We’d have you know that being home to the Man Down crooner—now-turned superstar international businesswoman—isn’t even one of the top five most amazing things about Barbados. That’s right. While Rihanna may dominate headlines and global charts, there’s something even older, more storied, and arguably more essential to the Caribbean identity—rum. 

Barbados is home to the Mount Gay Distillery, which was established as far back as 1703, officially making it the oldest commercial rum distillery in the world. Rum is the stuff that makes the world go round, and we’re inclined to think Queen Riri herself wouldn’t argue otherwise. 

Sitting on just 430 square kilometers – less than the size of New York City – and with an unprecedented real GDP growth of 4% last year and an expected 3% this year, Barbados is a testament that, indeed, great things can happen in small places. 

For nearly a decade, tax revenues have steadily constituted about 30-33% of the country’s burgeoning GDP. 

You’re thinking of doing business in Barbados? Great choice! 

While tax laws vary from place to place, one common feature cuts across – severe punishment for defaulters. Let’s help you settle in on the good side of the law by telling you all about Barbadian Payroll Taxes and how they work.

What Is Payroll Tax in Barbados?

Barbados operates an extensive mixed taxation system (both direct and indirect taxes), and, unlike many of its Caribbean neighbors, it implements personal income and corporate taxes (more on these later). 

Similar to other Caribbean countries, however, Barbados does not run the kind of traditional payroll taxation seen in the US. 

There are, nonetheless, some payroll-related obligations that include statutory contributions and withholdings.

National Insurance Scheme (NIS) Contributions

This is the chief payroll obligation that is mostly encompassing – it governs employers, employees, Barbados residents, and foreigners like you doing business on their island. 

All persons aged 16 – 65, regardless of their nationality, are obligated to contribute a portion of their insurable earnings to the government for the maintenance of the social security fund. These contributions are used to fund sickness and maternity benefits, injury coverage, unemployment benefits, and pensions, to name a few. 

Like other payroll taxes, the employer deducts the required portion of your salary and pays it on your behalf to the government. 

Since 1 October 2018, employees and employers have been mandated a monthly share of 11% and 12.75% respectively.

Here’s the breakdown of what the taxes contain:

Funds and LeviesEmployee %Employer %Total %
National Insurance6.75%6.75%13.50%
Non-contributory2.00%2.00%4.00%
Unemployment0.75%0.75%1.50%
Employment Injury0.00%0.75%0.75%
Severance0.00%0.50%0.50%
Training Levy0.50%0.50%1.00%
Health Service Contribution1.00%1.50%2.50%
Total11.00%12.75%23.75%

From the table, some payments apply to the employers that don’t apply to the employees, and vice versa. 

The employer, on behalf of himself and his employees, must pay the sum total of the 23.75% to the Government not later than the 15th of the following month. 

Taxable insurable earnings are capped at BBD 5,280 per month, i.e., whatever contribution you’re making to the NIS is only from the first BBD 5,280 BBD of your salary. 

Self-employed individuals are not left out. Unlike the monthly payments of normal employees, they are to make quarterly contributions of 17.1% on earnings of up to a maximum of BBD 5,280 per month. 

The only group of people exempt from NIS obligations is Diplomatic and Military personnel.

Personal Income Tax

Barbados practices a progressive taxation system, in that you pay as you earn (PAYE). While the NIS contributions are used for the maintenance of the social security fund, these are obligatory contributions made to the Barbados Revenue Authority for revenue generation. 

Unlike the NIS contributions, only Barbados residents are subjected to personal income tax – non-residents are only taxed on income arising from business(es) within Barbados. 

There’s more. 

Not all Barbados residents are obligated to pay personal income tax. Only:

  • Self-employed persons
  • Employees with an annual income above BBD 50,000, and
  • Contributory pensioners with an annual income (from any source) above BBD 90,000

Effective after 1 January 2020, individuals who ticked all these boxes were taxed at the basic rate of 12.5% on the first BBD 50,000 and 28.5% on the remaining income exceeding BBD 50,000. 

Note that for those concerned, the personal income tax is exclusive of their NIS contributions.

Here’s an example of what we mean.

Payroll Tax Calculation

The average worker in Barbados earns BBD 3,000 – 4,500 monthly. That amounts to BBD 36,000 – 54,000 annually. Top management roles can earn as high as BBD 8,500 monthly – BBD 102,000 annually.

