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UHY is an international organisation providing accountancy, business management and consultancy services through financial business centres in over 80 countries throughout the world. Business partners work together through the network to conduct trans‐national operations for clients as well as offering specialist knowledge and experience within their own national borders. Global specialists in various industry and market sectors are also available for consultation.
This detailed report providing key issues and information for investors considering business operations in the Bahamas have been provided by the office of UHY representatives:
John S. Bain
UHY Bain & Associates
Suite 7, Building #1
Old Fort Bay Town Center
P.O. Box SS-5609
You are welcome to contact John for any inquiries you may have.
Information in the following pages has been updated so that they are effective at the date shown, but inevitably they are both general and subject to change and should be used for guidance only. For specific matters, investors are strongly advised to obtain further information and take professional advice before making any decisions. This publication is current at November 2013.
We look forward to helping you do business in The Bahamas.
UHY Bain & Associates (the “Firm”) is a member of Urbach Hacker Young International Limited, a UK company, and forms part of the international UHY network of legally independent accounting and consulting firms. UHY is the brand name for the UHY International network. The services described herein are provided by the Firm and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.
The Bahamas is a constitutional monarchy and a parliamentary democracy based on the Westminster model, with a functional two‐party system. Under this system of government, the prime minister and his cabinet are responsible to the legislature. The Bahamas gained independence in 1973 and has the following constitutional safeguards: freedom of speech, press, worship, movement, and association.
The Bahamas has a population of 350,000. The ethnic makeup of the population is 85% Black, 12% White, and 3% Asian and Latin Americans.
The legal currency of The Bahamas is the Bahamian dollar (B$). The US dollar (US$) is however, widely accepted and treated by merchants on par with the Bahamian dollar. Within the banking system, conversion of foreign currency including US dollars to Bahamian dollars and vice versa is subject to an official rate of exchange (1 US$ : 1 BS$).
English is the official language of The Bahamas.
The domestic market
The Bahamas operates as a mixed, free-market economy with state enterprises as well as private sector businesses. The Bahamian government completed the sale of 51% of the country’s telecommunications companies in 2011 after 14 years of trying to privatize the state-owned enterprise. Key industries in The Bahamas are tourism, banking, cement, oil trans-shipment, salt, rum, aragonite, pharmaceuticals, and spiral-welded steel pipe. According to the Economist in October 2013, “The Bahamas has a GDP per head close to that of Spain or Italy.” The Bahamas is one of the wealthier Caribbean countries with an economy heavily dependent on tourism and offshore banking. Per capita income is US $31,900 (2012 figure) and is second only to the United States and Canada.
Tourism, together with tourism-driven construction and manufacturing, accounts for approximately 60% of GDP and directly or indirectly employs half of the archipelago’s labour force. Before 2006, a steady growth in tourism receipts and a boom in construction of new hotels, resorts and homes led to solid GDP growth, but since then tourism receipts have begun to dip. The global recession took a sizable toll on The Bahamas, resulting in GDP contraction and a widening budget deficit.
The decline was reversed in 2010-2011 as tourism from the US and sector investment returned. GDP in 2011 was 1.6%, rising to an estimated 2.5% in 2012. GDP is $3.9 billion. Services comprise 91% of GDP.
Financial services comprise the second most important sector of The Bahamian economy after tourism, and when combined with business services, account for about 36% of GDP.
However, the financial sector is currently smaller than it has been in the past because of the enactment of new and stricter financial regulations in 2000 that caused many international businesses to relocate elsewhere.
Manufacturing and agriculture combined contribute approximately 10% of GDP and show little growth, despite government incentives aimed at those sectors. Overall, growth prospects in the short-term rest heavily on the fortunes of the tourism sector and foreign investment in tourism related infrastructure projects.
Key Interest rates
The Prime Interest Rate is 4.75% and the Discount Interest Rate 4.50%. The interest rate on residential mortgages averages around 7.15%.
Foreign trade in The Bahamas is relatively easy once an entity gets pass paying taxes. There are no other significant barriers to trade. The facts on foreign trade are as follows:
- Exports of goods and services are $1.8 billion.
- Major export trading partners are the USA, 22.3%, Switzerland 15.6%, U.K. 15%, and Denmark 7.4%.
- Imports of goods and services are $2.3 billion.
- Major import trading partners are the USA. 27.3%, Italy 26.5%, Japan 10%, and Denmark 4.2%.
