This article looks at the present state of Trust law in Barbados up to the passage of the International Trusts Act 1995 which Act is reproduced below. In future months I will examine various aspects of the new Act in detail and comment on the usage of the Act since its passage. Where necessary and where this is helpful comparisons will be drawn with other domiciles which have similar legislation.

Barbados is a small island of 166 square miles with a population of approximately 260, 000 people. A former colony of the United Kingdom, it gained its Independence in 1966. As a colony its main source of revenue was sugar but as its natural climate made it an attractive vacation destination, revenue from tourism has gradually come to rival revenue from agro-industries. At the same time, revenue from sugar has been declining and greater emphasis was placed on this tourist sector which is now the major contributor to the country's economy.

Over the past two decades Barbados has faced increasing competition from other tourist destinations. Successive Administrations have realised the importance of diversifying its economy and have strived to develop the International Business Sector as a means of doing so. Barbados, already noted as a tourist destination, already had in place a developed infrastructure in terms of access to the financial capitals of the world with developed Air , Sea and Telecommunication links with the rest of the world. Allied to these factors was the fact that the country possesses, one of the highest literacy rates in the world, many highly trained professionals, a well educated workforce, a tried and tested legal system with a final appeal to the British Privy Council and the presence of several major accounting firms and International Banks.

During the last twenty years legislation has been passed to create the legal and financial framework within which this sector can operate and successive Governments and the Private sector have actively marketed Barbados abroad.

The recent passage of the International Trusts Act is but another indication of the Country's intention to maintain its status as a primary financial domicile catering to the needs of the International Community. This Act increases the attractiveness of Barbados as a domicile for persons wishing to utilise the mechanism of a Trust for investment and indeed Tax Purposes as a means of Estate Planning.

Prior to the passage of this legislation, the law of Trusts in Barbados consisted of the law as derived from the English Common law or to be more precise the development of Equitable principles from the Eighteenth Century onwards. Over the centuries, that law has been modified by a variety of domestic statues such as the Trustee Act Cap 250, certain provisions of the Property Act Cap 236, the Offshore Banking Act Cap 325, the Succession Act Cap 249 and the Charities Act Cap 243. These changes have in the main followed changes in the United Kingdom, with the exception of changes made as a result of legislation aimed specifically at the Offshore sector e.g. Cap 325.

The passage of the 1995 International Trusts Act ( I.T. Act) was in response to numerous requests for Barbados to create special provisions to govern International trusts which among other things would:

1) Exempt such trusts from the rule against perpetuities.

2) Modify the provisions of the Statute of Elizabeth with respect to fraudulent dispositions of property.

3) Not recognise claims against trust assets based on the forced heirship laws of a foreign state.

4) Allow for the creation of Non-charitable purpose trusts. Such a Trust must have a Protector appointed.

5) Allow for the placing of Assets in a Trust to avoid future creditors who are unknown or not likely to be known at the time the Trust was established.

With the passage of this legislation it is anticipated that Investors will find it easier to utilise Barbados as a domicile for the variety of purposes that Trusts have traditionally been established:

A)Provision for spouses and dependants.

B)Protection of assets from future personal liability.

C)Minimisation of estate\inheritance tax, income tax and capital gains tax..

Prior to the passage of this Act Barbados could be used by investors seeking an offshore Domicile to establish a Trust by the use of provisions in its Offshore Banking Act and indeed its International Business Act which when twinned would allow for the operation of an International Business Company solely in the area of trading in or holding in securities. Such a company attracts zero tax instead of the usual rate of 2.5%

Foreign nationals have also been able to take advantage of the many double taxation treaties that Barbados has established with several countries to plan suitable tax structures. At present treaties are in force with the following countries:.

1)United States.

2)United Kingdom.






Negotiations are continuing with other countries to establish such treaties. It is expected that Treaties with several South American countries will soon be signed. Most use is presently made of the Canada/Barbados tax treaty by Canadians who are able where Canadian assets are placed in a Barbados Trust to avoid certain Canadian Capital Gains. Paragraphs 4 and 5 of Article 14 of the Canada Barbados Tax Treaty provide that any Capital Gains that arise to a Barbadian resident who has not been resident in Canada for the last five years are not taxable by Canadian authorities. The practice has thus developed of establishing a Barbados Trust (deemed to be resident by virtue of the fact that the Trustees are resident in Barbados) in which assets are placed. Any capital gains that occur from transactions involving these assets are free of Capital Gains Tax.

Assets in such a Trust can be used actively to earn income by usage of the Offshore Banking Act and the International Business Act. Section 105 of the former act provides:

"Where a trust is established by a settlor who is not a resident of Barbados, in favour of another person who is not a resident of Barbados the Trust is exempt from any tax, duty or impost in Barbados if the funds of the Trust consist solely of foreign currency or foreign securities and the trust is under the management of a licensee."

A licensee is a bank granted a license under the Offshore Banking Act. Thus if the Trust is the sole shareholder of an International Business Company and the Company simply carries on the business of holding or trading in securities, then such a Company is not taxed. Use of such a method of Estate Planning would therefore not only be beneficial for Canadian Residents but other individuals as income from such a vehicle is not taxed in Barbados.

Use of legislation catering to the needs of the Offshore sector is far more beneficial than use of domestic legislation. The assessable income of a "Domestic Trust" is taxed similarly to that of an individual taxpayer. Tax is levied on income that is not distributed in the same year in which the income arises. The rate of tax is 25% for the first BD$13, 000.00 and thereafter at the rate of 40%. The beneficiary under such a Trust is taxed on income that is received at the rates applicable for other income.

As stated at the start of this Article the International Trusts Act 1995-14 was recently passed .The provisions of this Act are set out below. In future months it is my intention to discuss certain aspects of this Act in greater detail. In the interim should you require further information I may be contacted at the address and numbers set out at the foot of this article.

International Trust Act 1995-14

1. Short title
2. Definitions
3. Trust described
4. Application of Act


5. Creation of international trusts
6. Presumption against avoidance of trust
7. Duration of trust and accumulation of income
8. Proper law of trust


9. Interpretation
10. Creation of purpose trusts
11. Protector not to be trustee
12. Appointment of protector by court
13. Custody of copy of instrument
14. Extension of cy-pres


15. Capacity
16. Law of Barbados
17. Effect of section 16
18. Varying or setting aside trust


19. Interpretation
20. Fraudulent disposition voidable
21. Certain rights
22. Extent of avoidance of relevant dispositions
23. Act not to validate certain dispositions
24. Property Act
25. No intent to defraud


26. Appointment of protector


27. Language of trust
28. Confidentiality
29. Taxation
30. Non-application of Acts
31. Application of other law
32. Registration
33. Amendment enactment in Schedule
34. Commencement


An Act to provide for the creation and regulation of international trusts and for related matters.

ENACTED by the Parliament of Barbados as follows:


Short title

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances