Taxation of International Trusts in Barbados – A Clarification by Andrew Thornhill
In general the taxation of trusts is governed by section 40 of the Income Tax Act, which provides at subsection 1 that a trust shall, in respect of the trust property and in respect of the income arising therefrom, be deemed to be a separate individual. The effect of this provision is that in Barbados a trust is taxed as an individual, separate and distinct from the trustee, according to the rates specified in the Income Tax Act, i.e 25% on the first $24,200.00 of taxable income, and 40% of the excess.
The question has arisen whether an “international trust” as defined in the International Trusts Act is subject to income tax.
The answer to the foregoing question is found in section 29(5) of the International Trusts Act, which provides that:
“For the purposes of section 17 of the Income Tax Act, an international trust is deemed not to be domiciled in Barbados.”
Section 17 of the Income Tax Act reads as follows:
In calculating the assessable income for an income year of a resident person who during the income year is not domiciled in Barbados, the following amounts and no others shall be included. (a) income derived from Barbados for that income year, (b) income from an office in Barbados or employment exercised therein for the income year whether or not the contract of employment was made in Barbados and whether or not the employer is resident in Barbados, and (c) income from other sources outside Barbados whenever derived to the extent that a benefit is obtained in Barbados from an income in the income year in the form of a remittance of money, an importation of property, the granting of credit by bank overdraft or otherwise or in other form whatever,
and no deductions or allowances in respect of the calculation of assessable income shall be made in respect of income or the production of income not so included.