A Barbados Offshore Trust is an attractive option for asset protection and wealth management that offers strict confidentiality coupled with strong protection against claims and seizures. In addition, it is exempt from taxes and from exchange controls. Barbados is a leading jurisdiction for establishing trusts.
However, beneficiaries must be non-residents at the time the trust is created and the trust may not own real estate on the island. Non-resident beneficiaries of the trust are not subject to income tax on the amounts paid to them.
What is a Trust?
Trusts follow English common law and include the following:
Settlor – A settlor is the person who creates the trust by transferring the ownership of their assets to a person or company who acts as the trustee.
Trustee – The trustee is responsible administering the trust according to the trust documents and the law. The trustee manages and distributes the assets for the benefit of the beneficiary.
Beneficiary – The beneficiary is the equitable owner of the trust who receives either income from the trust assets or the assets themselves. The beneficiary’s entitlements depend on the trust document which is established to follow the settlor’s wishes.
A trust offers many benefits including:
• Tax exemptions – Offshore trusts are exempt from taxes and duties including income tax, capital gains tax and inheritance tax
• Asset protection and wealth management
• Avoiding probate
• No forced heirship requirements
• Protection against creditors
• Confidentiality – no registration or filing requirements
• Not subject to exchange controls
• Foreign ownership and beneficiaries
• Non-recognition of foreign judgments
• No minimum capital requirements
Types of Barbados Trusts
The types of available trust options include:
Offshore trusts are exempt from all Barbados taxes and have no registration or filing requirements. The settlor and beneficiaries must be non-residents of Barbados. The assets must also be foreign including currencies, securities, movable and personal property, and immovable and real estate property. This trust is regulated by the International Financial Services Act.
An international trust’s foreign income is exempt from tax. However, any of its Barbados sourced income or foreign income that is remitted to Barbados is subject to taxation. The settlor and beneficiaries must be non-residents of Barbados and one trustee must be a Barbados resident. This trust is regulated by the Barbados International Trusts Act and the trust document must specify that it is an International Trust and that the Act applies. Purpose trusts and trusts for charities can be established under this Act.
Domestic trusts qualify for treaty benefits under the numerous Barbados Double Taxation Agreements that are currently in place. Creating a trust to benefit from these treaties means that tax in other countries can be greatly reduced if not eliminated completely. Tax is only payable on income that is not distributed to the beneficiaries during the year. The trust is regulated under the Barbados Trustee Act and has no filing or registration requirements.
Barbados Trusts: Confidentiality, Protection and Tax Exemption
Barbados Offshore Trusts offer a high degree of confidentiality, protection and tax exemption to settlors and the trust’s beneficiaries. With over 30 years of successful trust management, Barbados stands out as a high quality, well regulated jurisdiction making it a compelling choice for the establishment of an offshore trust. Regulation and legislation are especially important aspects of asset protection and the island’s approach to these matters has always been to provide the highest quality regulatory environment in which to conduct business. Recognition of these efforts and accomplishments has been reflected by the country’s inclusion on OECD’s “white list”.
Tax exemptions for non-residents offer valuable tax planning options for individuals and corporations that are seeking to preserve their wealth through effective management and reduction of their worldwide tax burden.
These many benefits make Barbados a first class choice for establishing an international trust.