As a former colony under British rule, the foundation of Bahamian law and the legal system of The Bahamas is the common law of England.
The Bahamas is a parliamentary democracy based on the Westminster system of government consisting of three branches: the executive, a bicameral parliament, and the judiciary. The relationship between each branch is governed by the principle of separation of powers and the operation of each branch is enunciated in a written constitution.
The judiciary of The Bahamas comprises the Magistrates′ Court, the Supreme Court, the Court of Appeal, and the Judicial Committee of His Majesty′s Privy Council.
The Magistrates′ Court is presided over by stipendiary and circuit magistrates who exercise summary jurisdiction in criminal matters and civil matters involving amounts not exceeding BSD20,000. Currently, there are 17 Magistrates′ Courts throughout The Bahamas, with most located in New Providence (the most populous island in The Bahamas).
The Supreme Court bench consists of a Chief Justice and not more than 20 additional justices. The Supreme Court has unlimited original jurisdiction in civil and criminal matters and such appellate jurisdiction as may be conferred upon it by law.
The Court of Appeal, the highest resident court within The Bahamas, is made up of not more than six justices of appeal, inclusive of its president and has jurisdiction in criminal, constitutional, and civil matters.
The Judicial Committee of His Majesty′s Privy Council is the highest court for The Bahamas, which sits in England to hear appeals from the Court of Appeal.
The prior approval of the government of The Bahamas is required before a foreign investor invests in The Bahamas. All non-Bahamians are required to submit a formal investment proposal to the Bahamas Investment Authority (BIA), which serves as the secretariat of the National Economic Council and The Bahamas Investments Board.
Investment in Bahamian Business
The current investment policy reserves certain sectors of the Bahamian economy for investment by Bahamians, as follows:
(International investors may engage in the wholesale distribution of any product the investor produces locally.)
The following sectors are open to foreign investment; the list is non-exhaustive, and investors are encouraged to communicate their intended investment activity to the BIA:
In addition to BIA approval, Exchange Control Regulations and policies may bear upon a particular transaction and in certain instances may require that foreign investment inflows are granted approval, that entities wholly or partially owned by foreign investors are appropriately designated, and that “Approved Investment Status” is granted to foreign investors or lenders with respect to their investment or loans. Over recent years (including in early 2024), the Central Bank of The Bahamas has taken various steps to simplify or “relax” the Exchange Control regime and administrative arrangements, or to delegate authority for certain matters to local financial institutions, and a prudent investor or lender would want to obtain advice regarding what approvals may be required (or now dispensed with or delegated to local banks) in respect of their transaction.
Investments in Property
Subject to any exceptions in the International Person’s Landholding Act, non-Bahamians acquiring real property or having an interest in real property must first apply for a permit from the Investment Board. Eligibility for a permit includes a due diligence review of the intended purchaser.
Steps to Obtain Approval
A foreign investor interested in undertaking a significant development project or commercial enterprise would, as a first step be required to obtain BIA approval to invest in a business within The Bahamas. Such application must be supported, in addition to routine due diligence materials on the applicant, by a detailed investment proposal to the BIA. The proposal should include explicit details regarding the nature of the investment, the island on which the investment/business would take place, due diligence and financial details regarding the beneficial owners, employment projections for Bahamians and non-Bahamians, whether work permits or any concessions under the relevant legislation are required, and whether the investment will include the acquisition of land.
The proposal is reviewed by the BIA and, where required, based on internal administrative policies, referred to the National Economic Council for a decision. This process may take between one and six months, depending on the nature and complexity of the investment.
Following approval from the BIA, the investor will be directed to:
A business licence may be approved within 10 to 12 business days of receipt of an application with supporting information, though longer timelines are common for more complicated applications.
In addition to BIA approval, the investor must obtain the approval of the Central Bank of The Bahamas (the “Bank”), pursuant to the Exchange Control Regulations, to make the required investment for recognition of the beneficial owners of the enterprise and to be granted Approved Investment Status in relation to their foreign currency investment. The timeframe for this process is between two and eight weeks.
Consequences of Investing Without Approval
In as much as the prior approval of the BIA and the Bank are respectively required before a foreign investor makes a capital investment within The Bahamas, a major consequence of investing without the requisite approvals is that the investor cannot receive returns on capital.