Commercial banks, private banks, and credit unions are involved in the great majority of financial transactions in all sectors of the economy. Private Banks handle business transactions and are very similar in their operations to commercial banks, but tend to specialise in private savings, personal loans, and the financing of house purchases for wealthy individuals. The Central Bank of The Bahamas is a financial institution that manages the Bahamian currency, money supply, and interest rates. The Central Bank also oversees commercial banks in the Bahamas.
The Bahamas International Securities Exchange Limited (BISX) was incorporated in September 1999. In May 2000 BISX successfully launched its domestic market for the listing and trading of local public companies. Currently, there are seventeen domestic public companies listed on BISX. In April 2001, BISX launched a Mutual Fund listing facility. This listing facility is targeted at meeting the needs of international investors, who may require the extra visibility afforded by a listing on an established securities exchange as a basis for their choice of investment vehicle.
BISX is formally registered with the Securities Commission of The Bahamas as a “Securities Exchange” pursuant to the Securities Industry Act, 1999. As a Securities Exchange, BISX is vested with the authority and responsibility to regulate its Members and Listed Companies in accordance with BISX Rules. The BISX Rules operate to ensure fairness and transparency as it relates to the enforcement of regulatory responsibilities, membership, listing procedures, continuing obligations, and pursuing disciplinary action.
The organizational structure has been designed to ensure that BISX has both a commercial and a regulatory focus. BISX was incorporated as a private company and is owned by 45 dedicated shareholders comprised of stockbrokers, banks, investment companies, pension funds, mutual fund administrators, corporations, and individuals.
The Bahamian government restricts foreign investments in the following sectors with a few exceptions:
- Wholesale and retail operations;
- Commission agencies engaged in the import/export trade;
- Real estate and domestic property management agencies;
- Domestic newspaper and magazine publication;
- Domestic advertising and public relations firms;
- Nightclubs and some restaurants (except specialty, gourmet and ethnic restaurants and restaurants operating in a hotel, resort complex or tourist attraction);
- Security services;
- Domestic distribution and building supplies;
- Construction companies (except for special structures for which international expertise is required);
- Personal cosmetics/beauty establishments,
- Shallow water scale fish, Crustacean, mollusc and sponge fishing operations;
- Auto and appliance service operations; and
- Public transportation.
All outward capital transfers and inward transfers by non-residents require exchange control approval and that foreign direct investment must be approved by the Central Bank. “Capital investment into the Bahamas remains subject to exchange controls,” reports the US Department of Commerce, “but as a practical matter these controls have not been known to inhibit repatriation of approved investment capital.” Foreigners purchasing real estate for commercial purposes or purchasing more than five acres must obtain a permit from the Investments Board. In 2002, net private foreign direct investment rose to $316.7 million from $164.7 million in 2001. Net direct capital inflows rose to an estimated $144 million from $62.9 million in 2001, and net loan funding on foreign investments increased to an estimated $116.7 million from $63.6 million in 2001. Foreign demand for Bahamas real estate is constantly on the rise, though it took a dip somewhat from 2008 to 2011 during the global recession.
Setting up a Business
The formation of a corporate vehicle is perhaps the first step for individuals interested in having some form of commercial presence in the Bahamas. For non-residents who are interested in benefiting from the advantages offered by the Bahamas, the formation of an International Business Company (or IBC) is an ideal preference, popularly known for its efficient and convenient incorporation process and for its ability to obtain a bank account from a local financial institution. An IBC is a legal entity incorporated and holding its registered office outside the residential jurisdiction of its beneficial owner.
In order for an IBC or any other foreign-owned business to operate in The Bahamas, it will need authorization from the Bahamas Investing Authority (BIA). Additionally, from time to time the government of The Bahamas offers targeted investment incentives for particular types of projects. All non-Bahamians, permanent residents or citizens seeking to access concession pursuant to the government’s targeted investment incentive must also submit a Project Proposal to the Bahamas Investment Authority (BIA).
There are no requirements for Bahamians to qualify for this service. Non-Bahamians must meet a minimum capital investment of B$500,000, and the proposed investment must not be in an area reserved for 100% Bahamian participation.
Interested persons must:
- Be Non-Bahamian;
- Have a minimum investment of B$500,000;
- Be interested in an area that isn’t reserved for 100% Bahamian participation;
- Submit a Project Proposal, along with supporting documents to the BIA.
- The BIA will process the application and submit the same to the National Economic Council (NEC), for a determination.
- Depending on the nature of the proposed business activity, the relevant Government Ministry or Agency would be consulted for input:
- Ministry of the Environment.
- Ministry of Works and Transport.
- Ministry of Housing.
- Respective Family Island Local Government.
