The Bahamas has no income tax, profits tax, business tax, sales tax, capital gains tax, wealth tax, or withholding tax. It levies no inheritance, gift, or estate taxes and has no death duties. Resident companies, partnerships, individuals, and trusts, as well as non-residents and non-resident-controlled Bahamian entities, all enjoy this tax-free regime. The government raises revenue primarily from customs duties and license fees (a form of turnover tax) instead. Customs duties are summarized in `Part 5, Foreign Trade, Imports', and business license fees are described in `Part 11, Taxation In The Bahamas, Business License Fees'.
Even if taxes were to be introduced in the future, many enterprises would remain exempt from them in accordance with the Hotels Encouragement Act (see `Part 2, Incentives and Financing, Investment Incentives') and free trade zone laws (see `Part 5, Foreign Trade, Free Trade Zones').
Although a Bahamian company may offer tax advantages to non-Bahamian investors under the circumstances outlined in this Guide, it is essential that the tax laws of the investor's own country be carefully considered before action is taken. Consideration must be given to the ultimate disposition of accumulated funds; unless adequate planning is undertaken, the Bahamian tax advantages may ultimately be lost to the beneficial owners in their home country.
BUSINESS LICENSE FEES
Under the Business Licences Act 1980 (as amended), enterprises operating in the Bahamas, however they are constituted, are liable for annual license fees. The majority of foreign-owned enterprises deal offshore and are regarded as non-resident for exchange control purposes; many of them are now organized as international business companies (see `Part 8, Choice of Business Entity'). Non-resident or offshore enterprises do not pay business license fees.
For enterprises trading within the Bahamas (that is, with the Bahamian public), fee rates depend on two factors: annual turnover and gross profit percentage. Annual fees can be from B$250 to B$800, depending on the level of gross profit, for an enterprise with turnover of between B$50,000 and B$100,000; they can range up to the greater of B$500,000 or 1% of turnover for a business with a turnover of more than B$28 million and a gross profit percentage in excess of 75% of sales. Very small businesses with turnover of not more than B$50,000 are exempt.
If a medium-sized enterprise has hired additional employees (up to ten) during a license year, it may claim a 5% reduction of the fee payable. For large enterprises, this reduction is 3%. Gasoline retailers with turnover exceeding B$250,000 have to pay fees of only 0.2% of turnover, but they are not entitled to the deductions for hiring new employees.
Business license fees must be paid by 30 April each year. Proof of payment of real property tax (see `Part 11, Taxation In The Bahamas, Real Property Tax') must be produced before the license will be issued. Certification by a chartered accountant must accompany business license applications when turnover exceeds B$500,000.
The rates described above do not apply to banks, trust companies, or insurance companies operating in or from the Bahamas. The license fees payable by such entities are described at `Banks and Trust Companies' and `Part 9, Other Forms, Insurance Companies'. Shop license fees are B$1 per year. Ship registration fees are summarized in `Part 2, Incentives and Financing, Investment Incentives'.
An annual government filing fee is charged for the maintenance of a company's entry in the companies register. In the case of a domestic company, this fee is B$1,000 if the company is less than 60% beneficially owned by Bahamians; if it is 60% or more beneficially owned by Bahamians, the fee is reduced to B$350.
International business companies pay filing fees that vary according to the size of their share capital (see Table 7).
TABLE 7 - Annual Filing Fees for International Business Companies
SHARE CAPITAL (B$) FILING FEE (B$) 1 - 5,000 100 5,001 - 50,000 300 Over 50,000 1,000
NATIONAL INSURANCE CONTRIBUTIONS
The law governing national insurance contributions is set out in the National Insurance Act 1972, with subsequent amendments and regulations. All employers and employed and self-employed individuals in the Bahamas are required to contribute to the national insurance program, although generally only Bahamian residents may claim benefits. Expatriates who have reached the age of sixty and are returning to their home countries may apply for old-age pensions, however, and may receive refunds of contributions.
Contributions are based on earnings. Currently, employees contribute 3.4% of their earnings (up to maximum earnings of B$13,000 per year). Employers contribute 5.4% of the employee's earnings, up to the same maximum. Self-employed individuals contribute 8.8%, again up to the same maximum.
The Bahamas has not concluded any reciprocal social security agreements with other countries.
No other payroll taxes are levied.
REAL PROPERTY TAX
Real property tax is levied on all developed real estate located in the island of New Providence, except for real estate occupied by churches or schools, and on all developed real estate in the other islands that is owned by non-Bahamian companies or individuals. The tax is also levied on all undeveloped real estate in New Providence owned by non-Bahamian companies or individuals, with the exception of properties used exclusively for commercial farming, as approved by the Ministry of Finance and Planning. Rates are given in Table 8. Holdings of real estate must be declared annually to the chief valuation officer.
TABLE 8 - Real Property Tax Rates
TYPE OF PROPERTY RATE (%) Owner-Occupied Property: Up to B$100,000 - B$100,001 - B$500,000 1.0 Over B$500,000 1.5 Property That Is Not Owner Occupied: Up to B$500,000 1.0 Over B$500,000 2.0 Unimproved property in New Providence 3.0
HOTEL GUEST TAX
A guest tax is charged at a rate of 4% on the total cost of a hotel room in the Bahamas. Members of the Tourist Promotion Board pay an additional tax of 4%. These taxes are often combined on guests' statements and shown as a government tax of 8%.
A variety of stamp taxes are levied in the Bahamas. The major ones are described below. International business companies are exempt from these stamp taxes for twenty years from the date of incorporation.
A stamp tax is payable on the authorized capital of a domestic limited company, including increases in capital over that initially authorized in the memorandum of association on the incorporation of the company. Rates are B$64 on the first B$5,000 and B$3 on each additional B$1,000.
Stamp tax is also payable on every real estate transaction, according to the amount of the consideration declared on the document concerned, at rates ranging from 2% for very small transactions up to 8% for transactions in excess of B$100,000. Stamp tax is normally shared between the purchaser and the vendor.
The rate on mortgages is 1%. The tax is payable by the borrower.
A stamp tax of 0.25% is imposed on all funds remitted out of the Bahamas that emanate from a Bahamian currency source. This tax is not levied on remittances from a foreign currency source.
The Bahamas has concluded no double taxation agreements with any other country.
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.