The Bank, via the Exchange Control Regulations Act and the Exchange Control Regulations, has wide powers to make orders to prevent capital transactions involving the movement of funds to and from The Bahamas. The Bank also regulates and may restrict the conversion of Bahamian dollars to a foreign currency to make capital returns to non-Bahamians, where the underlying transaction/investment did not receive required approvals.
A failure to obtain from the Investments Board a Landholding Permit or Certificate, where such approval is required pursuant to the International Persons Landholding Act, may also result in the relevant transfer instrument or deed being null and void for all purposes of law.
Sanctions
Sanctions under the Exchange Control Regulations Act for non-compliance with the Exchange Control Regulations include:
Where a foreign investor fails to obtain a business licence under the Business Licence Act, they may be liable upon summary conviction to a fine of BSD5,000 and a sum of BSD100 for each day the offence continues subsequent to the date to which the conviction relates.
Generally, the conditions attached to the approval of foreign investors are found within a Heads of Agreement (setting out key terms that form the basis on which two parties intend to form a contract) executed between the government of The Bahamas and the foreign investor. In this regard, certain factors such as the sector of the economy being considered for foreign investment, the environment or infrastructure of the area or island being considered, the nature and scope of the foreign investment, the number of jobs expected to be created and any applicable government concessions will help to determine the type of conditions for a particular foreign investment project.
For example, it is often the case that the government of The Bahamas will require within a Heads of Agreement that a certain number of jobs be filled by Bahamians, continuing education and training be made available to employees, suitable infrastructure and essential services be put in place, and safety measures implemented to protect a particular area or environment, just to name a few.
There is no specific legislative framework in place that gives investors the ability to challenge decisions if a particular investment is not authorised by the government of The Bahamas.
The most common forms of legal entities within The Bahamas are companies incorporated under the Companies Act and the International Business Companies Act.
Some of the main characteristics of each type of company are outlined below.
Companies Incorporated Under the Companies Act
Companies Incorporated Under the International Business Companies Act
Within 48 hours from receipt of the relevant documents, a company may be incorporated under the Companies Act and the International Business Companies Act. The main steps under both Acts are:
Companies Incorporated Under the Companies Act
Companies incorporated under the Companies Act are subject to annual reporting and disclosure requirements. The following lists must be submitted to the Registrar of Companies.
Companies Incorporated Under the International Business Companies Act
Companies incorporated under the International Business Companies Act are subject to the following reporting and disclosure requirements.
The directors of companies incorporated under the Companies Act and the International Business Companies Act are charged with the responsibility of managing the company. Generally, this rule is subject to any limitation as provided for in any unanimous shareholder agreement and the constitutional documents of the company.
Companies Act
The typical management structure of a company is based on a single-tier system and consists of a board of directors responsible for appointing officers. However, subject to any limitation in the company’s articles of association or a unanimous shareholder agreement, the directors may delegate their powers to a single director, a committee of directors, or officers, and specify their duties to manage the business and affairs of the company to them.
The officers are, however, restricted from issuing shares, declaring dividends, purchasing or redeeming shares, approving financial statements, or amending the company’s articles of association.
The International Business Companies Act
The usual management structure of an international business company is also based on a single-tier system and consists of a board of directors responsible for the appointment of officers. Subject to any limitations in the memorandum or articles of association or in a unanimous shareholder agreement, each officer or agent has similar powers and authority to the directors, except the power to fix emoluments of directors with respect to services provided to the company.
Directors of an international business company are also permitted to designate one or more committees, each consisting of one or more directors. The only limitations of such committees are the powers to fill a vacancy in the board of directors and appoint and remove officers or agents of the company.
The directors owe a fiduciary duty to their companies and should avoid situations where their duty conflicts with their personal interests. In accordance with the Companies Act and the International Business Companies Act, directors, officers and agents must act honestly and in good faith with a view to the best interest of the company and exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances in performing their functions.
Where a current or former director or officer has acted in good faith with a view to the best interest of the company and, in certain cases, had reasonable grounds to believe that their conduct was lawful, the company may indemnify such person.
