Barbados
This report analyses the implementation of the AEOI Standard in Barbados with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Barbados’ legal framework implementing the AEOI Standard is in place but needs improvement in order to be fully consistent with the requirements of the AEOI Terms of Reference. While Barbados’ international legal framework to exchange the information with all of Barbados’ Interested Appropriate Partners (CR2) is consistent with the requirements, its domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has deficiencies significant to the proper functioning of elements of the AEOI Standard. Most significantly, there are some deficiencies with respect to the enforcement framework.
Overall determination on the legal framework: In Place But Needs Improvement
Effectiveness of AEOI in practice
Barbados’ implementation of the AEOI Standard is on track with respect to the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. While Barbados is on track with respect to ensuring Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1), some issues have been identified with respect to Barbados’ exchanging the information in an effective and timely manner (CR2).
Overall rating in relation to the effectiveness in practice: On Track
General context
Barbados commenced exchanges under the AEOI Standard in 2018.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Barbados:
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 July 2017. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2017 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2018.
With respect to the exchange of information under the AEOI Standard, Barbados is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2018.
Table 1 sets out the number of Financial Institutions in Barbados that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Barbados requires the reporting of Financial Accounts held by non-residents based on a prescribed list of exchange partners and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Barbados’ administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Barbados in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Barbados’ exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Barbados:
the Barbados Revenue Authority (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Barbados’ exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by the tax authority, which ensure the validation of the data reported by Financial Institutions before it is exchanged with Barbados’ exchange partners; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Barbados’ legal frameworks implementing the AEOI Standard concluded with the determination that Barbados’ domestic legal framework is In Place But Needs Improvement and its international legal framework is In Place. This has been taken into account when reviewing the effectiveness of Barbados’ implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Barbados are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Determination: In Place But Needs Improvement
Barbados’ domestic legislative framework is in place and contains most of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures, but it needs improvement in relation to the scope of Reporting Financial Institutions required to report information (SR 1.1) and the framework to enforce the requirements (SR 1.4). Most significantly, Barbados’ legislative framework provides for a jurisdiction-specific Non-Reporting Financial Institution that is not in accordance with the requirements, does not provide for sanctions on Account Holders and Controlling Persons for the provision of a false self-certification and sets out non-recurring record keeping obligations with respect to the reportable accounts subject to annual reporting.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Barbados has defined the scope of Reporting Financial Institutions in its domestic legislative framework in a manner that is largely consistent with the CRS and its Commentary. However, deficiency has been identified. More specifically, Barbados provides for a jurisdiction-specific Non-Reporting Financial Institution that is not in accordance with the requirements. The scope of Reporting Financial Institutions, including the provision of Non-Reporting Financial Institutions, is material to the proper functioning of the AEOI Standard.
Barbados should amend its domestic legislative framework to remove the Co-operative Credit Union League Ltd from its jurisdiction-specific list of Non-Reporting Financial Institutions as it does not meet the requirements.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Barbados has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Barbados has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary. While a deficiency has been identified with respect to the reporting of the account number, it is considered to be relatively minor as an account number or functional equivalent is required to be reported.
Barbados should amend its domestic legislative framework to require Reporting Financial Institutions to always report an account number when one exists, rather than a functional equivalent.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Barbados has a legislative framework in place to enforce the requirements in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. More specifically, Barbados’ legislative framework:
does not impose sanctions on Account Holders and Controlling Persons for the provision of a false self-certification; and
does not include rules requiring Reporting Financial Institutions to keep records in accordance with the requirements.
These are key elements of the required enforcement framework and are therefore material to the proper functioning of the AEOI Standard.
Barbados should amend its domestic legislative framework to include sanctions on Account Holders and Controlling Persons for the provision of a false self-certification.
Barbados should amend its domestic legislative framework to require Reporting Financial Institutions to maintain records for at least five years from the deadline to report the information, rather than five years from the end of the calendar year for which the record was made.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Barbados’ international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Barbados’ Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Barbados and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Barbados has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Barbados put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Barbados’ exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Barbados are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Barbados’ implementation of the AEOI Standard is on track with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures and are therefore reporting complete and accurate information. This includes ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with exchange partners to ensure effectiveness (SR 1.6). Barbados is encouraged to continue its implementation process to ensure its ongoing effectiveness.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Barbados implemented most of the requirements in accordance with expectations. However, some issues were identified. The key findings were as follows:
Barbados implemented an overarching strategy to ensure compliance with the AEOI Standard developed after conducting a risk assessment that took into account a range of relevant information sources, such as the OECD guidance, publicly available information, the profile of the financial sector, industry interactions and the daily operations of the tax authority. Barbados’ compliance strategy facilitates compliance and incorporates a credible approach to enforcement. Barbados intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.
Barbados has worked effectively to understand its population of Financial Institutions, including relevant non-regulated entities, utilising various relevant information sources, such as the lists of regulated entities maintained by the Financial Services Commission and the Central Bank of Barbados, the Foreign Financial Institution list for FATCA purposes and the tax database. Barbados is taking action to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting as required. Barbados intends to keep its understanding of its Financial Institution population up to date on a routine basis.
