Bahamas to tax companies' overseas revenues

Thursday, 29 June 2023
The Bahamas Business Licence Bill, published alongside the country’s budget for 2023/24, will tax Bahamas-domiciled international business companies (IBCs) on their overseas revenues for the first time.

As of 1 January 2024, a 0.25 per cent levy will be imposed on revenue attributable to operations outside the jurisdiction, starting at BSD2,500 on the first BSD1 million and rising to a maximum of BSD100,000.

The policy is driven by meeting commitments to the OECD and EU on preferential treatment for foreign entities. Until now, such entities have paid only BSD300 for a Bahamas business licence. Legislation to remove preferential treatment for IBCs was enacted in 2019, but this year has the Bahamas government announced a tax on IBCs.

The new scale of fees is set out in official briefings on the new Bill and its companion Commercial Entities (Substance Requirements) Bill 2023, which repeals the Business Licence Act 2010. The levy will apply to anyone carrying on a business in or from within the Bahamas, including any 'trade, profession, vocation, venture or undertaking, provision of personal services, technical and managerial skills, and the exploitation of tangible or intangible property for the purpose of obtaining income on a continuing basis from such property'. Regulated investment funds and pure-equity-holding companies will be exempt.

The charges are generally higher for financial services entities, which will be charged 1.25 per cent of turnover up to the BSD100,000 ceiling, reduced to 1 per cent for banks and trust companies. Family offices will pay BSD10,000 or 0.25 per cent of turnover, whichever is greater, to a maximum of BSD100,000.

IBC revenue is deemed to be from operations within the Bahamas if it is derived from the sale of or commercial benefit from property registered or located in the Bahamas, the export of goods, the sale or provision of services to persons within or resident in the Bahamas or professional services.

Further developments are planned in the form of a corporate income tax, on which a first phase consultation began in May 2023. The final policy will also have to take into account the OECD's Pillar Two minimum 15 per cent tax on large multinational enterprises.

The Commercial Entities (Substance Requirements) Bill 2023 will further tighten the jurisdiction's economic substance rules. However, the definition of 'holding business' and 'commercial entity' are being amended to remove the link between holding business and subsidiary activities, and to exclude investment funds, foreign tax-resident and resident-owned entities. The amount of economic substance information to be reported is being increased.


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