Section 58 of the International Business Companies Act provides that subject to any limitations in its memorandum or articles of association or any unanimous shareholder agreement, a company may indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal or administrative proceedings, any person who:
Also, under the common law of The Bahamas, there is the concept of piercing the corporate veil based on English common law principles.
Employment relationships are governed principally by the implied and expressed terms of the employment relationship. In The Bahamas, these terms (where applicable) may be gleaned from the following sources:
In particular, where an employment relationship has been created by oral agreement, the terms of the employment relationship are espoused principally from English common law (as applicable), local common law, and local statute (in particular, the Employment Act and the Employment (Amendment) Act).
The privileges associated with the freedom to contract exist in The Bahamas. This freedom, however, is subject to the relatively inalienable rights of the parties created under the Employment Act. These basic rights represent and dictate the minimum standard of behaviour and expectations between an employer and employee.
The termination of employment relations is governed by Sections 26 to 28E of Part VI (redundancy, lay-offs, and short-time) of the Employment Act as amended, Sections 29 and 30 of Part VII (termination of employment with notice), Sections 31 to 32 of Part VIII (summary dismissal) and Sections 34 to 48 of Part X (unfair dismissal) of the Employment Act.
Although there are no minimum requirements for the duration of an employment relationship, the employer’s duty upon the termination of a contract without cause varies depending upon the employee’s tenure of service with the employer.
Generally, when terminating the employee without cause, the employer is required to give the employee reasonable notice of the termination. The Employment Act establishes the minimum notice requirements and provides the employer with the power to elect whether to give notice or to give a payment in lieu of such notice. For example, an employee who has been employed at least six months but less than 12 months is entitled to one week’s notice or pay in lieu thereof, and an employee who was employed for 12 months or more is entitled to two weeks’ notice or pay in lieu thereof if such employee does not hold a managerial or supervisorial position, or one month’s notice or pay in lieu thereof if such employee does hold such a position.
In addition to this notice period (or payment in lieu thereof), the Employment Act places an obligation on the part of the employer to pay to the employee a sum representing the product of the dismissed employee’s bi-weekly or monthly salary (depending on their role) and the number of years of such employee’s service. This additional sum is usually referred to as “severance pay”. Severance pay acknowledges the dismissed employee’s years of service and is capped at six years for a non-managerial/non-supervisorial employee and 12 years for a managerial/supervisorial employee.
It is significant to note that the Employment Act does not confer an obligation on the part of the employer to give notice to an employee of less than six months′ tenure.
Notice of termination can be given verbally. However, the employer must ensure that the notice of termination was properly and unequivocally communicated to the employee and that they exercised their complete obligations upon termination. Thus, the parties’ conduct immediately after termination has been made orally may be evidence of the nature of the notice given.
Where notice is not properly given or is insufficient, an employee is entitled to claim damages for wrongful dismissal.
Where the employment contract confers a greater benefit on the employee regarding the duration of the notice period or the value of the pay in lieu of notice, then such provisions and/or benefits will apply. Where no notice period is provided for under the contract of employment, the calculation set out in the Employment Act will apply.
The Employment Act also mandates that employees have a right not to be unfairly dismissed. Whilst the question of whether the dismissal of an employee was fair or unfair is to be determined in accordance with the substantial merits of each case the Employment Act provides instances in which a dismissal will be deemed to be unfair which include dismissal:
These categories are not closed and it is important to note that the rules of natural justice should be applied when seeking to terminate an employee.
Under the Employment Act, the maximum number of daily work hours is eight, and weekly work hours is 40, except for employees who hold managerial or supervisorial positions or work in any industrial, construction, manufacturing or transhipment enterprise, or essential service. Employees are also entitled to 48 hours of rest, with at least 24 of such hours being consecutive.
Where the relevant employee is required or is permitted to work in excess of their daily work hours, they are entitled to overtime pay, which is calculated at 1.5 times their regular rate of wages and two times the regular rate of wages if the overtime is performed on a holiday.
Contracts of employment may be terminated by either party upon giving the other party reasonable notice of the termination, by the employer without notice as detailed previously or by the employer “for cause” when an employee commits a fundamental breach of the contract such that the nature of the breach is repugnant to the interests of the employer.
