATIONAL FINANCE & BUSINESS 2016 International BusinessInternationally Respected. CHANCERY HOUSE High Street, Bridgetown, Barbados Tel: + (6) - Fax: + (6) -6 For over thirty years, Chancery Chambers has been providing comprehensive legal services in Barbados and across the globe. Our relationships with firms worldwide ensure informed service. Special practice areas include: Banking and Finance, Mergers and Aquisitions, Trusts and Estate Planning, Charities, Insurance, and Environmental Law and Policy. Learn more about us at www.chancerychambers.com Globally Connected, In addition to the network of DTAs, another critical weapon in the island’s arsenal as an international financial and business centre, is the network of nine bilateral investment treaties (BITs) currently in force. BITs were originally designed to offer investors protection against government expropriation of their assets, particularly in developing countries, and still play an important role in this regard. Along with the expansion in global trade over the last 30 years or so, BITs have become increasingly popular. BITs are of particular significance to investors, providing them with many non-tax benefits, such as: • most favoured nation treatment • compensation for losses owing to war, revolution, state of national emergency, revolt, riot, etc. • unrestricted transfer of investments and returns • subrogation • dispute settlement by international arbitration. As Barbados continues to position itself as the jurisdiction of choice for investment into Latin America, it is significant to note that we have both DTAs and BITs with Cuba and Venezuela. In fact, although Cuba has approximately 40 BITs in force, it has only 10 DTAs, one of which is with Barbados, thus placing Barbados in a unique position for potential investors in this hemisphere, particularly as the USA further relaxes sanctions and lifts trade restrictions and embargoes with Cuba. Foreign direct investment (FDI) is expected to move into that country, bringing with it capital, technology, skills, employment and access to the emerging market. When this FDI starts to flow into Cuba, a market that is largely untested from a legal and regulatory perspective, investors will be comforted by the fact that their investment, if channelled through Barbados, will be protected by both a DTA and a BIT. While our network of DTAs has been expanding in recent years, our BITs have not kept pace, with only three being signed in the 2000s. As the Barbados Government continues to focus on making Barbados the jurisdiction of choice for international businesses, it can be expected that greater efforts will be made to negotiate new BITs, in conjunction with DTAs, in order to maintain and enhance Barbados’ competitive advantage as an international and financial services centre. F 2016 BARBADOS INTERNATIONAL FINANCE & BUSINESS International BusinessNext >