Barbados has a series of double taxation treaties, but the U.S. and Canadian agreements, in particular, are extremely favorable to certain types of investors. The full list of countries with which Barbados has double taxation treaties is given below, as well as its year of entry into force. Article 5 contains three options for parties to double taxation elimination methods. Option A provides that provisions of an LTT that would otherwise exempt from tax the income or capital of a resident of an enterprise established in a Contracting Country would not apply if the other Contracting Country applies the provisions of CTA to exempt such income or capital taxes or to limit the rate at which such income or capital may be taxed (conversion clause). Instead, a tax deduction with certain restrictions is allowed. Under Option B, the contract rules would not use the dividend exemption method if those dividends are deductible in the other contractual jurisdiction. Option C provides that the imputation method should be limited to net taxable income. The parties may choose different options that lead to an asymmetrical application of this provision. States Parties may also choose not to apply Article 5 to one or more of their CTVs. The MBTA provision applies to all cases of taxation contrary to the CTA concerned, unless a contractual court has issued a reservation that sets a more limited scope.
The MLI offers lawyers the opportunity to agree bilaterally on how the MBTA is to be applied, including the form of arbitration. However, the model rules set out in the MLI apply where the courts do not enter into such an agreement before a case eligible for arbitration occurs. For legal orders that choose to implement MBTAs through the MLI, the provisions of the MLI would apply to all CTAs that do not have such a provision or instead of the existing provisions that provide for MBTAs. The reservations and preliminary communications made by Barbados at the time of the signing of the MLI appear to be fairly balanced and consistent with Barbados` policy of negotiating double taxation treaties in recent years. The fact that Barbados and 26 other jurisdictions have also opted for compulsory arbitration reinforces Barbados` role as a jurisdiction ready to adopt the BEPS recommendations and to do its best to resolve disputes with other contract tribunals in the most efficient manner possible. In December 2009, the governments of the Netherlands and Barbados signed a protocol that amended the double taxation convention they share to put an end to the abuse of tax treaties. The Protocol in question amends the agreement by the fact that Dutch taxpayers cannot use the agreement to transfer dividends tax-free in the Territory of the Caribbean to a third country. The new text also provides for a tax rate not exceeding 15% on dividends and contains stricter parameters for eligibility.