An employment contract may also be terminated on the grounds of redundancy. An employee’s position is lawfully made redundant in the following circumstances:
Except where an employee is terminated for cause, the employer is required to either give notice or pay in lieu of notice (see 4.2 Characteristics of Employment Contracts).
Before the employer can lawfully terminate an employee or employees on the grounds of redundancy, the employer must:
Generally speaking, the role of an employee representative is not required by law.
Where the workforce is unionised, industrial agreements provide for the appointment of a representative, which would include, at a minimum, the purpose and functions as prescribed in the Industrial Relations Act. However, the extent of the rules and practices regarding employee representation depends on the terms negotiated between the relevant parties and thus may vary.
For those employment relationships to which an industrial agreement applies, a workplace representative is appointed who shall generally safeguard the interests of the employees and hear the collective views of the staff with a view of forwarding the same to the employer for their/its attention.
Trade unions are required by law to co-operate in ensuring effective communication and consultation with the employer regarding the employees’ views and the problems they face in meeting the employer’s objectives. The trade union is also obligated to keep all employees adequately informed of the main terms and conditions of the employment, job requirements, reporting requirements, disciplinary and grievance procedures, safety and health rules, and the conclusions reached through negotiations and consultation with the employer.
Contributions to the National Insurance Board (the Bahamian equivalent to social security) are the only taxes that must be paid on behalf of employees. Employees currently contribute the equivalent of 3.9%, and employers contribute the equivalent of 5.9% of an employee’s salary up to the employable wage ceiling. With effect from 1 July 2024 the contribution rate will increase. Employees will contribute the equivalent of 4.65% and employers will contribute the equivalent of 6.65%. The employable wage ceiling is BSD740 per week, from a previous ceiling of BSD710 per week.
Business Licence Tax
All persons (inclusive of companies) conducting business within The Bahamas must be granted a business licence. Although certain activities are exempt from the licence requirements under the Business Licence Act, generally, there is a modest business licence tax (calculated based on a percentage of the turnover for the preceding year) for companies conducting business within The Bahamas. The Business Licence Act has been amended to reflect that financial service entities, international business companies, proprietary trading entities and family offices with a turnover of BSD100,000 or less are not exempt from paying business licence taxes.
Additionally, the government has signalled additional amendments to the Business Licence Act which are discussed further in the Trends and Developments article of the Chambers 2024 Global Practice Guide to Doing Business In... The Bahamas.
Value Added Tax (VAT)
All goods and most services supplied by a VAT-registered business in The Bahamas that are neither subject to the zero rate nor exempt from VAT are subject to VAT at the standard rate (presently 10%) or such other rate as prescribed by law for certain goods and services (eg, real estate transactions). VAT is also charged on goods and some services that are imported from outside The Bahamas.
Stamp Duty
Stamp duty is payable in respect of certain transactions (namely transfers of personal property). A Stamp Duty may also arise on the conversion of funds from Bahamian dollars to United States dollars where such funds are to be used for remittance or transferred out of The Bahamas.
Qualified Domestic Minimum Tax Top-Up
See the Trends and Developments article of the Chambers 2024 Global Practice Guide to Doing Business In... The Bahamas.
The following is a non-exhaustive list of various pieces of legislation that provide tax concessions to persons who engage in business in The Bahamas.
The Hotels Encouragement Act
The Hotels Encouragement Act allows duty-free entry within The Bahamas of approved materials for, inter alia, the construction, rehabilitation, remodelling, equipping, and furnishing of a new or existing hotel or resort (taking into account both large and small-scale projects) together with a concession from real property taxes for a prescribed period.
Moreover, any entertainment facility, nightclub, restaurant, and shop within a designated area (described by an order of the responsible minister) is also afforded the same concessions.
The concessions under the Hotels Encouragement Act are geared towards any person or company or any group of persons or companies who are (acting in conjunction) prepared to undertake the construction or remodelling of a new or existing hotel or resort.
The Family Island Development Encouragement Act
The Family Island Development Encouragement Act allows persons to receive duty concessions on the importation of building materials (inclusive of plumbing, electrical, mechanical, and construction materials of all kinds) for residential and/or commercial development on certain islands within The Bahamas.
