Bahamas: International Tax and Business Guide - Setting Up A Business In The Bahamas - A Quick Guide For Foreigners

Last Updated: 17 December 1999
Article by Richard Evans
SETTING UP

What Type Of Business Entity Can I Set Up In The Bahamas?

The usual choice is a limited company; branches may also be used, There are two types of limited companies: domestic limited companies, which are incorporated under the Companies Act 1992, and international business companies (IBCs), which are incorporated under the International Business Companies Act 1989. The former are more expensive to form and operated and are subject to restrictions and filing requirements that do not apply to IBCs. IBC's cannot carry on business with any person resident in the Bahamas.

What Is The Difference Between Resident And Non-Resident Status?

Individuals and companies are given resident and non-resident status for exchange control purposes. Resident entities carry on business in the domestic market in Bahamian dollars, while non-resident entities can operate for the Bahamas but trade anywhere else in the world and in any currency except the Bahamian dollar.

How Do I Set Up An IBC, And How Much Does It Cost?

Formulations is usually entrusted to professional advisers, who prepare the memorandum and articles of association. Cost depends on the capital structure and starts at B$900.

Is It Easier To Set Up A Branch Than a Subsidiary Company?

In general, yes, setting up a branch is easier since the formalities of incorporation are avoided. Apart from this, there is little advantage in adopting a branch structure.

Can A Branch Be Reorganized As A Subsidiary Company?

Yes. There are no tax considerations, apart from the stamp taxes payable on the formation of a company. Legal fees will also be payable.

Is A Representative Or Non-Trading Office Treated In The Same Way By The Authorities As A Trading Branch?

No. There is little regulation of representative or non-trading entities, while trading concerns must comply with exchange control and other rules and obtain various permits and licenses.

What Proportion Of The Equity Of My Proposed Operation In The Bahamas Must Be Held By Bahamian Nationals?

Foreigners can own 100% of a non-resident company (one not trading within the Bahamas). Except in the case of a comparatively small range of activities in which they would be in direct competition with Bahamian national, foreigners can also own 100% of a resident company.

INVESTMENT INCENTIVES

Are Investment Incentives Offered To Foreigners As Well As Bahamian Investors?

A variety of incentives is offered, normally regardless of the origin of the investor.

What Are The Main Incentives Offered?

The primary incentive is complete freedom form taxation or income. In addition, the huge North American market offers duty-free access to approved Bahamian products. Other incentives offered are in the nature of exemptions from import duties.

What Type Of Businesses Qualify For The Incentives?

Agricultural, manufacturing, and processing operation and hotels qualify. Projects that provide employment for Bahamians are favored.

How Are Incentives Obtained?

Incentives are obtained by application to and subsequent approval by the relevant government ministries. The Bahamas Investment Authority serves to help investing in the Bahamas.

Do Non-Resident Businesses Have Access To The Same Sources And Types Of Financing As Enterprises That Are Resident?

Non-resident enterprises do not normally apply for or obtain Bahamian dollar financing, but foreign currency is readily available to them.

EXCHANGE CONTROLS

Must Exchange Control Approval Be Obtained For Inward Investment?

Although exchange control approval is not in theory required for inward capital, it is essential that it be obtained and that approved investment status be granted to the proposed investment, as otherwise the repatriation of capital profits may be difficult.

Must Exchange Control Approval Be Obtained For The Repatriation Of Dividends, Interest, Fees, Branch Profits, Loan Re-Payments, Or Invested Capital?

Exchange control approval must be obtained, but not difficulties arise provided that the original investment was granted approved investment status. Approval for repatriation is then routine, although it tends to be slow.

Can I Repatriate Any Capital Gain Achieved On The Liquidations Of My Investment In The Bahamas?

Yes, repatriation is possible if approved investment status has been obtained.

Can Foreign-Owned Companies In The Bahamas Raise Capital By Borrowing Abroad?

Non-resident companies are not subject to restrictions, but resident companies would have to obtain permission.

ACCOUNTING AND AUDITING

What Entities Must Make Their Financial Statements Available For Public Inspection?