- Once a determination has been made, the BIA will communicate to the applicant in writing.
- Once approval is obtained, the BIA also coordinates with other Government agencies and facilitates the implementation of projects.
A Project Proposal, following the BIA Project Proposal Guidelines
- Copies of Passports;
- Bank references;
- Character references;
- Police record from the country of residence;
- Copy of application for Crown Land (if applicable);
- Environmental Impact Assessment (if applicable); and
- Proof of financial capability.
A determination is communicated within 60 days following the submission of a completed Project Proposal.
There is no deadline.
There are no fees associated with this service.
Once there is approval from BIA, the foreign person or foreign-owned company must apply for a permanent or temporary business license. All businesses are required to be licensed under the Business Licence Act of 2010. This includes all businesses registered before the act became law. Any person who wishes to incorporate a company in The Bahamas is required by law to register the business. Applying for a permanent or temporary business license will depend on whether the foreign person is a permanent resident of the Bahamas. If the foreign person is a permanent resident of the Bahamas, he or she may apply for a permanent business license. The following relates to the permanent business license:
Any Bahamian citizen or permanent resident who is:
- Interested in registering a new business, or
- Existing Business Owner
- Privately Trading companies
- Publicly Trading companies
- Limited Liability Partnerships
- Limited Liability Company
- Sole – Proprietorships
- Home Based Businesses
A non-Bahamian applying to conduct business in The Bahamas requires approval from the Bahamian Investment Authority. Follow the related services link for more details.
- Collect the application form from any of Business License Unit (BLU) offices or online.
- The first part of the form is to register a business name, complete the entire application form and return to any of The Business License Division offices. Where there are no Business License Division Offices, the form can be returned to a Treasury Office or a Family Island Administrator.
- Note: if any identified names are rejected the applicant will be notified that the name choice was reject and would be advised to select from the remaining choices previously given on the form.
- The following must also be submitted along with the application:
- Proof of citizenship.
- Appropriate Registration Fee.
- Approvals related to your selected business.
- Once all document requirements are met, and the name is approved, the application is then processed within 7 working days. The BLU office will contact the applicant to inform them that they can collect their license.
Publicly Trading Companies, Limited Liability Partnerships, and Limited Liability Company are registered at the Registrar General Office, where the receive their certificate of incorporation. This is brought to the BLU office to complete the Business Licensing process.
- Prerequisite Approval(s) from relevant government or regulatory agencies where required
- Copy of a valid passport or original birth certificate as well as those of parents if one is born after July 1973. National Insurance Card.
- National Insurances “Letter of Good Standing.”
- Business Name – If you currently are the holder of a Business Name but owe arrears, these must be paid to the Registrar General’s Department, and the receipt indicating payment of arrears must be furnished.
- Certificate of Incorporation from the Registrar General’s Department must accompany the application where applicable.
- Real Property Tax – If the applicant owns the property on which the business is located, real property tax must be brought to account or an agreement entered into for payment.
- Necessary Approvals – If the business operates a STORE or is involved in the SALE of ALCOHOL – they must seek approval as follows:
- Department of Physical Planning (Zoning).
- Royal Bahamas Police Force (Determines if the location is acceptable).
- Ministry of Public Works, Building Control (Inspection of Building).
- Department of Environmental Health Services (Sanitation Certificate).
- Letter of authorization for Third Parties/Appointed Representatives, where a Third Party is used, such as an accountant or lawyer authorizing them to conduct business on their behalf.
Once an application form and all supporting documents have been submitted, it is processed within 7 working days.
No deadlines for a new application. However, all old business must be registered by March 31st 2011. Failing to register would incur penalties in accordance with the Act 2010 Section 26: Offences.
A Business License for a new business has a flat fee of BS $100. Fees for an existing business vary based on the type of business currently operating and the business turnover figures. Please refer to Schedule of Fees in the Business License Act 2010.
If the foreign person is not a permanent resident of the Bahamas, then he or she must apply for a temporary business license. The following relates to the temporary business license:
Business ventures that require a temporary business license include:
- Non Bahamian Company
- Bahamian company with non-Bahamian partnership
- A foreign person
- Secure Approval from BIA
- Register the company with the Registrar General Office where they will be issued with a Certificate of Incorporation.
- Submit the BIA approval along with the Certificate of Incorporation and a completed Business Registration Form A from the Business License Unit Offices
- The first part of the form is to register a business name, complete the entire application form and return to any of the Business License Division Offices. Where there are no Business License Division Offices, the form can be returned to a Treasury Office or a Family Island Administrator.
