A NEW GOVERNMENT was elected on 10 May 2017 in national elections for The Bahamas Parliament. This year marks the 288th year of continuous parliamentary democracy in The Bahamas based on the Westminster model. Independent since 1973, The Bahamas is a member of the Commonwealth of Nations and Queen Elizabeth II remains its ceremonial Head of State. The country has a bicameral parliament with an elected lower house, currently comprised of 39 seats. The upper house, the Senate, is composed of appointed members.
The Free National Movement (FNM) ousted the previously governing Progressive Liberal Party (PLP) winning an unprecedented majority of 35 of the seats in the lower house, with the PLP winning the remaining 4 seats. Hon Dr Hubert Alexander Minnis, leader of the FNM, is now the Prime Minister, being the fourth since Independence.
On Wednesday 31 May 2017 the new government tabled the national budget for the fiscal year 01 July 2017 – 30 June 2018. The last Wednesday of May each year, by tradition, is 'Budget Day' when the national budget is presented to Parliament, opening the budget debate for voting and passing by the end of June, in time for the start of a new fiscal year, which runs 01 July to 30 June.
In his budget address, the Minister of Finance, Hon Peter Turnquest, stated the Government's commitment to several pro-business objectives, including transparency and accountability, reform to the business and regulatory environment to promote entrepreneurship and economic growth, reducing burdensome taxes, and legislation to streamline procedures and improve the ease of doing business.
Of particular interest to our business clientele, briefly, aspects of the national budget include:
- No new taxes;
- Reduction in the business licence tax by 25 basis points of turnover;
- Elimination of customs duties on a specified range of medical and dental supplies;
- Elimination or reduction of customs duties on certain food items, specified building materials, and specified personal care and household items; and
- Customs duty exemption on equipment and machinery for ground repair, maintenance and service of cruise ships and sea vessels.
A more detailed report on the budget legislation as relevant to our business and financial services clientele will be provided in our next Legal Update.
Bahamas to Sign AEOI Multilateral Convention
On 29 May 2017 the Government of The Bahamas announced1 an intention to sign the multilateral convention of the OECD2 for the implementation of Automatic Exchange of Information ("AEOI"). That convention is the Multilateral Convention on the Mutual Administrative Assistance in Tax Matters ("Multilateral Convention"). Since 2014 The Bahamas had committed to adopting the AEOI Common Reporting Standard ("CRS"). The stated intention, then, was that The Bahamas would implement CRS by the end of 2018 through individually negotiated bilateral treaties with other countries. This recent announcement represents an important revision as to the mode of AEOI implementation by The Bahamas.
What is the effect of CRS
CRS provides for the exchange of non-resident financial account information with the tax authorities in the account holders' country of residence without specific request. That means Bahamian financial institutions would report information on accounts held by non-resident individuals and entities to the relevant Bahamian government agency to be established under the Ministry of Finance. Account information would include account balances, interest, dividends, and sale and redemption proceeds from financial assets.3
CRS sets out requirements pertaining to confidentiality, data safeguards and proper use of information that must be met by a jurisdiction with which The Bahamas would exchange information4.
The Bahamas Parliament enacted legislation in December 2016 to provide for the implementation of CRS.5
Implementation of CRS by Accession to the Multilateral Convention
The Multilateral Convention is intended to facilitate international co-operation for a better operation of national tax laws, while respecting the fundamental rights of taxpayers. It provides a single legal basis for multi-country co-operation in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion. The co-operation ranges from exchange of information, including automatic exchanges, to recovery of foreign tax claims.6
After the process leading to the signing by The Bahamas of the Multilateral Convention would have been completed, it would be necessary for The Bahamas to complete domestic procedures for the ratification, acceptance or approval of the Multilateral Convention.
Prior to The Bahamas' announcement of its intention to accede, according to the OECD, 111 jurisdictions (including 15 territories covered by territorial extension) participated in the Multilateral Convention. AEOI is to be implemented by 20187.
The Bahamas is a sovereign independent nation with an important international financial services industry based in its capital city of Nassau. Since 2002 it has been stated governmental policy to adhere to internationally agreed standards. As of 2009 The Bahamas worked to implement greater transparency in tax matters by efforts to significantly expand its network of tax information exchange agreements with other countries.8 This latest development is said by Government as serving to emphasize its enduring commitment "...to adhering to all international best practices, thereby assuring the continued participation of The Bahamas as a world-class financial services centre". Both The Bahamas Financial Services Board and the Association of International Banks & Trust Companies in The Bahamas have supported the Government's intention to accede to the Multilateral Convention, calling it necessary "...to position this jurisdiction for sustainable growth and development over the long term.
1 Bahamas Ministry of Finance Press Statement - 29 May 2017.
2 Organisation for Economic Co-operation and Development
5 Automatic Exchange of Financial Account Information Act, 2016.
7 Per OECD
8 More than 30 bilateral tax information exchange agreements have been entered and are in force.
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.