The Industries Encouragement Act
The Industries Encouragement Act allows for duty-free concessions for the importation of machinery, building, and other materials or appliances for an approved manufacturer who is manufacturing an approved product together with an exemption from real property tax for 15 years concerning any relevant factory premises.
The concessions under the Industries Encouragement Act are geared towards such manufacturers and products approved by the responsible minister to encourage the establishment and development of certain industries within The Bahamas.
Hawksbill Creek, Grand Bahama (Deep Water Harbour and Industrial Area) Act
The Hawksbill Creek, Grand Bahama (Deep Water Harbour and Industrial Area) Act allows for the Port Area known as Freeport, a free trade zone, to be free from certain taxes (eg, excise tax, stamp duties, and most customs duties) until 2054.
The City of Nassau Revitalisation Act
The City of Nassau Revitalisation Act allows incentives and duty concessions for owners of property situated in the city of Nassau (located on the island of New Providence) who are desirous of restoring, repairing, and upgrading the buildings, both commercial and residential.
The Bahamas Vacation Plan and Time-Sharing Act
The Bahamas Vacation Plan and Time-sharing Act allows duty-free concessions for persons who have been granted a developing owner’s licence with respect to building supplies for the construction of timeshare facilities.
This is not applicable in The Bahamas as there are no laws governing the same.
In The Bahamas this is not applicable as there are no laws governing the same.
Transfer pricing is not applicable in The Bahamas as there are no laws governing the same.
There are no anti-evasion rules in The Bahamas as there are no relevant laws.
Merger control notification is not applicable in The Bahamas as there are no laws governing the same.
There is no merger control procedure in The Bahamas.
The topic of cartels is not applicable in The Bahamas as there are no relevant laws.
Abuse of dominant position is not relevant in The Bahamas.
For the most part, the legal regime applicable to IP rights as outlined below includes:
A patent for an invention is the title granted by the government to protect an invention. The right conferred by a patent excludes others from making, using, or selling the invention.
A patent is granted by the Bahamian government through the Intellectual Properties Section of the Registrar General’s Department through the following process:
The entire process, from the date of submission to obtaining the Letters of Patent, could take up to one year.
Generally, the term of every patent shall be 16 years from the date of the patent as entered on the register of patents except as otherwise provided within the Industrial Property Act. However, renewals are possible under the Industrial Property Act.
Unless provided for to the contrary, a holder of an exclusive licence under a patent (as similarly a patentee; ie, a person entered on the register of patents) has a right to take proceedings in respect of any infringement of the patent committed after the date of the licence and, in awarding damages or granting any other relief in such proceedings, the Supreme Court shall take into consideration any loss suffered or likely to be suffered by the exclusive licensee as such or, as the case may be, the profits earned by means of the infringement so far as it constitutes an infringement of the rights of the exclusive licensee as such.
A trade mark is a mark, symbol or picture, or a combination used to distinguish goods to indicate that they are goods of the proprietor separate from the goods of others in the marketplace. A registered trade mark gives a proprietor exclusive rights to use the mark for the designated services of the mark.
The registration of the trade mark is governed by the Trade Mark Regulations and the policies set by the Registrar General’s Department.
To register a trade mark, the process is as follows:
The entire application process – inclusive of the publishing of the mark in the official gazette, and the final approval and registration of the mark – can take up to 18 months.
The registration of a trade mark is for 14 years but may be renewed from time to time in accordance with the provisions of the Trade Marks Act.
Under the Trade Marks Act, persons shall only be entitled to institute proceedings to prevent or recover damages for the infringement of a registered trade mark.
In any legal proceeding in which the validity of the registration of a registered trade mark comes into question and is decided in favour of the proprietor of such trade mark, the Supreme Court may certify the same, and if it so certifies, then in any subsequent legal proceeding in which such validity comes into question, the proprietor of the said trade mark, on obtaining a final order or judgment in their favour, shall have their full costs, charges, and expenses as between attorney and client, unless in such subsequent proceedings the court certifies that they ought not to have the same.
Similarly, in addition to the statutory penalties of a monetary fine or the forfeiture of all goods in respect of which an offence was committed, the Supreme Court can make such order as it sees fit with respect to suitable remedies.
