The term 'offshore' is not used
in Bahamian legislation or in describing company forms.
Abstaining from local trading activity is the key
factor which allows use of the various 'offshore'
corporate forms, and ensures long term exemption from
taxation and some or all of stamp duty, exchange controls
and business licensing requirements. Since there are
no general corporate taxes other than stamp duty,
there is no separate 'offshore' sector as such in
taxation terms.
Forms of Offshore Operation
Offshore
(external) operations take place mostly within the
following forms:
Tax Treatment of Offshore
Operations
In the Bahamas
there is no income or corporation tax, no capital gains
tax, no VAT or sales tax, and no withholding tax. Companies
and partnerships pay annual fees to the Government depending
on their nature and capitalisation. There is stamp duty
and there are some property taxes. Exempted Limited
Partnerships are exempt from both, as are Trusts provided
that their beneficiaries are non-resident. Banks and
Trust Companies (ie administrators of trusts) are also
exempt provided that they have non-resident licenses
(this is a matter of practice - a license is issued
as resident or non-resident depending on circumstances).
All of the offshore entities, and non-resident domestic
companies, are exempt from exchange controls. Mutual
Funds are exempt from taxes and exchange controls if
they have an appropriate corporate form; in practice
therefore they are exempt. For further details of stamp
duty and property taxes see Domestic
Corporate Taxes.
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Fees Payable by Financial Institutions
Financial
institutions licensed under the Banks and Trust Companies
Law 1965 pay fees on registration and annual fees (2006)
as follows:
| Authorised
Agents and Authorised Dealers |
$310,000 |
| Authorised
Dealers |
$250,000 |
| Authorised
Agents |
$60,000 |
| Other
Public Institutions |
$25,000 |
| Restricted
Bank and Trust |
$5,000 |
| Restricted
Bank |
$5,000 |
| Restricted
Trust |
$2,500 |
| Non-Active
Bank and Trust |
$1,000 |
'Other
Public Institutions' includes banks and trust administration
companies; 'Restricted' banks and trusts are those that
deal only with a list of customers included in their
license and which cannot be altered without permission.
Captives
are licensed under the External Insurance Act 1983,
and pay a fee of $2,500 on registration and annually
thereafter. In addition, $650 is paid annually for each
underwriting manager employed by a captive insurer.
On registration,
a captive insurer gains exemption from taxes for 15
years.
Resident
insurance companies pay a registration fee of $1,000
and the same annually thereafter, plus 2% of gross premiums
collected each quarter.
Insurance
companies are not permitted to use the International
Business Company or LDC corporate forms, but must establish
a Bahamian domestic limited company or must register
as foreign companies. Captives registered under the
External Insurance Act are exempt from exchange controls.
New insurance
legislation is in the pipeline which will update the
somewhat outdated Bahamian insurance acts.
The Investment
Funds Act 2003 established a new fee structure for investment
funds and fund administration companies:
| Application
Fee for a Investment Fund Licence (Standard Professional
or SMART Fund - non refundable) |
$750.00 |
| Initial
Registration Fee (Recognized Foreign Fund -non
refundable) |
$100.00 |
| Initial
Filing Fee (Investment Funds licensed by an
Unrestricted Investment Fund Administrator) |
$750.00 |
| Annual
Investment Fund Licence Fee (Standard, Professional
Fee payable in or SMART Investment Fund) |
$950.00 |
| Annual
Investment Fund Licence Fee (Self Administered
Standard, payable in the first Professional or
SMART Investment Fund) |
$1,000.00 |
| Annual
Registration Fee (Recognized Foreign Fund) |
$100.00 |
|
Initial principal office fee payable by an Investment
Fund in the first year to Administrator (non-refundable)
|
$500.00
|
| Application
Fee for an Unrestricted Investment Fund Administrator’s
Licence (non-refundable) |
$5,000.00 |
| Application
Fee for a Restricted Investment Fund Administrator’s
Licence (non-refundable) |
$2,000.00 |
| Application
Fee for an exemption from the obligation of having
to obtain an Investment Fund Administrator’s
Licence (non-refundable) |
$1,500.00
|
| Annual
Unrestricted Investment Fund Administrator’s
Licence Fee |
$10,000.00 |
|
Annual Restricted Investment Fund Administrator’s
Licence Fee. |
$5,000.00 |
| Annual
Exemption Fee from the obligation of having to
obtain an Investment Fund Administrator’s
Licence |
$1,500.00 |
NB:
Fees charged by administration or registration agents
are a separate matter; the above fees are simply set
annual dues.
