The Corporate Income Tax (CIT) takes effect from January 31, 2025 after an extension was approved by the Barbados Revenue Authority from the original proposed implementation date of January 1, 2025. The CIT is a system that requires companies with a gross income greater then $2,000,000 to make monthly prepayments of CIT calculated on taxable income from the year before the preceding income year to be paid no later than the 15th of each month. Failure to make the prepayment will result in a 10% or $10.00 penalty, whichever is greater , as well as interest rate of .5% per month.
Accounting firm KPMG explains on its company website this prepayment system is part of government’s fiscal policy to reduce public debt and ensure long term economic sustainability. By demanding companies to prepay taxes, the aim is to minimise the risk of tax arrears and defaults, promote greater accountability and simplify the tax collection system. KPMG also highlights that the decision by government aligning with the OECD Base Erosion and profit Shifting (BEPS)initiatives which Barbados has been party to implementing in order to improve tax compliance and transparency.
However BU family member John A disagrees with the adoption of CIT by government. He explains that the corporation tax was paid before with a single prepayment of 50% made the following year based on prior year profit – this meant if sales were way down in the actual year you would not have encountered a problem providing your profit did not fall to 50% of the last year (the value of prepayment made). There was also a provision for the business to write to the Commissioner of Barbados Revenue Authority to advise of a drastic occurrence in the performance of the busniness that affected the making of the 6 month prepayment.
John A is of the opinion the implementation of CIT is a major signal by the state that it has critical cash problem. The challenge as he see it is that a business does not operate in a linear way. For example, if you manage a toy shop and 90% of sales and profit was generated in December, “well skippa you cripple, cause where the money coming from to run the other 11 months? Supposed December is the only profitable month then you pay in the tax on sales in January, where the money coming from to feed the next 6 months to June if your financial year is July to June?”
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