The Bahamas has been known for its attractive global financial services since the 1930s, thanks to its strict confidentiality policies and tax-exempt business models. As a result, many wealthy individuals continue to incorporate their businesses in the Bahamas, even though other countries offer similar options.
Recent Changes To Incorporating Businesses In The Bahamas
In 2018, the Bahamas made several legislative changes to ensure compliance with regulations set by the European Union and the Organisation for Economic Co-operation and Development (OECD). These changes aimed to improve ethics while maintaining confidentiality and tax exemptions. Bahamas International Business Companies (IBCs) are often used as holding companies for various purposes, including holding bank accounts, financial and commercial titles, and assets such as properties.
One of the changes was the Removal of Preferential Exemptions Act, which eliminated several non-tax exemptions that allowed for ring-fencing. This included the removal of the Business Companies Act, the Exempted Limited Partnership Act, the Investment Condominium Act, 2014, and the Executive Entities Act, 2011. As a result, IBCs must now obtain a business license, pay an annual fee, and stamp duty on designated instruments. The act also abolished limited duration companies. Companies incorporated before December 31, 2018 are grandfathered until December 31, 2021, but will still be able to enjoy full tax exemptions.
The act also allows international banking, insurance, and securities sectors to offer their services to Bahamas residents, subject to pending regulatory approval. It also allows local commercial banks to provide their services to international clients.
The Commercial Entities (Substance Requirements) Act introduced minimum economic substance requirements for certain companies, including financial and insurance services companies, shipping businesses, IP businesses, headquarters businesses, and holdings. The aim of this act is to prevent the formation of shell companies.
The Register of Beneficial Ownership Act now requires registered agents to verify the identities of the beneficial owners of all companies incorporated in the Bahamas and add them to a secure database that can only be accessed by registered agents. Unlike in most countries, the beneficial owner database in the Bahamas is not open to the public in order to maintain confidentiality.
The Multinational Entities Financial Reporting Act requires ultimate parent entities (UPEs) of multinational entity groups (MNEs) to report their annual profits and loss statements in a country-by-country report (CbCR). MNEs are defined as groups of two or more entities incorporated in different jurisdictions that have a consolidated revenue of over USD 850 million. The CbCR must include details of the profits and loss statement, such as revenue, tax paid and accrued, employment, capital, retained earnings, tangible assets, and business activities.
Terms You Need To Know Before You Incorporate A Business In The Bahamas
Country code – BS
Legal basis – Common law
Legal framework – International Business Companies Act updated as of 2018.
Company form – International Business Company (Company limited by shares)
Liability – The liability of the shareholders is limited up to the amount of the shares they hold.
Economic Substance – Financial and insurance services companies, shipping businesses, IP businesses, headquarters businesses, holdings and companies providing services to or trading with affiliates are required to meet economic substance requirements. They must be controlled and managed from the Bahamas and have adequate premises, amount of expenditures and number of employees in the Bahamas, according to its business activity and size. Companies deemed to be conducting a high-risk intellectual property business will be subject to enhanced substance requirements.
Share capital – The authorized share capital is usually USD $50,000. There is no statutory requirement for capital to be fully or partly paid on incorporation. Shares may be denominated in any currency and may be with or without nominal or par value. Bearer shares are not allowed.
Shareholders – International Business Companies may be formed by one or more shareholders, who can be either natural or legal persons, residents or non-residents, without limitations. Details of shareholders are not publicly disclosed. Nominee shareholders are allowed.
Directors – At least one director is required, who may be a natural person or a legal entity. Directors’ details are available to the public. Nominee directors are permitted.
Secretary – The appointment of officers such as a secretary is optional, and may be an individual or a corporation, resident or non-resident.
Registered Address – An IBC must have a registered office in the Bahamas, provided by a licensed service provider.
General Meeting – Annual general meetings are not mandatory. However, if meetings are held, they can be anywhere in the world and may be by proxy or by telephone.
Electronic Signature – Permitted.
Re-domiciliation – A foreign entity can easily be re-domiciled as a Bahamas IBC, and vice versa.
Compliance – Bahamas’ IBCs must keep accounting records, which may be kept anywhere. There is no requirement to file financial statements and annual return to the Registrar, neither tax return to the Tax authorities. Bahamas IBCs are subject to an annual government fee.
- Shareholders Not Disclosed
- Directors Not Disclosed
- Corporate Shareholders Permitted
- Corporate Directors Permitted
- Local Secretary Highly Suggested
- Annual General Meetings Required
- Redomiciliation Permitted
- Electronic Signature
- Financial Statements required
- Audited Accounts Exemption
Tax Terms You Need To Know Before Incorporating Your Business In The Bahamas
Corporate income tax – Bahamas does not levy corporate income tax.
There are no withholding taxes on dividends, interests, and royalties paid to non-residents.
IBCs in the Bahamas may trade with residents and they may own real estate within the territory, but exchange controls and stamp duties on authorized capital will apply in these cases.
Other taxes – There are no personal direct taxes such as personal income tax or net worth tax.
The Bahamas levy a real property tax up to 2% for land and building owners, although several exemptions may apply. There is also a stamp duty on the transfer of certain assets and financial instruments.
Companies conducting business in the Bahamas may be subject to several indirect taxes such as import duties, hotel guest tax, passenger tax, casino tax, among others.
Need Help Incorporating Your Business In The Bahamas?
As you can see there is a lot to take into consideration. Not to worry as SCGIBC is here to assist. We work with you remotely to register and incorporate your startup in the Bahamas—no need to hop on a plane. This is just two of our ongoing corporate services. Reach out today to learn more!