The Commonwealth of the Bahamas owes its tax haven status to its tax- and business-friendly laws for foreign investors. This is because citizens of the Bahamas and resident aliens pay no taxes on personal income, inheritance, gifts, or capital gains. Instead, the government derives revenue from other forms of tax, including value-added tax (VAT), property taxes, stamp taxes, import duties, and license fees.
The Bahamas is an international center for banking activities that attract foreign financial institutions because of its reputation for stability. The parliamentary democracy of the Bahamas has governed the island nation continuously since 1729. The Bahamas are also the ninth-wealthiest country in the New World, with a per-capita GDP of $28,239.4 as of 2021 and their official language is English.
Key Takeaways
- Citizens of the Bahamas do not pay taxes on income, inheritance, gifts, or capital gains.
- The Bahamian government uses revenue from sources like VAT and stamp taxes.
- There are strict laws prohibiting illicit financial activity such as money laundering.
Offshore Financial Institutions in the Bahamas
More than 250 banks and trust companies representing 25 countries are licensed to do business in the Bahamas. Bahamian laws protect the right to privacy of bank clients. Strict Bahamian laws also prohibit any illicit financial activity, such as money laundering. The Central Bank of The Bahamas regulates foreign financial entities by providing a secure environment for banks specializing in private banking, mutual fund administration, and portfolio management.
Financial institutions doing business in the Bahamas represent the United States, Canada, Switzerland, the United Kingdom, Brazil, and Japan. Major international accounting firms, including Deloitte & Touche, KPMG International Cooperative, and PricewaterhouseCoopers International Limited have offices in Nassau.
Offshore Companies in the Bahamas
The Bahamas offers foreign companies seeking a tax haven the convenience of easily setting up a business entity. One example of business entities for foreign individuals and businesses is the international business company (IBC).
Bahamian IBCs do not have to pay corporate tax unless the revenue is derived locally. IBCs are also exempt from stamp and estate duties and other taxes for 20 years from their incorporation date. The benefits of IBCs established in the Bahamas also include exemptions from corporate reporting requirements and shareholder privacy. IBCs are required to list one director, and a copy of the register of directors and officers must be open to the public.
Sole Proprietorships for Foreign Investors
Bahamian law allows foreign investors to establish businesses as sole proprietors. Investors need to obtain a business license and register their businesses.
Foreign sole proprietors also enjoy the same tax exemptions as foreign individuals and business entities. Investors must get approval from the Bahamas Investment Authority for business ventures, as some business areas are reserved for Bahamian citizens.
Real Estate Tax
Foreign investors can buy property in the Bahamas without restrictions. The government levies a graduated stamp tax on all real estate transactions. The stamp tax is between 2.5 and 10%. Property tax on investment properties is based on assessed value. For investment properties valued under $500,000 Bahamian dollars, the tax rate is 1%. The tax rate is 2% for properties of more than $500,000. There is a maximum annual property tax of $60,000 on owner-occupied properties.