Barbados Panama Tax Treaty

The Barbados Panama Tax Treaty improves economic opportunities between the two countries by supporting international business and trade relations.

The Barbados Panama Double Taxation Agreement was signed on June 21, 2010 by the Government of Barbados’ Minister of International Business George Hutson and the Republic of Panama’s Vice President and Minister of Foreign Affairs Juan Carlos Varela.

Commenting on the agreement, Barbadian Minister George Hutson said that the Double Taxation Agreement “will be a vital mechanism for a reciprocal and mutually beneficial framework in matters of international taxation.  The signature of this DTA is, however, not only a demonstration of Barbados’ dedication to expanding its tax and investment treaty network.  I believe that this signing sends a very powerful signal that Barbados and Panama possess the determination and vision as developing countries, to build stronger political and economic relationships, which will enable us to be more competitive on the international trading stage.”

Panamanian Vice President Juan Carlos Varela added that the Agreement would improve commercial relations between the two countries, both of which are members of the Organisation of American States.

Barbados uses Double Taxation Agreements as its principal means of expanding business relations with other countries as these tax treaties play an important role in fostering investment and eliminating double taxation between partner countries.

View the Barbados Panama Double Taxation Agreement

Low Tax Rates

This Barbados tax treaty means that Panamanian residents can benefit from the attractive low tax rates offered.  In general, the island offers a tax rate of just 2.5% which can be reduced all the way down to 1% on a sliding scale as income increases.  In addition, certain company types may be completely tax exempt.

Capital gains are exempt from tax.  There are no withholding taxes on dividends, royalties or interest, as well as management fees paid to non-residents.

Company Types

Barbados offers a variety of international business vehicles which foreign investors can use in order to receive tax relief and asset protection.  These Barbados company types include:

•    Barbados International Business Companies
•    Barbados Offshore Trusts
•    Barbados Societies with Restricted Liability
•    Barbados Offshore Banks
•    Barbados Offshore Insurance Companies

Tax Treaty Details

The Barbados Panama tax treaty highlights include the following:

Withholding taxes on:

•    Dividends: Cannot exceed 5% withholding tax for owners with at least a 25% share in the company, and in all other cases, it cannot exceed 75% of the statutory nominal rate applicable
•    Interest: Cannot exceed 5% withholding tax if the owner is a bank, and in all other cases, it cannot exceed 7.5%
•    Royalties: Cannot exceed 7.5% withholding tax
•    Management fees: Cannot exceed 7.5% withholding tax

Double taxation is avoided as follows:

In Barbados:

•    Tax payable under the laws of Panama on profits or income from sources within Panama shall be allowed as a credit against any Barbados tax computed.
•    In the case of a dividend paid by a company that is a resident of Panama to a company that is a resident of Barbados and which owns at least 10% of the capital of the company paying the dividend, the credit shall take into account, the Panama tax payable in respect of the profits out of which such dividend is paid.

In Panama:

•    Where a resident of Panama derives income which may be taxed in Barbados, Panama will exempt such income from taxes.
•    Where income derived by a resident of Panama is exempt from tax in Panama, Panama may nevertheless, in calculating the amount of tax on the remaining income or capital of such resident, take into account the exempted income.

Barbados: Offshore Opportunities Await

The Barbados tax treaty network is expansive with treaties in place with more than 30 partner countries.  Tax treaties emphasize the promotion of investment opportunities and trade, providing investors and businesses with a low tax framework for international expansion.

The Barbados Offshore Advisor provides free assistance to businesses interested in starting a Barbados offshore company.  In addition, the Advisor offers important mind and management services to the Barbados offshore business.

Barbados is a leading offshore jurisdiction and the Barbados Panama tax treaty has further strengthened the island’s commitment to be a major player in the Caribbean offshore business community.