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Bahamas reforms business tax regime

Monday, 7 January, 2019

The Bahamas government has published details of a new corporate taxation scheme, introduced to remove the preferential 'ring-fencing' treatment hitherto offered to international financial institutions (FIs).

The scheme is intended to meet the demands of the European Union and the OECD. The bodies regard preferential tax systems as unfair inducements to attract investments from offshore clients, and have threatened to blacklist the Bahamas and other financial centres as 'non-cooperative jurisdictions' if they do not amend them.

The new framework, introduced under the Removal of Preferential Exemptions Act 2018, will allow all FIs to offer services to both domestic and international clients. A unified tax regime will apply to all such institutions.

From January 2020, all regulated FIs will be exempted from the existing business license fee, which currently only domestic firms pay. Instead, they will be subject to a new three-tiered fee system, calculated on a sliding scale according to the FI’s size and complexity. Eventually, a firm's licence will be charged for, at between zero and 2.5 per cent of the value of its taxable assets. Banks that are big enough to be 'systemically important' will have to pay an extra levy. There will also be additional fees for banks wishing to access the domestic payments system, or who intend to act as an authorised agent for Bahamian dollar transactions.

'We expect that our demonstrated commitment to operate within the framework of mutually agreed standards, that are accepted by all stakeholders, will allow the Bahamas and the global community to move forward and get down to the work of doing business in a marketplace characterised by more transparent rules that lead to equity and fair competition', commented the Bahamian Deputy Prime Minister and Minister of Finance, Peter Turnquest.

However, he added: 'We remain concerned, and have voiced these concerns in international forums, about the appearance of shifting goal posts when it comes to the Bahamas and other international finance centres...We will continue to press and argue this point in the international arena.'

Sources