Notes on 2nd Protocol Amending the Convention… US and Barbados… Taxes on Income, July 26, 2004

DEPARTMENT OF STATE
WASHINGTON
July 14, 2004
Excellency:
I have the honor to refer to the Second Protocol Amending the
Convention Between the United States of America and Barbados for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income Signed on December 31, 1984, which was
signed today and inform you on behalf of the Government of the United
States of America of the following:
During negotiations leading to the conclusion of the Protocol signed
today, the negotiators developed agreed Understandings that are attached to
this note. The Understandings are intended to give guidance both to
His Excellency
Michael Ian King,
Ambassador of Barbados.
DIPLOMATIC NOTE

taxpayers and tax authorities of our two countries in interpreting Article 22
(Limitation on Benefits).
If the attached Understandings are acceptable to the Government of
Barbados, this note and your note in reply thereto will indicate that our two
Governments share a common understanding in this matter.
Accept, Excellency, the expression of my highest consideration.
For the Secretary of State:
Attachment:
As stated.

Embassy of Barbados
2144
Wyoming Avenue, N.W.
Washington, D.C 20008
July 14, 2004
The Secretary of State
U.S. Department of State
2201 C Street, N.W.
Washington, D.C. 20520
Excellency:
I have the honour to confirm receipt of your Note of today’s date which
reads as follows:
“DEPARTMENT OF STATE
WASHINGTON
July 14, 2004
Excellency:
I have the honor to refer to the Second Protocol Amending the
Convention Between the United States of America and Barbados for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income Signed on December 31, 1984, which was
signed today and inform you on behalf of the Government of the United
States of America of the following:

2

During negotiations leading to the conclusion of the Protocol signed
today, the negotiators developed agreed Understandings that are
attached to this note. The Understandings are intended to give guidance
both to taxpayers and tax authorities of our two countries in interpreting
Article 22 (Limitation on Benefits).
If the attached Understandings are acceptable to the Government
of Barbados, this note and your note in reply thereto will indicate that our
two Governments share a common understanding in this matter.
Accept, Excellency, the expression of my highest consideration.
For the Secretary of State:
Attachment:
As stated.”
I have the honour to inform you that my Government agrees to the
above.
Accept, Excellency, the assurances of my highest consideration.

UNDERSTANDINGS REGARDING THE LIMITATIONS ON BENEFITS
ARTICLE IN THE U.S.-BARBADOS PROTOCOL
1. The Protocol, signed December 18, 1991, Amending the Convention Between the
United States of America and Barbados for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income Signed on December 31,
1984, was accompanied by Understandings Regarding the Scope of the Limitation on
Benefits Article in the U.S.-Barbados Protocol. Those Understandings continue to apply
for purposes of applying Article 22 (Limitation on Benefits) of the Convention, as
amended by this Protocol, except to the extent the Understandings are inconsistent with
the provisions of Article 22.
2. Paragraph 3 of Article 22 provides that a person that is not entitled to the benefits of
this Convention pursuant to the provisions of paragraph 1 of Article 22 may,
nevertheless, be granted the benefits of the Convention if the competent authority of the
State in which the income in question arises so determines. In making determinations
under paragraph 3 of Article 22, it is understood that the Competent Authority will take
into account all of the relevant facts and circumstances. In the case of an organization
that fails to satisfy the requirements of paragraph 1(f) of Article 22 solely because 50
percent or less of its beneficiaries, members or participants are persons entitled to the
benefits of this Convention, the U.S. Competent Authority will favorably consider the
following factors:
(a) the organization is established in Barbados;
(b) the sponsoring employer of the organization is a resident of Barbados
entitled to the benefits of the Convention (other than a person described in
paragraph 6 of Article 22);
(c) more than 30 percent of the beneficiaries, members or participants of
the organization are persons entitled to the benefits of this Convention;
and
(d) more than 70 percent of the beneficiaries, members or participants of
the organization are individuals resident in a member of the Caribbean
Community.
3. For purposes of paragraph 6 of Article 22, a “special tax regime” shall mean:
(a) in the case of Barbados:
(1) the Exempt Insurance Act, Cap. 308;

(2) the International Financial Services Act, 2002;
(3) the International Business Companies Act, Cap. 77;
(4) the Societies with Restricted Liability Act, Cap. 318B; or
(5) the Insurance (Miscellaneous Provisions) Act, 1998; or
(b) in the case of either Contracting State, any legislation or
administrative practice enacted or adopted after the signing of this
Protocol pursuant to which the income of a person is entitled to the same
or substantially similar tax benefits to those granted under the legislation
referred to in paragraph (a).