The definition of “design” for the purposes of the Industrial Property Act means features of shape, configuration, pattern or ornament of an article, or features of a pattern or ornament applicable to articles in so far as such features appeal to and are judged solely by the eye.
Generally, design copyright in a design exists for five years from the date of deposit. However, applications for extensions can be made under the Industrial Property Act.
Every claim for design copyright in a design must be accompanied by a representation or, at the Registrar General’s option, a specimen of the design, and must include certain information as specified by the Industrial Property Act.
Similarly, there are various remedies available through the Supreme Court and applicable to patents under the legislation.
A copyright is a property right that, unless specifically excluded by the Copyright Act, may subsist in the following categories of work of authorship:
Generally, copyright in any work expires after 70 years from the end of the calendar year in which the author dies, save for those limited exceptions outlined in the Copyright Act when the period varies.
Although there is no formal system for copyright registration, this is usually made by the owner of the copyright or of any exclusive right in the work, together with the application and the applicable fee for examination and consideration.
An infringement of copyright shall be actionable at the suit of the copyright owner, and, subject to the Copyright Act, any action for such infringement includes all such relief by way of damages, injunctions, accounts, or otherwise.
Although not yet fully brought into force to date, the government of The Bahamas has introduced the following pieces of legislation via parliament whereby it intends to ultimately provide a better legal framework to protect IP rights:
The Data Protection (Privacy of Personal Information) Act (DPA) governs the protection of a living individual’s personal data in The Bahamas.
The Act applies to data controllers, defined as persons that determine the purpose for which and the manner in which any personal data is used or is to be used.
The Minister with responsibility for information privacy and data protection may make regulations to:
A foreign company targeting customers within The Bahamas will be governed by the provisions of the DPA where it is deemed a data controller and establishes a legal presence within The Bahamas for the purpose of processing personal data in the context of that establishment or, where no legal presence is established within The Bahamas, such data controller uses equipment in The Bahamas for processing data otherwise for the purpose of transit through The Bahamas.
The office of the Data Protection Commissioner (DPC) is established by the DPA as a corporation solely to enforce data protection rules as enacted by the DPA. Its function is to regulate data controllers and processors and provide internationally accepted rules to ensure that the personal information of citizens is collected, kept up to date, stored, used, disclosed, and disposed of lawfully.
The DPC is also empowered to encourage trade associations and other bodies to prepare codes of practice for dealing with personal data and to approve such codes of practice.
Under the DPA, the DPC has the authority to do the following:
See the information set out in the Trends and Developments article of the Chambers 2024 Global Practice Guide to Doing Business In... The Bahamas.
Sassoon House
Shirley Street & Victoria Avenue
PO Box N-272
Nassau
The Bahamas
+1 242 322 4130
+1 242 328 1069
info@gtclaw.com www.grahamthompson.comMoving The Bahamas Forward in 2024
The Bahamas has been a well-established destination from the 1950s and continues to enjoy a stable government and a parliamentary democracy based on the Westminster model. Investors rely on a seasoned and experienced legal infrastructure underpinned by a well-regarded court system with ultimate appeal to the Privy Council in the UK. World-class housing, internationally accredited education and medical facilities, and easy accessibility to the United States make it an attractive destination for ultra-high-net-worth (UHNW) homeowners and investors. Immigration and residency options include permanent residence and annual residence. For business owners, the Commercial Enterprises Act facilitates expedited approvals for a variety of entrepreneurial ventures that can be operated both within and outside of The Bahamas.
The economy of The Bahamas has been remarkably resilient in the wake of the COVID-19 pandemic. The volume of visitor arrivals has continued to increase along with greater spending in the economy
On 29 May 2024 the Prime Minister of The Bahamas, the Honourable Philip Davis KC, tabled “Budget 2024: Changing the Status Quo, Changing Lives Communication to Parliament” in the House of Assembly. The government’s Budget Communication has made it clear that the government continues to strengthen national security, economic security and the livelihoods of the people of The Bahamas by seeking to reduce the cost of living, create safer communities, support entrepreneurs, strengthen the borders and build a more inclusive economy by challenging the status quo.