- Note: if any identified names are rejected, the applicant will be notified that the name choice was rejected and would be advised to select from the remaining choices previously given on the form.
- The following must also be submitted along with the application:
- Appropriate Registration Fee
- Approvals related to your selected business
- Once all document requirements are met, the applicant must pay the business license tax (fee) of 1½% of the value of the contract.
- The application is then processed within 7 working days, and the BLU office will contact the applicant to inform them that they can collect their license.
- Prerequisite Approvals from relevant government or regulatory agencies where required. To determine if your type of business requires additional government and regulatory approval, please review the Guide for Requirements for License, which is included in the application form.
- National Insurance Board Registration Number/Letter of Good Standing.
- Certificate of Incorporation from the Registrar General’s Department must accompany the application along with annual company registration fee receipt.
- Copy of the contract.
- Letter of authorization for Third Parties/Appointed Representatives, where a Third Party is used, such as an accountant or lawyer authorizing them to conduct business on their behalf.
Once an application form and all supporting documents have been submitted, it is processed immediately. Sometimes the time frame may require a longer period for processing based on the type of application.
There are deadlines for this application.
Fee for a Temporary license is 1½% of the value of the contract.
provide for the grant of maternity and family leave; to provide for redundancy payments to employees; to make provisions relating to notices to terminate contracts of employment; and to make provisions relating to
summary dismissal and unfair dismissal. The minimum wage in the Bahamas is $5.25 per hour, or $210 per week.
The proper procedure for terminating employment varies according to the different categories of employees. Employees whose tenure is 90 days or fewer are neither entitled to notice nor compensation.
- Entitlement of employees whose tenure is between 91 and 179 days
- No notice
- Accrued vacation – 4% of total salary earned for the applicable period
- Entitlement of employees whose tenure is between 6 and 12 months
- 1 weeks’ notice OR 1 week’s salary en lieu of notice, AND
- 1 week’s salary.
- Entitlement of non-managerial employees whose tenure exceeds 1 year
- 2 weeks’ notice OR 2 weeks’ salary en lieu of notice.
- Entitlement of managerial staff
Managerial staff is entitled to the following:
- 4 weeks’ notice OR pay en lieu of notice, AND
- 4 weeks’ salary for every year of employment, up to 12 years.
Tax and Other Concessions
Investment in The Bahamas is and will be in an environment free from capital gains, inheritance, withholding, profit remittance, corporate royalties, sales, personal income, dividends, payroll, and interest taxes. Stamp duty is chargeable at an ad-valorem rate on all property transactions, and a real property tax is charged on real estate holdings, except for land holdings in Freeport, Grand Bahama. Additionally, investment incentives under the following Acts of Parliament include exemptions from the payment of customs duties on building materials, equipment and approved raw materials and real property taxes for periods of up to twenty years:
- Export Manufacturing Industries Encouragement
- The Freeport, Grand Bahama Act, 1993.
- Hotels Encouragement
- Industries Encouragement
- Spirits and Beer Manufacture
- The Tariff Act.
- The Bahamas Free Trade Zone Act.
- The Agricultural Manufactories
- The City of Nassau Revitalization Act.
- The Family Islands Development Encouragement
- The Bahamas Vacation Plan and Time-Sharing Act,
Incentives may be applied for by making application to the relevant government department.
Freeport, Grand Bahama Island
The island of Grand Bahama, one of the islands of The Bahamas, comprises a land area of 530 square miles. Freeport is the capital city of the island of Grand Bahama, and it is approximately 150 miles off the coast of Florida.
Under the Hawksbill Creek, Grand Bahama (Deep Water Harbour and Industrial Area) Act of 1955 and the subsequent amendments (the Hawksbill Creek Agreement) the Grand Bahama Port Authority Limited (the Port Authority), a private company, acquired from the government of The Bahamas and private owners some 149,000 acres in Freeport (the Port Area) and in order to encourage the development of this land, the government granted to the Port Authority and its licensees certain concessions which included an exemption from customs duties on manufacturing supplies and other consumable stores as defined in the Hawksbill Creek Agreement, personal income taxes, corporate profit taxes, capital gains taxes or levies on capital appreciation, real property and inventor taxes. The customs duty exemption expires in 2054 and in 1993 the other exemptions were extended until August 2015. Goods for personal use or consumption are dutiable.
