Bahama Taxes: Why the Bahamas Is Seen as a Tax Haven

The Bahamas has long been recognized for its appeal as a tax haven, attracting individuals and corporations seeking to minimize their tax liabilities. The country’s favorable tax policies have made it a popular destination for wealth management and business incorporation.

This article explores why the Bahamas is perceived as a tax haven, focusing on income and capital gains requirements, indirect obligations, property taxes, residency considerations, corporate formation, and compliance measures.

No Income and Capital Gains Requirements

The Bahamas stands out for its lack of personal income and capital gains taxes, a system designed to attract high-net-worth individuals and investors. Residents and non-residents alike can enjoy their earnings without taxation, making it appealing to expatriates and retirees. The absence of capital gains tax allows investors to profit from asset sales without additional burdens.

This tax structure also benefits businesses, enabling them to reinvest profits without the need to allocate funds for income or capital gains taxes. This fosters growth and reduces administrative hurdles, making the Bahamas an attractive hub for multinational corporations and financial institutions.

Types of Indirect Obligations

Although the Bahamas does not impose direct taxes like income or capital gains taxes, it relies on indirect taxes, including Value Added Tax (VAT), stamp duties, and import duties, to generate government revenue.

VAT

Introduced in 2015, the VAT in the Bahamas is set at 12% for most goods and services, with some exemptions and zero-rated items. Businesses with annual turnovers exceeding BSD 100,000 must register for VAT, which aligns with international standards and ensures transparency in tax collection.

Stamp Duties

Stamp duties are applied to legal documents and transactions, such as property transfers and mortgages. Rates vary based on the transaction’s value and nature, with real estate transactions incurring duties from 2.5% to 10%. Compliance is essential to avoid legal issues.

Import Duties

Import duties are levied on goods brought into the Bahamas, with rates ranging from 0% to 45%, depending on the product category. Businesses must incorporate these costs into their pricing strategies. Accurate classification and valuation of goods are critical for compliance.

Property Obligations

Property taxation is a significant revenue source in the Bahamas. The real property tax applies to residential, commercial, and undeveloped properties, with rates depending on the property’s value and use. For owner-occupied residential properties valued over BSD 250,000, the tax rate is typically 0.75%, while commercial properties are taxed at 1%.

Accurate property valuation is critical for determining tax liabilities. Property owners must submit an annual declaration of their property’s value. Non-residents face the same rates as residents but may encounter additional complexities when navigating these obligations.

Residency for Tax Purposes

Residency in the Bahamas is obtained through annual residency permits or permanent residency certificates, often tied to real estate investment thresholds. A minimum property investment of BSD 750,000 typically qualifies individuals for permanent residency consideration.

While residency in the Bahamas does not result in liability for worldwide income taxes, it may have implications for tax obligations in other jurisdictions. Careful planning and expert advice are essential to ensure compliance with international tax laws.

Corporate Formation and Levies

The Bahamas is a preferred location for corporate formation due to its streamlined processes and tax-neutral environment. International Business Companies (IBCs) are exempt from corporate income taxes, withholding taxes, and capital gains taxes. The IBC Act provides flexibility in structuring, such as issuing shares without par value.

Costs for maintaining a Bahamian company include a one-time incorporation fee, typically between BSD 300 and BSD 1,000, and an annual renewal fee of BSD 350. Companies must maintain a registered office and agent within the Bahamas.

Certain sectors may require additional licenses and regulatory fees. Compliance with sector-specific rules is essential for operational legitimacy. Companies must also adhere to anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

Disclosures and Compliance

The Bahamas has implemented stringent compliance frameworks to meet international standards. Companies and individuals must adhere to disclosure requirements to promote transparency and prevent illicit financial activities. These obligations are governed by laws such as the Financial Transactions Reporting Act and the Automatic Exchange of Financial Account Information Act.

Under the OECD’s Common Reporting Standard (CRS), Bahamian financial institutions must collect and report information on account holders who are tax residents of participating jurisdictions. Non-compliance can result in significant penalties.

The Beneficial Ownership Register Act requires disclosure of ultimate beneficial owners (UBOs) of Bahamian entities. Companies must maintain accurate UBO records, with non-compliance leading to fines. These measures highlight the Bahamas’ commitment to combating money laundering and tax evasion.