Barbados Revenue Authority Requires Monthly Pre-Payment for Corporation Tax to Bolster Government Cash Flow

In a move the authorities expect to give Government’s cash flow a boost, companies are about to be required to pre-pay corporation tax each month.

The Barbados Revenue Authority (BRA) announced last week that an extension has been granted until January 31, “for the submission of monthly corporation tax pre-payments up to January 2025 for income year 2025”.

“Failure to make prepayments by the due date will result in a penalty of ten per cent or $10 whichever is greater, as well as interest at the rate of 0.5 per cent per month,” it advised.

“The Barbados Revenue Authority reminds entities that these prepayments are due in accordance with the relevant provisions of the Income Tax Act. The legislation requires taxpayers to submit monthly prepayments towards their estimated Corporation Tax liability for the income year,” the state entity explained.

The BRA said companies should note that “the monthly prepayment obligation does not apply to a company

with a gross income of $2 000 0000 or less; and which is registered as an approved small business under the Small Business Development Act, Cap. 318C.”

It also encouraged corporate tax payers to “utilise the available electronic platforms to ensure timely submission and payment”.

Prime Minister and Minister of Finance Mia Amor Mottley announced the new pre-payment requirement in November 2023 in Parliament while delivering a ministerial statement on corporate tax reform.

She said that in accordance with international best practice, Government would introduce “a requirement for smoother cash flow to facilitate its fiscal circumstances”.

“Monthly pre-payments for the fiscal year will be calculated based on the previous year’s tax base, multiplied by the new applicable rate, net of the impact of the tax credits,” the Prime Minister said.

The BRA says in a new guidance note on the pre-payment of corporation tax from this year that “the taxable income of a company for an income year shall be taken to be the taxable income for the income year before the preceding income year, as disclosed in its return filed in accordance with section 52 of the Income Tax Act, Cap. 73.”

“Therefore, for income year 2025, the prepayment shall be calculated based on the company’s taxable income for income year 2023. Where the return for Income Year 2023 is not available, the prepayment shall be calculated based on the company’s taxable income for income year 2022,” it explained.