If, for instance, you fall in the latter as a Barbados resident, here’s what your monthly take-home would be:

Item Calculation Amount (BBD)
Gross Monthly Income — 8,500.00
NIS Contribution (11.1%) 11.1% × 5,280 586.10
PIT (Personal Income Tax) (12.5% × 4,166.70) + (28.5% × 3,833.30) 1,613.30
Total Deductions 586.10 + 1,613.30 2,199.40
Net Monthly Income 8,500.00 − 2,199.40 6,300.60

Too much Math jargon? Yeah, we thought so too.  It’s why you should simply use our payroll calculator here. 

Meanwhile, hiring a Bajan resident or sending your employee to work in Barbados has never been easier than now with our recruitment agency. Let’s help you get your business up and running in Barbados!

Employer and Employee Responsibilities

Both employers and employees have well-delineated responsibilities in ensuring proper remission of funds to both the NIS and the Barbados Revenue Authority, where applicable. More of these responsibilities fall on the employer. 

The Employer is to deduct both NIS and PAYE contributions – 11% for NIS from the employee’s insurable earnings (up to the monthly ceiling of BBD 5,200) and 12.5% [and 28.5%] for personal income tax where applicable. 

He is also expected to pay his employer’s share of 12.75% of the same insurable earnings amount and remit the total 23.75% to the NIS not later than the 15th of the following month. Late payments attract a fine of 1% interest per month on the unpaid contributions, and are solely the employer’s to bear.

On commencement of employment, an employer is required to immediately obtain a National Insurance card from a new employee or within 7 days of job commencement. 

In the event that the card cannot be obtained within the required time frame, the employer is still expected to submit the employee’s contributions. 

Finally, employers are expected to keep detailed payroll and contribution records for at least 7 years, in case of audits or employee benefit claims.

The employee is to register with the National Insurance Department and obtain an NIS number. He is also to check his payslips monthly to ensure his employer correctly deducts and remits the 11%. He is to report suspicious activities to the appropriate authorities. 

The employee is also to inform the NIS if there’s a change in employment status or multiple employers, and file for personal income tax returns annually, by April 30th of the following year. 

Finally, while this is not a responsibility per se, he or she is to file for claims when eligible (e.g., sickness, maternity, unemployment, or pension) using the correct procedures. If you’re paying for it, you could as well use it.

Industry-Specific Taxes

Beyond the standard National Insurance Scheme (NIS) contributions and personal income tax, Barbados’ tax system extends into specific industries through a combination of levies, excise duties, and regulatory fees. 

In Barbados, corporate taxation depends on residency and domicile. A company is resident if its central management and control is located in Barbados, domiciled if it is incorporated in Barbados, and non-resident if its management is outside Barbados.

Resident and domiciled companies are taxed on worldwide income; resident, non-domiciled companies are taxed on Barbados income and foreign income remitted to Barbados; and non-resident and non-domiciled companies are taxed only on Barbados-sourced income.

The tourism sector, which is a major driver of the Barbadian economy, is subject to a range of targeted levies. These include the Room Rate Levy, which ranges from BBD $2.50 – $10 per night, depending on the classification of the accommodation, and a 10% Shared Economy Levy applied to short-term vacation rentals booked through platforms such as Airbnb. 

In the insurance industry, companies are subject to a premium tax that varies between 3% and 5%, depending on the nature and origin of the business. 

Financial institutions, including commercial banks, credit unions, and insurance companies, are required to pay an asset-based tax, calculated at a fixed percentage of their average domestic assets. They are also subject to a 2% Foreign Currency Transaction Levy, which is charged on the purchase of foreign exchange.

Products like alcohol, tobacco, and fuel are subject to high excise taxes, reflecting both their environmental and public health impact. 

These industry-specific taxes – and more not mentioned – form the skeletal framework of Barbados’ fiscal structure, balancing revenue generation with strategic economic planning.

Simplify Barbados Payroll and Income Tax with RemotePeople

Taxation is hard; trying to figure it out yourself can be a bit overwhelming. The penalties for tax discrepancies are not worth the risk of the ‘adventure’

At Remote People, we do all the heavy lifting for you with our timely, accurate, and compliant payroll operations system. Let us help you today.