Barbados implemented its Value Added Tax (VAT) regime on January 1st, 1997. With the implementation of VAT over thirty (30) different indirect or ad valorem taxes were eliminated. 

All activities in Barbados fall into one of the following categories for VAT purposes:

  • Non-taxable activities
  • Taxable activities

Non-Taxable Activities

These are defined as follows:

  1. Purely recreational pursuit or a hobby
  2. Employment activities as an employee or an officer of a business

Taxable Activities

Taxable activities are defined as follows:

  1. Any business activity
  2. Any activity of a charity or association for the benefits of its members
  3. Any activity of a trade union for the benefit of its members

Taxable activities are broken down into three categories:

Zero-Rated Supplies or Services

  1. Services supplied to businesses that will continue to be licensed to operate in the International Business Sector up to June 30, 2021
  2. Services sold to non-resident customers
  3. Certain food items that are published on the zero-rate supply listing from time to time

Taxpayers who supply zero rated goods must file their periodic VAT return and are eligible to claim a refund of the input taxes paid to generate their zero-rated goods or services.

Exempt Supplies or Services

Exempt supplies are goods or services which are not subject to VAT. These services include:

  1. Bank services
  2. Medical services
  3. Interest on borrowed money
  4. Insurance premiums
  5. Finance lease payments

A taxpayer that only provides exempt supplies is NOT entitled to recover the input tax incurred with respect to goods and services acquired or imported for the purposes of making exempt supplies.

Taxable Supplies

A taxpayer must register for VAT if their taxable activity exceeds $200,000 annually with effect from January 1st, 2016. The taxpayer has the option of registering for VAT if their business activity falls below the threshold.

All other activities are considered taxable activities. Taxable supplies are taxed currently at the following rates:

  1. Guest accommodation – 10%
    1. General taxable activities – 17.5%
    1. Mobile telecommunication services – 22%