The government seeks to achieve these results by:
The government’s prioritisation of enhancing collection and enforcement systems was evident from the previous budget cycle. Considerable efforts have been and continue to be undertaken with the certain tax assessment and collection initiatives. Current and potential investors should be aware of the rate changes and enhanced scrutiny and collection.
Real property investments
Property investment/development is a particularly robust pillar of foreign direct investment in The Bahamas. All non-Bahamians acquiring an interest (directly or indirectly) are required to be approved by the Investments Board or to register their purchase with that department pursuant to the International Persons Landholding Act. The government has taken some significant steps to improve the ease with which such applications are made (now through online applications and fee payment processing) and to improve the efficiency of handling such matters – roughly halving the previous timelines typically experienced.
Similarly, all real property is (unless specially exempted) subject to annual Real Property Tax and the government has carried out various initiatives (primarily the adoption of electronic portals and payment methods) and improved the options and methods by which property owners may monitor their property’s annual tax and remit payment, with the former system of hardcopy mailing and “over-the-counter” payment largely falling away.
Property transactions valued under BSD1 million are currently subject to the payment of VAT on an ascending scale up to 10% of the assessed value of the property. In an effort to shore up the country’s finances, all real property purchases by non-Bahamians are now charged VAT at 10% of the assessed value of the property. Whilst this rate change was expected to impact investors who traditionally sought to acquire properties worth less than BSD1 million, the market has not shown a significant decrease in activity or a slowdown attributable to the rate change.
The government has announced a policy change with respect to the requirement to qualify for economic permanent residency status. Currently, real estate investments of a minimum of BSD750,000 qualified the investor for economic permanent residency status. The government has indicated that the minimum investment will increase to BSD1 million and the route to obtain such status will include either an investment in real estate or the purchase of Zero Coupon Bonds from the Central Bank of The Bahamas. In both cases the investment must be held for a minimum of ten years. The legislative amendments to effect the policy change have yet to be implemented; however, the government has indicated that the changes are to take effect on 1 January 2025.
Condo-Hotel Tax
Previously, properties not owned by a hotel that form a part of a hotel’s bedroom inventory (condo-hotels) were exempt from paying Real Property Taxes, as they enjoyed the same benefit of various concessions and exemptions granted to the hotel or resort developer pursuant to the Hotels Encouragement Act. Effective as of 1 January 2023, a Condo-Hotel Tax at the rate of 75% of the residential property rate set under the Real Property Tax Act is payable on a unit if it does not report net VAT in excess of the Condo-Hotel Tax. The maximum annual Condo-Hotel Tax payable is currently BSD150,000 per annum.
Corporate income tax
There are currently no corporate, withholding, payroll, or transfer taxes paid by companies incorporated and/or doing business within The Bahamas. Rather, a business operator requires a business licence to operate a business within The Bahamas. Business licence fees are, generally, calculated based on gross turnover. Small businesses – ie, those whose turnover is less than BSD50,000 – pay a flat rate of BSD100 per annum. A rate of 0.50% is charged on turnovers of BSD500,000 to BSD5 million and a rate of 1.25% is charged on each turnover in excess of BSD5 million.
The government has signalled that the implementation of an International Business Income Tax (QDMTT) for large multinational corporations will take effect this year and this will necessitate changes to the current Business Licence and Stamp Tax regimes. It is not intended for a business to be subject to both taxes and the Stamp Tax will be amended to convert the 5% tax on dividends into withholding tax to avoid a potential double taxation.
The government also intends to amend the Business Licence Act, and such amendments will focus on/impact companies with revenues of BSD5 million or more per annum.
The Business Licence Act has been amended to reflect that financial services entities, international business companies, proprietary trading entities and family offices with turnover of BSD100,000 and less are not exempt from paying business licence fees.
Enforcement
The implementation of a corporate income tax will represent a sea-change in tax law in The Bahamas and will depend on effective tax collection (of new and current taxes) to ensure that the government’s objectives can be met. The government has stated that it will be particularly focused on improving tax compliance and enforcement by:
Sassoon House
Shirley Street & Victoria Avenue
PO Box N 272
Nassau
The Bahamas
+1 242 322 4130
+1 242 328 1069
info@gtclaw.com www.grahamthompson.com