GENERAL

The Exchange Control Department of the Central Bank is responsible for the operation of exchange controls in the Bahamas under the Exchange Control Act 1952 and Exchange Control Regulations 1956.

The objectives of the Bahamas' exchange controls are to conserve the country's foreign currency resources and maintain the value of the Bahamian dollar at par with the US dollar. The Exchange Control Department regulates conversions between Bahamian dollars and other currencies, dealings of resident or domestic companies and individuals in non-Bahamian currencies, and dealings of residents with non-resident companies and individuals.

While the Central Bank has primary responsibility for the operation of exchange controls, banks with authorized dealer status may, upon presentation of suitable documentation, approve requests by residents for personal travel funds up to B$1,000 and for business travel funds up to B$10,000. Banks may also approve payments for imports up to B$100,000. Payments in excess of B$100,000 must be approved by the Central Bank.

International business companies (described in `Part 8, Choice of Business Entity') are exempt from exchange control regulations and do not need to obtain permission for incorporation or the issue of any securities.

RESIDENT AND NON-RESIDENT STATUS

For exchange control purposes, individuals and companies are divided into two categories: resident and non-resident. In general, residents may freely hold and operate in Bahamian dollars but require Exchange Control Department permission to deal in foreign currencies. Non-residents, on the other hand, may freely hold and operate in foreign currencies but may not conduct business or hold bank accounts in Bahamian dollars except to meet expenses incurred in the Bahamas.

The following are considered residents: Bahamian nationals, Bahamian beneficially owned companies, and foreign-owned Bahamian companies or foreign companies operating within the Bahamas. Operating generally means owning real estate or trading in the Bahamas. Foreign nationals living in the Bahamas and holding work permits (that is, most foreign expatriates: see `Employment of Foreigners') are also normally classified as residents for exchange control purposes.

Non-residents are foreign nationals (resident abroad or, if living in the Bahamas, without the right to work in the country) and foreign companies and foreign-owned Bahamian companies trading exclusively outside the Bahamas. Bahamian companies thus deemed to be non-resident require Exchange Control Department permission to issue or transfer Bahamian dollar securities and to borrow in Bahamian dollars.

Foreign nationals who invest in either a major business or a residential property worth B$250,000 or more are accorded accelerated consideration for annual or permanent residence in the Bahamas. Residential property owners may apply for a home owner's resident card, issued annually at a cost of B$500, that facilitates entry into the Commonwealth by the holder.

INWARD DIRECT INVESTMENT

Foreign investment in the Bahamas is encouraged, but Exchange Control Department permission should be obtained before any such investment is made to ensure that subsequent repatriations of funds may be freely made. The Exchange Control Department promptly considers applications for the formation of Bahamian companies by foreigners and grants such companies either resident or non-resident status, as appropriate.

In practice, the investor or his or her advisers write to the Exchange Control Department giving details of the proposed investment. Provided that all other requirements are in place, the investment will be given approved investment status. This status ensures that dividends, interest, profits, and capital can subsequently be taken out of the Bahamas, provided that the department is notified of and approves the remittance concerned. Foreigners planning to purchase an existing Bahamian business must follow a similar procedure.

Although resident individuals and Bahamian-owned resident companies are not permitted to borrow in foreign currencies, wholly or partly foreign-owned resident companies can be granted permission from the Exchange Control Department to borrow in both Bahamian dollars and foreign currency.

REPATRIATION OF FUNDS

Provided that Exchange Control Department permission for the original importation of foreign currency has been obtained, the repatriation of share and loan capital, regardless of the destination of the remittance, and the payment abroad of dividends, interest, royalties, or branch profits will be freely approved on application to the Exchange Control Department. The department tends, however, to take some time to issue its formal approval for remittances. Capital profits arising on the realization of an investment can also be repatriated without restriction.

Foreign expatriate employees can convert a reasonable proportion of their earnings during the time of their employment in the Bahamas into foreign currency and remit the resulting funds to their home countries subject to obtaining prior approval annually. Foreign employees are not restricted in their use of foreign currency.

IMPORTS AND EXPORTS

Although payments for imports by a resident Bahamian individual or company may require the approval of the Exchange Control Department, this approval is usually granted. No controls are exercised over intercompany pricing policies. Export proceeds may be remitted to the Bahamas in any currency, but a resident Bahamian company is required to convert all foreign receipts into Bahamian dollars.

Bahamian group companies may maintain intercompany current accounts. No restrictions apply to accounts of non-resident Bahamian companies, but resident Bahamian companies proposing to make remittances to foreign parents or affiliates in settlement of intercompany accounts must obtain permission from the Exchange Control Department.

OUTWARD INVESTMENT

Direct investments by resident individuals or companies in other countries can be made only with Central Bank permission and in Bahamian investment dollars. These are convertible into any currency, but they must be bought at a premium rate from an authorized dealer after a license to do so has been obtained from the Exchange Control Department. Resident individuals or companies can invest abroad with borrowed Bahamian dollars if they obtain Exchange Control Department permission; they normally cannot invest with borrowings in foreign currency.

Non-resident individuals and companies can freely invest abroad and can borrow in foreign currencies in order to do so, but they may not borrow in Bahamian dollars.

PORTFOLIO INVESTMENT

A resident individual or company may make portfolio investments abroad only with permission. A non-resident individual or company may make such investments without restriction. Non-residents may make portfolio investments in the Bahamas on the same terms as they may make direct investments, but the opportunities for making such investments are extremely limited.

Investments in real estate generally are made under the same rules as any other investments. To make inward investments, non-residents may have to obtain permission to purchase Bahamian real estate from the Investments Board, and their investments should be registered with the Exchange Control Department.

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.