Barbados 2026 Budget: Key VAT Changes Explained

The Barbadian Minister of Finance presented the 2026 Budget, named “Greater Will Our Nation Grow”, the first budget delivered outside of an IMF programme. Apart from highlighting the country’s improved fiscal position, the 2026 Budget also proposed new tax measures, including VAT-related measures.

Proposed VAT Measures

The Minister of Finance outlined that Barbados’s debt-to-GDP ratio has decreased from 178.9% in 2018 to 93.3% as of January 31, 2026. Additionally, the Minister stated that the economy has experienced 18 consecutive quarters of growth, expected to extend to 19, with key metrics including an unemployment rate of 6.1%, real GDP growth of 2.7%, forecasted capital expenditure of USD 520 million for the current quarter, and a budgeted USD 875 million in capital expenditure for 2027.

However, to mitigate the economic consequences of various geopolitical events on the cost of living, the 2026 Budget proposes several VAT measures. One of the proposed measures is to increase the VAT registration threshold from BBD 200,000 (USD 99.500) to BBD 350,000 (USD 174,000). If adopted, the measure will take effect on October 1, 2026, and will exempt smaller taxable persons from VAT compliance and administrative filings.

In the tourism sector, rental cars can qualify as “eligible tourism services” and benefit from a 10% reduced VAT rate, provided they generate at least 60% of their revenue in foreign currency. Also, stand-alone restaurants will gain duty-free access to spirits and exemptions from duties and VAT on commercial kitchen equipment, aimed at supporting tourism-related businesses. 

Additionally, the 2026 Budget proposes raising the de minimis threshold for duty-free personal imports from BBD 60 (USD 30) to BBD 150 (USD 75), while goods valued between BBD 150 and BBD 200 (USD 100) remain duty-free but are subject to VAT. Furthermore, the full exemption from customs duties and VAT on CCTV systems, burglar alarms, dashcams, and GPS devices has also been proposed.

Other VAT measures include extending the VAT and excise tax holiday on EVs until March 31, 2029, a two-year extension of duty and VAT waivers on residential generators, transfer switches, water tanks, and pumps, and capping VAT on fuel.

Conclusion

With the 2026 Budget, the Barbadian government aims to remove administrative friction that typically prevents small businesses from scaling, protect the broader economy from external price shocks, and ensure that the tourism value chain remains profitable even as global travel trends evolve. Moreover, by limiting VAT on fuels, the government seeks to mitigate external factors from being embedded in domestic prices.

Source: KPMG