Banks and insurance companies (other than foreign captives) must publish their balance sheets in the Official Gazette. Pure trust companies (that I, those not holding banking licenses) and other entities need not make their financial statements available to the public in any way.

When Must The First Financial Statements Of Banks And insurance Companies Be Prepared And Published?

In the case of banks, this must occur within four months after the end of the financial year; in the case of insurance companies, within six months.

What Accounting Principles And Standards Are Used In Preparing Financial Statements?

Financial statements are expected to give a "true and fair view" of the company's financial positions. The Bahamas Institute of Chartered Accountants recommends that international accounting standards be followed in the preparation of financial statements.

Must The Same Amount Of Detail Appear In The Financial Statements Of All Bahamian Enterprises?

There are no requirements as to the detail required in financial statements. Apart from the recommendations of the Bahamas Institute of Chartered Accountants, there is no regulation as to the content of financial statements.

What Entities Must Have Their Financial Statements Audited?

Banks, trust companies, insurance companies, credit unions, labor unions, and government corporations must by law appoint auditors. IBCs do not have to appoint auditors. Companies incorporated under the Companies Act 1992 must appoint auditors unless the shareholders unanimously agree to waive this requirement.

Must Auditors Of Such Entities Be Independent Public Accountants?

Anyone approved by the relevant government ministry can act as an independent auditor. In practice, auditors are members of the Bahamas Institute of Chartered Accountants.

Can The Audit Firm I Choose Help Me Set Up An Accounting System, Give Me Management Consulting Advice, And Generally Guide Me On Business Matters?

Yes, the major accounting firms in the Bahamas provide all these services. The audit firm is expected to maintain its independence.

EMPLOYMENT OF STAFF

Can I Employ Foreign Staff Without Difficulty?

Foreign staff can be employed only with the permission of the Immigration Department. Proof must be given that the position has been advertised locally and that no Bahamian nationals are available to fill the position. The government can guarantee the issuance of work permits based on the size, scope, and type of business.

Will My Employees Have To Belong To A Labor Union?

No, union members is not mandatory.

Must I Have Employee Representatives On My Management Board?

No, employees need no participate in management decisions.

Is Profit Sharing Common?

No, only a few profit-sharing plans are in operation.

How Much Notice Must I Give When Terminating The Employment Of Any Of My Staff?

There is no law on this matter, but the accepted practice is to give one pay period's notice.

Are Employees Entitled To Paid Leave For Sickness Or Maternity?

The normal practice as to sick leave is to give two weeks of paid sick leave, but there is no legal authority for this. In the case of maternity, the law mandates a period of up to eight weeks of paid leave.

TAXATION IN THE BAHAMAS

I Understand That There Is No Corporate Income Tax In The Bahamas. What Other Taxes Are Not Levied?

The Bahamas has no profits tax, business tax, sales tax, capital gains tax, wealth tax, or withholding taxes. There are no inheritance, gift and estate taxes.

How Does The Government Raise Revenue?

The government raises revenue primarily from customs duties and license fees.

Will I Be Liable For Personal Income Tax In The Bahamas?

No. No income tax of any type, corporate or personal, is levied in the Bahamas.

Will I Have To Contribute To The Bahamian Social Security Program While Working In The Bahamas?

Yes. All employees, employers and self-employed persons must contribute to the social security program, known as national insurance. Employees and employers must contribute 3.4% and 5.4%, respectively, of employee earnings up to per year; self-employed individuals must contribute 8.8% up to the same maximum.

Can I Claim Any Sort Of Refund Of The National Insurance Contributions I Have Paid When I Leave The Bahamas To Return Home?

In general, you can obtain a refund only if you have reached the age of sixty and are applying for an old-age pension.

BUSINESS LICENSE FEES

What are the business license fees?

Business license fees are annual fees whose rates depend on annual turnover an gross profit percentage. Non-resident or offshore enterprises, including IBCs are not liable for business license fees.

What Rates Apply?

The fee is as low as B$250 for a domestic business with turnover of B$50,000 to and a low gross profit percentage. It is the greater of B$500,000 or 1% of turnover for a very large company with a high gross profit percentage. Banks and insurance companies pay fees on a different basis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Richard Evans
 
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