Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Barbados

Barbados’ implementation of the transparency framework is still in the early stages of development. Barbados is recommended to finalise its information gathering process for identifying all past and future rulings and potential exchange jurisdictions, with a review and supervision mechanism, as soon as possible (ToR I.4). Barbados is recommended to continue its efforts to complete the templates for all relevant rulings and to ensure that the exchanges of information on rulings occur as soon as possible (ToR II.5).

Barbados can legally issue five types of rulings within the scope of the transparency framework.

In practice, Barbados has issued two past rulings; and for the year in review, Barbados issued no future rulings within scope of the transparency framework.

As no exchanges of information on rulings were conducted during the year in review, no peer input was received in respect of the exchanges of information on rulings received from Barbados.

Introduction

94.  This peer review covers Barbados’ implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. A summary of recommendations is included at the end of this report.

A. The information gathering process

95.  Barbados can legally issue the five following types of rulings within the scope of the transparency framework: (i) rulings related to preferential regimes;1 (ii) cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) cross-border rulings giving a unilateral downward adjustment to the taxpayer’s taxable profits in the country giving the ruling; (iv) permanent establishment rulings; and (v) related party conduit rulings. The Legal Department of the Barbados Revenue Authority (“BRA”) is authorised to issue rulings.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

96.  For Barbados, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2015 but before 1 September 2017; or (ii) on or after 1 January 2012 but before 1 January 2015, provided they were still in effect as at 1 January 2015.

97.  Barbados acknowledges that it did not implement the information gathering process during the year in review. As a result, no past rulings were identified. However, Barbados has implemented new processes to identify past rulings in 2018.

98.  The process for identifying past rulings in 2018 was conducted as follows. The BRA is constituted as one centralised office. Rulings are not recorded on any database, but all physical files relating to rulings are maintained within one area of the Legal Department. Due to the small number of rulings issued by Barbados, the Legal Department staff members therefore conducted a manual review of all files pertaining to tax rulings to identify past rulings in scope. Each physical file was manually read and reviewed to determine whether it fell into any of the five rulings categories.

99.  In order to identify potential exchange jurisdictions, the BRA reviewed the available information in the taxpayer’s files. As there were only two past rulings in scope, Barbados was able to ascertain the relevant exchange jurisdiction from the information on file. Barbados reports that the “best efforts approach” was not utilised as all the information regarding relevant exchange jurisdictions was contained within the ruling request in the file.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

100.  For Barbados, future rulings are any tax rulings within scope that are issued on or after 1 September 2017.

101.  Barbados acknowledges that it did not implement the information gathering process during the year in review. As a result, no future rulings were identified. However, Barbados has implemented new processes to identify future rulings in 2018, and has identified that BRA did not issue any future rulings during the year in review.

102.  Barbados’ information gathering process for future rulings is identical to the process for past rulings. For future rulings, information regarding potential exchange jurisdictions is to be acquired during the ruling request process. A rulings request would not be processed without the relevant information being obtained from the taxpayer.

Review and supervision mechanism (ToR I.4.3)

103.  The BRA is a small, centralised office that also serves as Competent Authority of Barbados. The rulings information compiled by the legal officers within the BRA Legal Department is thereafter reviewed by the Senior Manager of the Policy, Planning and Governance Department who has the ultimate responsibility for matters of international taxation.

Conclusion on section A

104.  Barbados is recommended to finalise its information gathering process for identifying all past and future rulings and potential exchange jurisdictions, with a review and supervision mechanism, as soon as possible (ToR I.4). It is recognised that Barbados has made efforts to rectify their information gathering process in 2018, and Barbados’ implementation of the information gathering process during 2018 will be assessed in the next annual peer review.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

105.  Barbados has the necessary domestic legal basis to exchange information spontaneously. Barbados notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

106.  Barbados is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”) and (ii) double tax agreements in force with 32 jurisdictions.2

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

107.  For the year in review, Barbados had not identified any rulings in scope of the transparency framework and therefore no exchanges were undertaken.

108.  Barbados is still developing a process to complete the templates on relevant rulings, to make them available to the Competent Authority for exchange of information and to exchange them with relevant jurisdictions.

109.  The BRA has indicated, in the event of an exchange, that the information would be provided via the template in Annex C of the 2015 Action 5 Report (OECD, 2015). The Legal Department of the BRA would be responsible for completing the template, and this process would be supervised by the Senior Manager of the Policy, Planning and Governance Department.

Conclusion on section B

110.  Barbados has the necessary legal basis to undertake spontaneous exchange of information. Barbados is recommended to continue its efforts to complete the templates for all relevant rulings and to ensure that the exchanges of information on rulings occur as soon as possible (ToR II.5).

C. Statistics (ToR IV)

111.  As no information on rulings was exchanged for the year in review, no statistical data can be reported.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

112.  Barbados offers two preferential regimes, which also offer benefits to income from intellectual property (“IP regime”).3 However for the year in review no transparency requirements were relevant, as follows:

• New entrants benefitting from the grandfathered IP regime: not applicable for the year in review, because Barbados is currently amending both regimes and in the process of implementing grandfathering for the International business companies regime. The enhanced transparency requirements will apply to Barbados’ regimes that provide grandfathering to taxpayers that entered the regimes after the publication of the 2017 Progress Report (OECD, 2017b), which occurred on 16 October 2017, and this will be taken into account during the subsequent peer review.

• Third category of IP assets: not applicable to these regimes, which in 2017 were in the process of being amended.

• Taxpayers making the use of the option to treat the nexus ratio as a rebuttable presumption: not applicable to these regimes, which in 2017 were in the process of being amended.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Barbados did not complete the information gathering process during the year in review.	Barbados is recommended to finalise its information gathering process for identifying all past and future rulings and potential exchange jurisdictions, with a review and supervision mechanism, as soon as possible.
Barbados did not undertake spontaneous exchange of information on tax rulings within scope of the transparency framework during the year in review.	Barbados is recommended to continue its efforts to complete the templates for all relevant rulings and to ensure that the exchanges of information on rulings occur as soon as possible.

References

OECD (2017a), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2017b), Harmful Tax Practices - 2017 Progress Report on Preferential Regimes: Inclusive Framework on BEPS: Action 5, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264283954-en.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  Credit for foreign currency earnings.

← 2.  Antigua, Austria, Bahrain, Belize, Botswana, Canada, China (People’s Republic of), Cyprus, Cuba, Czech Republic, Dominica, Iceland, Italy, Finland, Grenada, Guyana, Jamaica, Luxembourg, Malta, Mauritius, Mexico, Netherlands, Norway, Panama, Portugal, Singapore, Spain, Sweden, United Arab Emirates, Singapore, Saint Kitts and Nevis, Saint Vincent and the Grenadines, San Marino, Seychelles, Switzerland, Qatar, United Kingdom, United States and Venezuela.

Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union. The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

← 3.  These regimes are: 1) International business companies and 2) International societies with restricted liability.