Investors wishing to conduct business in the Port Area are required to become licensees of the Port Authority. The licencing procedure is straightforward and transparent. An annual licence fee is payable to the Port Authority by all licensees. The Port Authority may be contacted at:
The Grand Bahama Port Authority, Limited Licencing Department
Port Authority Headquarters Pioneers Way & East Mall P.O. Box F-42666 Freeport, Bahamas
Telephone: (242) 352-6711
Telefax: (242) 352-8811
The Bahamas has entered into Tax Information Exchange Agreements (“TIEAs”) with several countries. These agreements make arrangements to co-operate for exchange of information on tax matters. Signed agreements come into force only when necessary internal procedures in the signatory countries are completed.
As of August 2011, TIEAs are in force with the following countries:
- United States of America
- Faroe Islands
- The Netherlands
- Great Britain and Northern Ireland
TIEAs have also been signed with San Marino, New Zealand, Argentina, Belgium, Greenland, Iceland, Germany, Canada, Korea, Guernsey, Aruba and South Africa.
Business License Tax
The Bahamas also has a business license tax. The business license tax mostly depends on the turnover or revenues of the business. For examples:
- A business license tax of $100 per year shall apply to any business where the turnover or revenues does not exceed $50,000 per year.
- For a business with revenues greater than $50,000 per year but not exceeding $500,000 per year, there shall be a tax of 0.5% of revenues.
- For a business with revenues greater than $500,000 per year but not exceeding $5 million per year, there shall be a tax of 0.75% of revenues.
- For a business with turnover greater than $5 million per annum but not exceeding $50 million per annum, there shall be a tax of 1.25% of turnover.
- For a business with turnover greater than $50 million per annum but not exceeding $100 million per annum, there shall be a tax of 1.5% of turnover.
Moreover, a business license tax of 1% of revenues shall apply to a services business rendering services, such as accountants, doctors, lawyers, architects, engineers, and other similar or like professions.
Value Added Tax
The government of The Bahamas announced its intention to introduce a system of Value Added Taxes (VAT) with a beginning rate of 15% effective July 2014. The details of this legislation have not yet been published.
Accounting & Reporting
The Companies Act (1992) is the primary source of legal requirements regarding the operation of a company, including corporate disclosures. The Companies Act (1992) was broadly based on the UK Companies Act of 1948.
The Act prescribes the basis of incorporation, regulation, and other associations registered there-under and makes provisions for other matters relating thereto. The Companies Act requires considerable disclosure and compliance requirements as well as providing for increased penalties for compliance failure. The Act addresses disclosure and other regulatory requirements in relation to:
- Incorporation and registration
- Disclosures to be made in a prospectus
- Capitalization minimums
- Management and administration
- Duties and responsibilities of directors and other officers
- Matters relating to winding-up
- Registration and inspections
- Accounts and audit
- Annual reports
- Meetings and statutory filings.
An amendment to the Companies Act for Chapter 308 for the Companies Liquidation Rules 2012 now covers winding up, insolvency and company liquidations.
The Bahamas Institute of Chartered Accountants (BICA) licenses certified public accountants, registered public accountants and public accounting firms. Currently, there are over 200 licensed chartered accountants in The Bahamas. The requirements for Chartered Accountants (CA) license include education, and experience.
What is a Bahamas Chartered Accountant?
Basically, in order to qualify as a CA in The Bahamas in most instances, one has to be licensed as a Chartered Accountant or Certified Public Accountant in the US, UK or Canada. BICA recognizes licenses from the American Institute of Certified Public Accountants (AICPA), The Association of Chartered Certified Accountants (ACCA), The UKs Institutes of Chartered Accountants (ICAEW, ICAI, ICAS), The Canadian Institute of Chartered Accountants (CA), and the Canadian Certified General Accountants (CGA). Other Chartered bodies, for example, the Australian CPAs or CAs can apply on a case-by-case basis for admittance. BICA will issues its own license if it is satisfied that a person is a member of one of the recognized bodies and has the requisite experience, while not necessarily being licensed to practice as a registered accountant or auditor.
Registration as a member in the BICA entitles you to use the designation “Chartered Accountants” and the initials “CA” after your name. Registration as a licensed member in the BICA entitles you to use the designation “Public Accountant” and the initials “P.A.” after your name.
Regularly, draft Acts incorporate changes based on insightful comments submitted by the public. BICA Investigates matters concerning conflict of interest and complaints against members of the institute through the investigations committee, issues professional practice notes that provide guidance for accountants on specific topics/issues, provides membership and license approvals to qualified accountants that apply and meet the requirements of the Act and regulations.
UHY in the Bahamas
Phone: (242) 322-6656
Fax: (242) 323-0971