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The Bahamas

Expat Briefing Editorial Team
25 September, 2015


Recently described by its Prime Minster Perry Christie as a country “ripe for investment,” the Bahamas is a byword for tropical paradise and was last year chosen as the best low-tax expat destination by relocation specialists Bradley Hackford.


Where Are The Bahamas?

The Bahamas comprise an archipelago of about 700 islands, roughly 50 miles south-east of Florida, in the Atlantic. About 30 of the islands are inhabited. The total land area is 5,360 sq m. The two largest islands are New Providence and Grand Bahama. The time zone is 5 hours behind GMT, i.e. US Eastern Standard Time.

The population of the Bahamas is approximately 320,000, mostly concentrated in Nassau, the capital, on New Providence Island, and Freeport. English is the official and everyday language, although Creole is also spoken.


What’s The Weather Like?

The climate is sub-tropical; winter temperatures average between 21 C and 24 C and summer temperatures between 27 C and 32 C. There is a rainy season which lasts from May until October and peaks in June when rainfall averages about 250mm over the month. The cooler, drier winter months provide some respite from the uncomfortable humidity often experienced in the summer. Average daily sunshine hours range from 7 hours a day in December and January to 10 hours a day in the summer months. A note of caution: the Bahamas regularly finds itself in the path of hurricanes and other tropical storms, which can cause extensive wind and flood damage; the latter can be exacerbated by the islands’ low-lying geography, with most of the country at or near sea level.


From Colony To Independence

The Bahamas became an English colony in 1718. Much of the population, black and white, arrived by immigration from the Americas. In 1973, the Bahamas became an independent member of the Commonwealth, although the Queen of England remains head of state, represented by a Governor-General.

There is an independent judiciary and English common law forms the basis of legislation, but many Bahamian statutes have been added over the years. The highest local court is the Supreme Court, and there is a Court of Appeal; final appeals can be made to the Privy Council in London.


The Economy And Business

The Bahamian economy was weak in the years after the Second World War, but determined efforts to develop the tourist trade have been successful, so that it contributes more than 60 percent to GDP; more recently, the government has encouraged the financial services industry, particularly banking and insurance, which, when combined with business services, accounts for about 35 percent of GDP. The Bahamas is now one of the wealthiest countries in the Caribbean region, with GDP per capita of USD25,000 in 2014. Nevertheless, unemployment has been a continuing problem in the Bahamas and the unemployment rate was around 15 percent in 2014.

The Bahamian economy is closely linked to that of the US, and inflation rates are comparable. Indeed, in June 2009, the IMF concluded that the global economic downturn had put significant stress on the Bahamian economy because of its strong ties to the US economy, although the Bahamas’ low debt ratios provide scope to deal with the current difficult economic environment.

In terms of business and communications infrastructure, the Bahamas are very well-developed. The business environment is particularly well-attuned to the finance sector as a result of the Bahamas' long-term policy of promoting itself as an international finance centre, accompanied by a well-developed regulatory structure; as the economy depends heavily on the offshore financial sector, the government tries hard to avoid use of the island for money laundering. 

There is a wide range of professional services in the Bahamas, particularly for the insurance, trust management and mutual fund sectors. The Government has understood the importance of e-commerce for the future of international business and is making a determined attempt to become a centre of e-commerce development.

There is relatively little Government involvement in business in the Bahamas, particularly for offshore businesses. Onshore business activity requires a license under the Business Licenses Act 2010.


Exchange Controls

The Bahamas' exchange controls apply only to the Bahamian dollar and to resident companies and individuals. There are no other capital or exchange controls applying to non-residents or to the various forms of offshore entity, which are allowed to import and export funds in all currencies. 

In February 2006 the Central Bank announced the relaxation of exchange controls relating to real estate investments, foreign currency transfers, mortgages, and debt and equity instruments.


Foreign Investment

The foreign investment regime in the Bahamas is complex, largely because of the variety of types of support and incentive that are offered, coupled with legislation protective of Bahamian interests and employment, and exchange controls.

The Bahamas have a National Investment Policy vested in the National Economic Council; it is operated by the Bahamas Investment Authority, which is the first port-of-call for any intending inward investor.

