Gildan hit with US$91.4m tax bill

Canadian clothing company Gildan Activewear Inc., which is a leading multinational enterprise with operations in Barbados, is reporting US$91.4 million in financial fallout from the implementation of the global minimum tax by both countries.

Management reports that Barbados’ decision to raise corporation tax to nine per cent alone resulted in an additional tax expense of US$58.4 million, but that the overall financial blow was cushioned by a US$41.8 million “positive benefit” from the jobs credit Government introduced last year.



The jump in corporate taxation for Gildan was detailed in reports for the financial year ended December 31, 2024 and during a recent earnings call by its management team. “Our fiscal 2024 results of operations were . .

. impacted by tax reforms, including the enactment of the Organisation for Economic Cooperation and Development’s Pillar Two global minimum tax regime in Canada and Barbados, as well as an increase in the applicable corporate tax rate in Barbados to nine per cent,” the company says. “The enactment of the global minimum tax increased the company’s tax expense by US$33 million, while the corporate tax rate increase resulted in an additional tax expense of US$58.

4 million, bringing the total impact of these changes to US$91.4 million.” Comparing fiscal 2024’s performance with fiscal 2023, Gildan explained that “the increase in the income tax expense and average effective tax rate in fiscal 2024 compared to the prior year, is mainly due to the impact of the enactment of global minimum tax in Canada and the enactment of legislation in Barbados introducing certain tax measures in response to the global implementation of global minimum tax”.

“More specifically, during the second quarter of fiscal 2024, Barbados increased its domestic corporate tax rate applicable to the company from a sliding scale of 5.5 per cent to one per cent to a flat rate of nine per cent, effective January 1, 2024,” it noted. “In addition, Barbados enacted a domestic minimum top-up tax that applies to the company effective January 1, 2024, resulting in a top-up tax on the company’s subsidiaries in Barbados.

The combined result of these events is an effective tax rate of 15 per cent in Barbados.” Gildan added: “During fiscal 2024, the company recognized a current tax expense of US$48 million related to the increase in the Barbados corporate tax rate and a US$33 million top-up tax on the company’s earnings in Barbados. “In addition, the company recorded a deferred income tax charge of US$10.

9 million for the fiscal year ended December 29, 2024, for the revaluation of deferred tax assets and liabilities in Barbados as a result of the increase in the Barbados corporate tax rate to nine per cent”. In Barbados since 1999 Gildan reported that its 2024 net earnings of US$132 million were down US$21 million versus the prior year due to the higher financial and income tax expenses, while adjusted net earnings were essentially flat versus 2023, as higher adjusted operating income was offset by higher financial and income tax expenses”. The corporation has operated in Barbados since 1999 and the island now hosts its “customer related functions, including sales management, marketing, customer service, credit management, sales forecasting, production planning, inventory control, and logistics, as well as finance, human resources and information technology functions”.

Gildan said its selling, general and administrative expenses (SG& A) – nonproduction operational costs – were US$16 million lower in 2024, reflecting the benefit of the jobs credit introduced by Barbados. “During the second quarter of fiscal 2024, the Government of Barbados enacted a jobs credit, in order to foster economic activity and employment in Barbados,” it reported. “The jobs credit was effective retroactively to January 1, 2024 and the company recognised US$41.

8 million during fiscal 2024 as a reduction of SG& A expenses.” Rhodri Harries, Gildan’s executive vice president and chief financial and administrative officer, said the company expected “ongoing benefits from the jobs credit programme”. “And we anticipate that our effective tax rate for 2025 will remain at a similar level to what we saw in 2024,” he stated.

This tax rate was 13.4 per cent compared with 3.1 per cent in 2023.

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