BIBA on TIEAs
Friday May 15 2009 | 04:16 PM

Within the last week the government of Bermuda announced that it has concluded negotiations with Canada on a Tax Information Exchange Agreement (TIEA). More TIEAs are expected to be announced in the next few months.  While this could be described as probably the most formidable challenge that Barbados has faced as an international business jurisdiction, the Barbados International Business Association (BIBA) remains confident that Barbados will continue to be a choice location for Canadian investment, primarily because of its excellent working environment and strong bonds of confidence and trust that have characterized the Canada-Barbados business relationship for over 100 years.

BIBA President Lisl Lewis had this to say of this new development in the regional offshore sector: “We, at BIBA view the increased competition as a great opportunity to further improve the Barbados brand for the benefit of local and international business given the Barbados Government’s commitment to the steady progress and evolution of the Barbados business environment”.

Barbados is the third largest recipient of Canadian foreign direct investment in the world, having received inflows worth CAN $36.2 billion (BDS $60 billion) to date, mostly in the areas of investments in banking, finance and tourism.

In its 2007 budget, the government of Canada announced a policy to support the negotiation of TIEAs with jurisdictions where it does not already have a comprehensive tax treaty, such as Bermuda. It is anticipated that under these new agreements, dividends paid to Canadian parent companies out of the active business income earned by their foreign affiliates in these offshore jurisdictions, will be exempt from Canadian taxation However, such TIEAs will not provide any of the other benefits Canadian companies resident in Barbados enjoy through the comprehensive tax treaty this island has had with Canada for two decades, such as reduced withholding tax rates or the exchange of temporary workers between affiliates and parent companies.

Furthermore, Canadian investors know from experience that Barbados’ double taxation treaty facilitates Canadian companies’ access to Canada’s exempt surplus treatment of profits flowing back into Canada from Barbados because it has been tried and tested over a long period. This is just one in a wide network of tax treaties that Barbados possesses, which provides substantial tangible benefits for many Canadian companies doing global business. Treaty networks of this extent are not available in most other international jurisdictions.

Canadian and other companies that choose Barbados as their country of residence can be confident that they are operating in a jurisdiction that has been identified by the Organisation for Economic Cooperation and Development (OECD) in its top tier of countries that have substantially implemented internationally agreed upon tax standards. All other offshore domiciles in this region are at best on the “grey list” of previously identified “tax havens” that have committed to the international tax standards but have not substantially implemented them.

Long before the publication of this recent OECD list and through a long history of partnership in commercial activities, Barbados had established an excellent reputation with regulatory authorities around the world as a transparent, well regulated and internationally compliant jurisdiction and this has worked, and will continue to work, in favour of Canadian companies that do business here.

Barbados holds clear advantage over other similar jurisdictions in terms of the availability of high quality human resources, making it more suitable to companies seeking to establish active businesses employing a significant number of people. Moreover, we have long settled the “mind and management” issue while countries that do not have a tax treaty with Canada will have to wait to see how that issue is resolved.

This island has enjoyed a long and favourable relationship with Canada in which mutual business interests have been served over the years. Our solid reputation will continue to stand the country in good stead and propel even greater Canadian investments to a domicile historically affirmed as trustworthy.