Among the incentives that are available are exemption from customs duties, exemption from property taxes, subsidised land and buildings, support for training and retraining, freedom from licensing and permit rules. The Bahamas belong to a number of international preferential trade groupings which may assist in reducing tariffs on exports from the Bahamas to certain other markets.


Taxation

There’s a reason why the Bahamas was placed top of the low-tax expat destination league: there is no income tax, capital gains tax, or capital transfer tax. Employees pay national insurance contributions, and there is stamp duty on property and mortgage transactions, and a tax on real property; customs duties are quite high on most imported goods. A value-added tax was introduced in 2015 at a rate of 7.5 percent.

With regards the taxation of businesses, there are no taxes on profits, dividends or income or capital gains, and there is no withholding. The main taxes impinging on companies are business license fees, stamp duty, property taxes and import duty. Most offshore or non-resident entities are exempt from business license fees and many are exempt from stamp duty. Corporate entities pay incorporation or registration fees to the Government.

In the 2015 Budget, the Government announced that residential property tax rate will be lowered by and that taxpayers who are 65 and over will get a further reduction (see below). A National Health Insurance system is also to be introduced from January 1, 2016, although the Government has said that the system will not require new taxes or fees.

Since the Bahamas do not levy direct taxes, there are no double tax treaties between the Bahamas and other countries. However, the Bahamas has committed to new standards in tax transparency and as of 2015 the territory has signed Tax Information Exchange Agreements with 30 countries, including the UK, Germany, France, China, Canada and Australia.


Bahamas Companies

The majority of companies formed in the Bahamas for offshore purposes are incorporated under the International Business Companies Act 1989. Until 2001, there was no need to register details of beneficial owners, directors or officers, but under the IBC Act 2001 which came into force at the start of 2001 IBCs are required to submit their identities, addresses and names of directors and owners to the Registrar General's Department. Otherwise, statutory requirements are minimal, and flexible.

A domestic resident company limited by shares is usually formed for the purposes of carrying on local business. There must be at least two directors. The company's annual return includes a list of the members, and is kept on the public register. An annual audit can be dispensed with, if all shareholders agree. There is no requirement to file financial statements. Shares need not have a par value, and when paid up, need not have distinguishing numbers. Bearer shares can be issued with exchange control permission.


Entry And Residence

Tourist visas are granted readily. But people wishing to stay for longer periods without working must obtain a residence permit from the Immigration Department.

Major international investors and existing owners of properties worth more than USD1.5m receive accelerated treatment of residence applications.

Work permits are necessary for non-Bahamians to be employed: key (senior or specially-skilled) people are issued permits; in other cases it is wise to discuss the possibility of a permit with the Bahamas Investment Authority in advance.


Property

The International Persons Landholding Act 1993 reversed a previously deterrent stance and actively encourages the purchase of local residential property. Acquisition of a single family dwelling or up to five acres of vacant land for construction of a dwelling no longer needs an advance permit, but can be registered after purchase.

However, foreign buyers will require a permit however if the property is undeveloped land and of five acres in size or larger, or the property is not a private residence, or it is not intended for development as such.

Although at the time of writing, one bedroom apartments were selling for around USD50,000, and two/three bedroom one-story houses in need of a little TLC were changing hands for around USD70,000, with limited space for development property prices are on the high side, although they are probably more reasonable than many other small low-tax jurisdictions. Expect to pay double these prices for more comfortable properties in sought after locations. More substantial family-sized homes are worth USD500,000 upwards.

As from July 1, 2015, stamp duty on real estate transactions is 2.5 percent. Prior to July 1, 2015, stamp duty on the conveyance or real property ranged from 4 percent on the portion of the value below USD20,000 up to 10 percent when the value of the consideration was greater than USD100,001.

There is also an annual real estate tax, which is 0.75 percent on the value between USD250,000 and USD500,000; 1 percent on the value between USD500,000 and USD1m; and 0.25 percent over USD5m. However, under pending legislation, the property tax for owner-occupied property between BSD250,000 and BSD500,000 will be reduced from 0.75 percent to 0.625 percent.


Getting There

The Bahamas is served by a number of international airports, the largest of which is Lynden Pilding International Airport at Nassau from which there are regular flights to and from cities in North America and Europe. The Bahamas also has excellent port facilities and is a regular stop on the cruise circuit.




 

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