THE recent implementation of new tax laws by some Caribbean territories, in order to comply with the Organisation for Economic Co-operation and Development’s (OECD) rules, has resulted in some large Caribbean companies facing higher tax bills.

CIBC Caribbean Bank Limited indicated in its recent 2025 annual report that its Bahamian subsidiary was subject to a domestic minimum top-up tax (DMTT) which increased its overall tax bill by US$10.98 million. As a result, CIBC’s consolidated tax bill went up from US$26.57 million to US$35.95 million for its October 2025 financial year (FY). If this DMTT was not applied, CIBC’s consolidated tax bill would have been US$24.97 million. The Bahamas has no corporate income tax.

“Barbados and The Bahamas have enacted the DMTT legislation in accordance with the OECD’s pillar two initiative which became applicable for the bank this fiscal [year]. These regimes required the bank to have an effective tax rate (as calculated under the relevant legislation) of at least 15 per cent of net income in those jurisdictions. Where the bank’s effective tax rate was less than 15 per cent, an additional top-up tax was levied to bring the effective tax rate to 15 per cent,” CIBC’s annual report stated.

The overall effective tax rate for CIBC Caribbean also went up from 8.9 per cent to 18.7 per cent. The Bahamas and Barbados’s pillar two legislations for multinational entities (MNE) with consolidated revenue above €750 million (US$883.35 million) took effect for FY’s beginning on January 1, 2024. This pillar two framework requires MNEs to pay a minimum effective tax rate of 15 per cent on profits in each jurisdiction. Depending on the circumstances between the entities in each jurisdiction and the ultimate parent entity/company (UPE), a DMTT might be paid in the jurisdiction with the lower tax rate or by the UPE in their domestic jurisdiction.

These changes came due to OECD/G20 pressure on jurisdictions with low tax rates which resulted in profit shifting in what was described as a race to the bottom. The pressure from the OECD intensified after the Panama Papers revelation in April 2016. This pushed forward reform to tax rates on certain jurisdictions which were threatened with blacklisting and the introduction of beneficial ownership requirements.

These changes have resulted in numerous legislative changes across the Caribbean, with Dominica repealing its international business companies (IBC) act while other jurisdictions changed tax rates and introduced new requirements for firms that continued as IBCs.

Barbados previously had a sliding scale tax rate for IBCs which was 2.5 per cent on the first BBD$10 million (US$5 million) in taxable income which went as low as 0.25 per cent of taxable income exceeding BBD$30 million (US$15 million). However, this was changed in January 2019 when the International Business Companies Act Cap. 77 was repealed and existing IBCs were required to continue under the Companies Act Cap, 308.

Effective January 1, 2022 the tax rates changed again, with the first US$500,000 of taxable income being taxed at 5.5 per cent and the highest rate of 1.0 per cent being applied on taxable income above US$15 million.

The ongoing tax reform has resulted in additional changes to tax rates in Barbados and other jurisdictions. Barbados previously had a domestic 25 per cent tax rate for resident companies but the corporate income tax rate is now 9 per cent for all companies effective January 1, 2024, except firms which fall under specific criteria. Companies registered as approved small businesses are now subject to a 5.5 per cent tax rate, with MNEs being taxed at the same 9 per cent tax rate.

These reforms are having a wide-ranging effect on different publicly listed companies that are now assessing the implications of their business in different jurisdictions. Massy Holdings Limited, a Trinidadian conglomerate in integrated retail, gas products, and motors and machines, reported in its 2025 audited financials that it did not pay a top-up tax for its Barbadian businesses.

This was due to the conglomerate benefiting from the transitional provisions made available in the law, resulting in no current tax exposure for the 2025 FY. This is against the backdrop of Massy’s operating Barbadian subsidiaries having an effective tax rate (ETR) of 7.6 per cent for the 2025 FY. These businesses had accounting profits of TT$161.80 million (US$23.86 million) but a tax expense of TT$12.24 million (US$1.81 million).

“However, although the average effective tax rate is below 15 %, the group’s exposure to paying pillar two income taxes might not be for the full difference in tax rates in relation to Barbados. This is due to the impact of specific adjustments envisaged in the pillar two legislation which give rise to different effective tax rates compared to those calculated in accordance with IAS 12,” Massy said in its audited financial statements.

All of Massy’s operating businesses, except for those in Barbados, have effective tax rates above 15 per cent. Massy’s management team expects that the application of pillar two legislation is expected to increase the group’s effective annual tax rate by one to two percentage points once effective in 2025. Massy’s consolidated ETR for the 2025 FY was 33 per cent as it had TT$1.14 billion in profit before tax and TT$374.70 million in an income tax expense. This means that a one to two per cent increase will translate to an additional TT$11.41 million to TT$22.82 million (US$1.68 million to US$3.37 million) in taxes to be paid.

Productive Business Solutions Limited (PBS), a subsidiary of Musson (Jamaica) Limited, noted in its 2024 audited financial statements that it was part of a MNE with revenues above €750 million. However, while Jamaica has signalled its intention to implement a qualified DMTT, the country is at the preliminary stage of the legislative process and has not enacted pillar two legislation.

PBS itself noted that it was assessing its exposure to the pillar two legislation and that it would implement changes once it was adopted by the MNE in Jamaica. It also pointed out that not all entities in the relevant jurisdictions with tax rates below 15 per cent have legislative frameworks to accommodate the pillar two top-up tax. These entities are in the jurisdictions of Barbados, British Vergin Islands (BVI), Cayman Islands and St Lucia.

Both Massy and PBS also noted that their group exposure to paying pillar two income taxes might not be for the full difference in tax rates for the low-tax jurisdictions. In other words, the difference between the ETR and the 15 per cent rate might not be the amount due under the pillar two framework, due to specific adjustments which give rise to different ETRs than those calculated in accordance with accounting standards.

The OECD developments on Caribbean jurisdictions has had other implications for different listed companies. Whereas St Lucian IBCs used to be taxable at one per cent of taxable income, they are now subject to a 30 per cent tax rate for any income earned in St Lucia. However, some pure equity holding companies have applied provisions of the foreign source income exemption which results in no income tax being applicable to income earned outside of St Lucia.

Sterling Investments Limited (SIL) and Mayberry Jamaican Equities Limited (MJE) were exempt from paying income tax in 2024. However, SIL moved its investment assets to its subsidiary Sterling Investments (Cayman) Limited in 2022, in a move to be a pure equity holding company. Proven Group Limited (formerly Proven Investments Limited) also benefited from paying no income taxes at the company level since it derives its income outside of St Lucia.

The United States of America (USA) signed on as one of 138 nations for the OECD’s two-pillar solution in October 2021. However, President Donald Trump issued an executive order on his first day to effectively withdraw the US from any participation in the global initiative.