The Bahamas has long been considered a popular international center due to its “tax haven” status. Yet, there are many issues and obligations you should be aware of when doing business in this beautiful country.
If you are looking to reduce your tax liability and conduct business in the Bahamas, it would be a good idea that you have in place all the appropriate licenses, regulatory requirements, and compliance with The Bahamas Government.
Let’s look into the key considerations as well as relevant legal obligations when establishing a business in the Bahamas.
1. Considerations for doing business in Bahamas “tax haven”
While people often frame taxation as the main consideration for doing business in the Bahamas, other issues are just as important.
Some key points you need to consider when doing business in the Bahamas fall within the following categories:
1.1. Business secrecy laws
The Bahamas adopts rather strict laws for business secrecy. Particularly, companies in the Bahamas are under the protection of security frameworks for corporate properties, offering high privacy rates.
If you want to avoid revealing your business’s financial records publicly, the secrecy practices can guarantee you the highest level of protection.
In relation to banking, as a bank account holder, your sensitive information such as account numbers, name, address, can only be disclosed by the specific order of the Bahamian Supreme Court.
The Bahamas Government has signed several agreements on the exchange of information under standards of the Organization for Economic Co-operation and Development (OECD). But the country still demonstrates a commitment to its secrecy institution.
1.2. Policy toward foreign businesses
Living up to the status of “tax haven”, the Bahamas’ government greatly encourages foreign investment, particularly in the tourism and financial services sector.
For instance, the government provides preferential treatments and incentives that enable your business to easily engage and conduct trading in the Bahamas.
If you are running a small business, the legislative support plan can assist you in navigating the incorporation and investment process in the country.
You can establish and choose the type of business entity you want in the Bahamas from various options such as sole proprietorships, limited liability companies, or International Business Companies (IBCs).
Apart from the favorable policy, there are some business restrictions in certain economic sectors, such as wholesale and retail operations, security services, personal cosmetic/beauty establishments, etc.
Nevertheless, the government has made exceptions to this restriction policy on a case-by-case basis, allowing full market access for foreign businesses.
Moreover, the Bahamas’ government pays great attention to factors like economic impact, job creation, and environmental protection of businesses. Therefore, you must take this into account and act accordingly.
1.3. Intellectual Property Rights
The Bahamas government has enacted regulations and policies to strengthen Intellectual Property (IP) protection in the country, covering all aspects of intellectual properties including patents, trademarks, copyrights, and more.
If your company acquires or utilizes any IP for business activities in the “tax haven” country, these regulations and policies may enhance the overall IP protection and help you manage and secure your assets more effectively.
However, if you have already registered IP in other countries, it can be troublesome. The reason is that you have to register again under Bahamas law to have your IP rights enforced in the country.
For example, the trademark and patent registrations in the US will not be valid in the Bahamas. Therefore, it is primarily vital for you to take notice of this issue and have an overall strategy to protect your properties and avoid violations in the Bahamas.
2. Compliance obligations for businesses in the Bahamas
No matter what sector you are in, how big your company is, or what you do, complying with the laws is one of the most important pillars in doing business.
Being mindful of the regulatory obligations and being able to react accordingly, is extremely essential for business owners. There are four key areas to which you need to pay attention:
2.1. Bahamas Investment Authority (BIA)
Companies conducting business in the Bahamas are required to obtain approval from the Bahamas Investment Authority (BIA).
The application for BIA approval must be submitted in the form of a comprehensive Project Proposal. It must also include all of the requirements outlined in the Project Proposal Guidelines issued by the BIA.
The application process is as follows:
(1) The companies submit Project Proposal, along with supporting documents to the BIA;
(2) The BIA processes the application and submits it to the National Economic Council (NEC);
(3) The application will be consulted by the relevant Ministry of Agency, based on the nature of the proposed business activity;
(4) Upon approval, the BIA will issue a “Project Approval in Principle” in written consent, indicating that the companies have satisfied the requirements of relevant government agencies.
2.2. Business license
In accordance with the Bahamas Business Licence Act, it is mandatory for companies doing business in the Bahamas to acquire an annual business license and pay annual license fees.
Once the BIA approval is obtained, companies must apply for the business license with the Business Licence Unit (BLU).
The requirements for a new Business Licence are:
(1) Nature of business – if the company conducts business in several sectors (e.g. finance, manufacturing, tourism, etc.) a separate application for each proposed business sector must be submitted;
(2) An application fee of BS$100 for each license submission;
(3) Other supporting documents – incorporation proof, national insurance registration, and more.
Business licenses must be renewed annually, and the deadline for renewal filing is 31st January every year.
2.3. Exchange control
Exchange Control is a division of the Central Bank of the Bahamas, responsible for currency transactions and maintaining the foreign reserves within the country.
If your business is a non-resident company (e.g. foreign companies and foreign-owned Bahamian companies doing business exclusively outside the Bahamas), you will need consent from the Exchange Control to trade in Bahamian dollars.
If your business is a resident company (e.g. foreign-owned Bahamian companies operating within the Bahamas), you will need consent to use foreign currencies and hold foreign currency accounts from the Exchange Control.
While these rules may seem rather complicated, it is considered a primary compliance requirement for any companies and investors seeking to carry on business in the Bahamas.
2.4. Economic Substance
To access the advantages of the Bahamas “tax haven”, companies carrying on one or more relevant activities have to comply with the Bahamas Economic Substance (ES) requirements.
The Bahamas ES laws and requirements apply to various economic sectors, determining the business substance level associated with control and management, business adequacy, and core income-generating activities.
Moreover, as an in-scope entity under ES laws, your business will be required to annually submit ES reports to the Competent Authority. Non-compliance behaviors will be subject to penalties as per the law.
Wonder if your business is considered an in-scope entity for Economic Substance? Read our full guidance on Bahamas Economic Substance Rules
3. Final thoughts
Although there are significant benefits to incorporating in the Bahamas “tax haven”, there are also many considerations and obligations that need to be addressed.
Being aware of these related factors and sorting them out as soon as possible will lead your business toward a better performance and compliance standing.
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
- 1. Considerations for doing business in Bahamas “tax haven”
- 2. Compliance obligations for businesses in the Bahamas
- 3. Final thoughts
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