Barbados is Future-Proofing its BusinessInternational Sector

Barbados is Future-Proofing its International Business Sector

Over the past two years, the Barbados Government has adopted a proactive rather than reactive approach, along with a sense of urgency, in making changes to legislation governing its international business sector.

Some might say it has been ‘future-proofing’ this vital sector through a balancing act: complying with requirements laid down by the Organisation for Economic Cooperation and Development (OECD) and the European Union (EU), while at the same time retaining the island’s attractiveness to foreign investors. For example, on 1 January 2019 the Government embraced the concept of tax convergence. It took down the ‘ring fence’ that had allowed international businesses to enjoy several incentives, including lower tax rates, that were not available to local companies.

Today, there is a single corporate tax rate regime, and after the grandfathering provisions expire on 30 June 2021, there will be no such entity as an International Business Company (IBC) or an International Society with Restricted Liabilities (ISRL).

These types of entities will now be considered Regular Barbados Companies and Societies and will be able to enjoy the benefits of such. For example, they will now be able to do domestic business in Barbados and can also access the country’s network of tax treaties with some 40 countries.

Furthermore, since they can apply for a foreign currency permit if they earn 100 per cent of their income in a foreign currency, they can retain many of the non-tax benefits previously enjoyed. In other words, foreign investors won’t be disadvantaged by the structure of a ‘local’ company. As for the new ‘converged’ tax rate, it is only marginally higher than that previously paid by IBCs and ISRLs.

More recently, the Government has moved quickly to implement economic substance legislation, known officially as the Companies (Economic Substance) Act. Today, any company wishing to do business in Barbados must demonstrate that its business is genuine; that is, it employs people here, is managed from here, and occupies physical premises, among other things. What is more, it will be tested to ensure that it meets the requirements and penalized if it doesn’t.

But the Government has been doing more than simply revamping its tax regimes through new legislation. It has also been taking steps to ensure that the public sector and its bureaucracies can keep up with the changes.

Faced with immutable deadlines for legislative change imposed by international watchdogs, small countries that operate as international financial centres are often hard-pressed to respond in a timely manner because of lack of resources and specific skill sets. Barbados is no exception, and delayed responses in the past have landed the island on blacklists.

To reduce the likelihood of this happening in the future, the Government has been tapping experience and skills within the international business sector. For example, in revamping its tax regime the Government turned to tax experts from leading professional services firms, leaders within the Barbados International Business Association, as well as other key stakeholders for help in drafting legislation and regulations. Additionally, it has recruited from the international business sector to fill positions within key government agencies, and weak spots have been addressed through training. In essence, there is now a clear understanding at the top level of government that the handson experience residing in the sector is a must-have for bureaucracies to function speedily and effectively.

This recognition of private-sector thinking and the pursuit of efficiency are spreading beyond government agencies involved in international business. Across the public sector spectrum, a digital transformation is taking place to enable individuals and businesses to interact with several government departments online.

Led by its Ministry of Innovation, Science and Smart Technology, the Government is aiming to digitize the entire public service and has pledged to establish a special bureau within the ministry to drive this. It has also set up a public-private sector cyber security working group to help the country protect itself against cyber threats.

The ultimate goal is for Barbados to become a ‘digitally enabled nation’, one in which e-commerce and information technology are not exotic concepts but everyday realities. In effect, it will easier, safer, more efficient and more affordable for firms to do business with the state.

This is a work in progress, but it will benefit international investors. Doing business here and working here will become easier.

If there is one area that still needs more emphasis and greater impetus, it is the need for Barbados to have a louder voice on the world stage. There is no point in building better mousetraps if we don’t tell people about them, and we must always be prepared to defend our integrity as an international business and financial centre.

At Home in Barbados - Running a Global Company

Born and raised in Kenya, educated in the United Kingdom and a former Royal Marine Commando, Damian McKinney has been a permanent resident of Barbados for over 14-years. Having founded his consultancy company, McKinney Rogers, in 1999, Damian has undertaken multiple successful business transformations around the world, predominantly in the alcoholic beverages sector. After selling his business in 2017, he maintained links with the industry by investing in and accepting the Chairmanship of Cockspur Rum. More recently, in late 2020, Damian McKinney was appointed Global CEO of the internationally acclaimed Stoli Group.

Damian McKinney

My first experience of Barbados was between 1988-90, while serving with the military. I loved the place from day one and deeply regretted having to leave at the end of my tour of duty.

Fortunately, some years later, by which point I was living in New York with a family and a thriving business, I made the smart decision to return for a holiday. It was a wonderful trip down memory lane and we all thoroughly enjoyed ourselves. While here, my daughter Charlotte announced just prior to her 18th birthday that she wanted to become a Barbados Citizen. In full agreement, I launched a rush job to get it done. The really pivotal moment came when she then asked, ‘Can we live here?’. Well, apparently, we had all been thinking along those same lines. In no time at all the decision was made and within a year we

were calling Barbados home

As soon as we settled into our new house, I brought our senior McKinney Rogers staff to Barbados and started running our operations from an office on the property. The island has excellent telecoms capacity, so it was easy to keep connected with our employees and clients around the world via video conferencing. Initially, I felt a little apprehensive about how people might react when they discovered I was operating out of Barbados, but that was unfounded. Most people said they wished they could be here too. Plus, crucially, we didn’t miss a beat in terms of efficiency, so our clients were happy. And that positive scenario continued uninterrupted until I sold the company in 2017.

At that point I really didn’t need to launch any new business, so I started relaxing and enjoying life a bit more. Then, out of the blue, I got a call from the owner and founder of the Stoli Group, asking for my thoughts on how to transform his company. Little did I know that midway through our second 1hour phone call, I would be offered the position of Stoli Global CEO. Taking on a major responsibility like that was the furthest thing from my mind, but I was immediately tempted.

Along with their broader ultra-premium portfolio, which is second to none in the industry, Stoli is a brand I have admired for many years. So I saw this as a wonderful confluence of a fantastic opportunity meeting a moment in my life when I was free to accept it. In many ways the offer was impossible to turn down, except that Stoli is headquartered in Luxembourg. My instant reaction was to say I’d love to take the job but couldn’t possibly leave Barbados. Thankfully, we agreed to find a way to make that work.

As with McKinney Rogers, I set up a virtual global team. On my second day, I spoke with all the Stoli leaders from around the world via a Zoom meeting. It was the first occasion they had all spoken to each other for many years. Barbados isn’t just about rum, sea, sand and sun. With its modern infrastructure and extensive fibre optic cable networks, the island is as good as many international business centres. In fact, Barbados is now considered a strong candidate to become the new Stoli HQ.

The reality is I am transforming Stoli while dressed in a pair of shorts and a tee-shirt, sat at my desk at home in Barbados. But there’s nothing wrong with that. In fact it offers a lot of pluses, so I don’t hide anything. Where I am located or what I am wearing does not affect company standards or discipline. And it certainly doesn’t affect my performance – except in a positive way.

Following a distinguished military career and a successful period as an entrepreneur, this unexpected opportunity to run Stoli has put a capstone on my life. Some people might enjoy the status, but for me it’s all about the excitement of the challenge. And it’s all the better for being based at my own home. Mucking out the turkeys is a great way to keep yourself grounded.

After enjoying fourteen good years in Barbados, as a logical conclusion to the direction my life has taken me, I have applied for Barbadian Citizenship. Coming here is undoubtedly one of the best decisions I ever made.