United Kingdom: New Treaty with Barbados Signed
Her Majesty’s Revenue & Customs (HMRC) in the United Kingdom has confirmed that a new income tax treaty between the U.K. and Barbados was signed in Barbados on 26 April 2012. This treaty generally follows the OECD Model Double Taxation Convention and there are some noteworthy provisions that may concern international executives and their multinational employers.
Overview
The new treaty generally follows the OECD Model. Some of the more noteworthy items included in the new treaty are highlighted below.
• An updated employment income article which has been amended to apply to a period of 183 days in any 12-month period (previously 183 days in any fiscal year).
• The remuneration of company directors is treated in the same way as remuneration of an employee.
• An updated interest article which has been amended to tax interest arising in either country in the country that the individual is resident (previously a 15-percent rate applied in the country where the interest arose).
• The latest OECD Model provision on exchange of information.
• A “remittance clause” has been included whereby if the income is not taxed in the state of residence because it is only taxable if remitted to that state and it has not been remitted, then exemption from tax in the “other state” cannot be claimed.
The full text of the treaty can be found on the HMRC Web site at: http://www.hmrc.gov.uk/international/uk-barbados-dtc.pdf .
Effective Dates
The new treaty will enter into force once both countries have completed their legislative procedures. The provisions of the treaty will then take effect from the following year, as follows:
• In the U.K.:
§ from the following 6 April for income and capital gains tax purposes;
§ from the following 1 April, for corporation tax purposes.
• In Barbados from the following 1 January.
Source: KPMG