The tax authority responsible for implementing Barbados’ compliance strategy appears to have the necessary powers and resources to discharge its functions. With respect to resourcing, Barbados has assigned the equivalent of four full time staff to monitor and ensure compliance by Reporting Financial Institutions, which are further assisted by one administrative staff. In addition, the compliance strategy is supported by other teams, including the Office of the General Counsel and the audit teams from the Audit Services Division and the Large Taxpayers unit.
Barbados has adopted a phased compliance review process, based on a risk-based approach, as set out in its documented compliance strategy and its accompanying timelines. The tax authority has commenced putting the strategy into practice, firstly with the review of the Financial Institution population, and secondly with the drive and promotion of voluntary compliance.
Barbados has started AEOI CRS compliance audits on 20 Reporting Financial Institutions, selected according to a risk analysis, which are currently ongoing. The objective of these audits is to analyse the overall compliance with their obligations under the AEOI Standard, including the due diligence procedures, such as the collection of self-certifications, as well as the reporting requirements. It is noted that Barbados’ ability to check the records maintained by Reporting Financial Institutions will be impacted by its legal framework that only requires records to be kept for five years from the end of the calendar year for which the record was made rather than five years from the deadline to report the information. Barbados has a plan to carry out further compliance activities, taking into consideration the analysis of the information reported, as well as other relevant sources of information.
Barbados is ready to take effective action to address circumvention of the requirements if such circumvention is detected and the tax authority is currently seeking to develop processes and procedures to identify circumvention of the due diligence and reporting procedures.
As far as following up on undocumented accounts is concerned, Barbados has followed up on them during the ongoing compliance audits and an approach to follow up on them more systematically has been established, although it has not yet commenced.
Barbados will also keep its jurisdiction-specific lists of Non-Reporting Financial Institutions and Excluded Accounts under review to ensure they continue to pose a low risk of being used for tax evasion purposes.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
With respect to the Financial Account information collected and sent by Barbados, the presence of the key data points of the Tax Identification Numbers and dates of birth appeared to be in line with most other jurisdictions, as did the level of undocumented accounts.
Two exchange partners highlighted issues with respect to the information received from Barbados, such as missing Tax Identification Numbers and dates of birth. Barbados is yet to follow up with them to address the issues. More generally, many of the exchange partners that received a significant number of records from Barbados indicated that they achieved a success rate when matching the information received from Barbados with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.
Based on these findings it was concluded that, overall, Barbados is meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. Barbados is encouraged to continue its implementation process accordingly including by addressing the recommendations made.
Barbados should continue to implement and expand its activities to verify and ensure that Reporting Financial Institutions are correctly conducting their due diligence and reporting obligations.
Barbados should implement its plans to systematically follow up with Reporting Financial Institutions that report undocumented accounts.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
In order to collaborate on compliance and enforcement, it appears that Barbados implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, Barbados has the necessary systems and procedures to process them as required. It also appears that Barbados will notify its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.
Based on these findings it was concluded that Barbados is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Barbados is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Barbados’ implementation of the AEOI Standard is partially compliant with respect to exchanging the information effectively in practice and in a timely manner. More specifically, while Barbados is meeting expectations with respect to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information and in a timely manner (SRs 2.5 - 2.8), and providing corrections, amendments or additions to the information (SR 2.9), there is a fundamental issue with respect to Barbados correctly receiving the information and sending status messages in a timely manner (SR 2.8). Barbados should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Three exchange partners highlighted particular issues with respect to preparation and format of the information sent by Barbados (representing 4% of its partners). These generally related to transmission errors. More generally, two (or 3%) of Barbados’ exchange partners reported rejecting more than 25% of the files received but none reported rejecting more than 50% of files received, due to the technical requirements not being met. This is broadly in line with the general experience of other jurisdictions. Barbados is yet to follow up with two of the peers to address the issues and clarify the situation.
Based on these findings it was concluded that, overall, Barbados is meeting expectations in relation to sorting, preparing and validating the information. Barbados is therefore encouraged to continue its implementation process accordingly, including in relation to the area highlighted.
Barbados should continue to engage with its partners to address the issues raised.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Barbados linked to the CTS.
Based on these findings it was concluded that Barbados is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Barbados is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Feedback from Barbados’ exchange partners did not raise any concerns with respect to timeliness of the exchanges by Barbados and therefore with respect to Barbados’ implementation of this requirement.
Based on these findings it was concluded that Barbados is fully meeting expectations in relation to exchanging the information in a timely manner. Barbados is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Barbados’ exchange partners did not raise any concerns with respect to Barbados’ use of the agreed transmission methods and therefore with Barbados’ implementation of this requirement.
Based on these findings it was concluded that Barbados is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Barbados is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
19 exchange partners highlighted delays in the sending of status messages by Barbados, representing 24% of its partners. This represents a very high proportion of partners and has not improved over time. Barbados has sent some of the outstanding CRS status messages but there remain many instances where the status messages have still not been sent.
Based on these findings it was concluded that Barbados is not meeting expectations in relation to the receipt of the information. Barbados should continue its implementation process to ensure its effectiveness, including by addressing the recommendation made.
Barbados should ensure it sends status messages to all of its exchange partners in a timely manner.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
Barbados appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by Barbados’ exchange partners and therefore with respect to Barbados’ implementation of these requirements.
Based on these findings it was concluded that Barbados appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Barbados is encouraged to continue to ensure the ongoing effectiveness of its implementation.