Barbados sets tax rules for approved rental-car companies

Approval brings a combined consumption-tax charge

Approved rental-car companies must charge 10% VAT on rental services and a 2.5% Product Development Levy under section 3(1) of the Tourism Levy Act 2019-57. The policy note applies from 1 October 2026 and requires the levy to be filed and paid using the Revenue Authority’s prescribed return and payment process.^[1][2]

Approval is conditional rather than automatic. An applicant must be compliant with VAT, corporation tax, national insurance and customs obligations, and at least 60% of its rental income must arise from foreign sources and be deposited with a domestic financial institution. The Revenue Authority can verify continued compliance and the policy note links access to the concessionary regime to maintaining approved status.^[2]

Import relief is limited to qualifying cleaner vehicles

Within the approved fleet quota, new battery-electric, plug-in-hybrid and full-hybrid rental vehicles may qualify for relief from import duty, excise tax and VAT. The concession does not cover every vehicle purchase: the company must obtain the necessary approval and satisfy the vehicle and use conditions in the note before importation.^[2]

A qualifying vehicle is generally subject to a five-year retention condition. Disposal or a change of use within that period can trigger the duties and taxes relieved, unless the competent authority authorises the transaction or another stated exception applies. Groups should therefore track each vehicle’s import approval, tax value, use and disposal date rather than treat the fleet concession as an unrestricted exemption.^[2]

Practical effect for cross-border operators

International rental groups and tourism businesses should separate three compliance questions: whether the operating company has approved status, whether each vehicle falls within the authorised quota and technology category, and whether the rental invoice correctly applies both VAT and the Product Development Levy. The 60% foreign-source revenue test also makes banking evidence and customer-source records part of the continuing tax-control file.^[2]