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Taxation
of Foreign Employees of Offshore Operations
This
section refers to the taxation of foreign employees
in the Bahamas. See Domestic
Personal Taxes for the general principles of individual
taxation in the Bahamas, which also apply to the resident
employees of non-resident entities. There are in fact
no personal taxes as such in the Bahamas, and there
is no distinction between the employees of resident
or non-resident operations.
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Exchange Control
The
Bahamas have exchange controls, under the Exchange Control
Act and Regulations 1956, applying to resident individuals
and companies, who need consent from the Central Bank
to conduct operations in foreign currencies. Likewise,
non-resident or offshore companies, who are free to
deal in foreign currencies, require Central Bank consent
to deal in Bahamian dollars.
Residents
comprise: Bahamian nationals, companies beneficially
owned in the Bahamas, and companies whether Bahamanian
or foreign-owned operating within the Bahamas. Foreign
nationals with work permits who live in the Bahamas
are also normally considered to be resident.
Non-residents
comprise: foreign nationals living abroad, or, if living
in the Bahamas, without the right to work there; and
foreign companies and foreign-owned Bahamian companies
trading exclusively outside the Bahamas.
Residents
who want to make external investments in foreign currencies
will usually be allowed to do so, but have to buy the
foreign currency at a premium; non-residents who want
to invest into the Bahamas may do so, but the opportunities
for portfolio investment are very limited.
Exchange
controls are gradually being dismantled, initially in
respect of CARICOM, and it is the intention of the Central
Bank to remove them entirely in due course.
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.
Prior to
the changes, residents purchasing securities or making
real estate investments overseas had to do so through
the Investment Currency Market (ICM), at a premium bid
and offer rate of 25% and 20%, respectively. With immediate
effect, these rates were reduced by half, to 12.5% and
10.0%, respectively.
In addition,
equities of Bahamian Companies listed on BISX can be
cross listed on principal CARICOM exchanges (i.e. Barbados,
Jamaica, ECU and Trinidad & Tobago), within prescribed
limits.
Foreign companies
listed on principal CARICOM exchanges may list issued
and outstanding equity securities on BISX.
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Offshore Activities in
the Bahamas
The
International Business Company and its cousin, the Limited
Duration Company, are not allowed to do business with
Bahamian residents, but are allowed the following activities
in the Bahamas:
- To maintain
bank accounts;
- To make
and maintain contact with professional firms;
- To maintain
books and records;
- To hold
meetings of directors or members;
- To lease
real estate for use as an office.
It
is possible to obtain a license from the Minister of
Finance to carry out other types of business activity
on the island, if he considers it is in the interests
of the jurisdiction.
Other offshore
and non-resident entities operate under broadly similar
regimes to the International Business Company.
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Employment
and Residence
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.
Anyone wishing
to reside in the Bahamas must obtain a residence permit
from the Immigration Department. Home-owners can obtain
an annually-renewable Home Owner's Residence Card which
acts as a visa for entry and residence during its validity.
Major international investors and existing owners of
properties worth more than $500,000 benefit from accelerated
treatment of residence applications
The International
Persons Landholding Act 1993 reversed a previously deterrent
stance and actively encourages the purchase of local
residential property by foreigners. Acquisition of a
single family dwelling or up to 5 acres of vacant land
for construction of a dwelling no longer needs an advance
permit, but can be registered after purchase. Rule for
inheritors of Bahamian properties have been similarly
relaxed. Fees for the (compulsory) registration of real
estate and residence permits are as follows:
- Application for registration:
$25
- Application for permit:
$25
- On issue of certificate
of registration or issue of permit:
| Value
of property, $ |
Fee,
$ |
| Up
to 50,000 |
50 |
| Under
101,000 |
75 |
| 101,000
and over |
100 |
- Homeowner
resident card: $500
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