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Bahamas - Information

Jurisdiction Basics – Open with Map on Landing Page - Stats
            Taxation Regulations and Policies
            Investment and Incorporation Regulations
            Banking Regulations
            The Economy, Security Regulations and Global Status
            Political Climate
            Employment and Labor Climate
            Geographical Climate and Lifestyle

Landing for Bahamas Jurisdiction – Page Landing (Facts/Map/Flag)

Bahamas - Jurisdiction Basics – Facts about the Bahamas

Everything You Need to Know About the Bahamas

  • Full Name: Commonwealth of The Bahamas
  • Geographical Area: group of 700 Islands and nearly 2,500 small islets or cays. Approximately 30 of these Islands are inhabited with two major population centers, Nassau, located on New Providence Island and Freeport, located on Grand Bahama Island
  • Terrain and Climate:  tropical maritime climate, generally year-round good weather between 70 degrees to 92 degrees
  • Population: 305,655  (July 2007 est.)
  • Ethnicity:  Black 85%, Caucasian 12%
  • Capital: Nassau
  • Government:  The Bahamas is a member of the British Commonwealth and has a constitutional multi-party parliamentary democracy.
  • Major Languages: Colorful local English, Creole and French
  • Major Religion: Christian, Baptist and Roman Catholic
  • Life Expectancy: 65.66 years
  • Monetary Unit: Bahamian and U.S. dollars are approximately equivalency (1 $B = 1 $US)
  • Exchange Controls and Taxation:  Yes on citizens, but n8\[o income, corporate tax, capital gains or inheritance tax   
  • Stamp Tax – 7% on businesses imports of any kind
  • Main Exports: Fish and crawfish; rum, salt, chemicals; fruit and vegetables
  • Compulsory Education:  Compulsory to the age of 16, suffrage 18 years of age
  • GDP: US $6.1 billion (2005)
  • Annual Growth Rate: 2.9%
  • Major Industry:  Tourism
  • Communication:  Owned and Monitored by Government, considered good, broadband and VOIP generally best choices, internet - .bs
  • International dialing code:  +1 - 242
  • Known as “tax-haven” for qualified residents
  • Number of Banks:  425
  • Head of State: Hubert Ingraham, Nominal Chief of State – Queen Elizabeth II
  • Press: 
  • Radio:  AM 3, FM 5,
  • Television:  2 Major Stations
  • Time Zone: EST, GMT -5 (GMT -4 from first Sunday in April till last Sunday in October).
  • Airport:  Six Major Airports

Bahamas Map
Page 2 Taxation Regulations and Policies

In the Bahamas there is no income tax, capital gains tax, sales tax, death tax or VAT .  There are government fees imposed annually for national health care insurance, property tax and stamp taxes.  Since there are no taxes, offshore financial industry and International Business Companies provide the Bahama banking industry plenty of revenue.

With banking as a leading sector of the economy The Bahamas list 425 banks with 300 of then being major international banks reporting assets of near $1 trillion, mutual fund management at $100 billion and insurance companies with assets around $700 million.
Most of the taxes in the Bahamas are comprised of duties.  About 70% of the government’s revenue comes from the duty of imported goods.  These duties range as high as 200%., but average around 35%.

There is also a C.I.F (cost, insurance, freight)  "stamp tax" of 7% levied on businesses for almost everything except resale business equipment computer hardware and software. 
Since there are no taxes, there is no double taxation treaties.
Employment Taxes
Bahama employers and employees pay social security and self-employed taxes under the National Act of 1972.   Employees pay 3.4 % of earnings, employers pay 5.4% and self-employed taxes are 8.8% up to a maximum of $13,000 annually.  Taxes are scheduled to increase since the Social Security Reform Commission reviewed the taxation and determined it was too low.  The benefits of these taxes are only for residents and expatriates returning to the Bahamas by age 60 may qualify for a refund if they meet the qualifications.  Self-employed taxes were increased to 11,8% and all taxes are to be increased 1% per year until 2014.
Stamp Duties
Bahama currency moved from the jurisdiction has a stamp duty of 1.25%.  The stamp duty on real estate is 2 – 8% with higher taxes on real estate valued over $100,000.  There is a 1% stamp duty place on the borrower of a mortgage.
Real Estate Taxes
Real estate taxes are on the following and must be declared to the Chief Valuation Officer.

  • Real Estate owned by non-Bahamians
  • Real Estate developments to all persons on the island of New Providence
  • Undeveloped real estate on the island of New Providence owned by non-Bahamians

Property falls into two categories, owner occupied and other and are sorted into categories.

            Owner Occupied Property
                        up to $250,000                        0% Taxation
                        $250,001 - %500,000              0.75 %
                        over $500,000                         1% with a max of $35,000

            Other Property
                        up to $500,000                        1.%
                        over $500,000                         2%
                        undeveloped property             3%
                                    on New Providence only
Exchange Controls of Foreign Capital
The exchange controls apply only the Bahamian residents and applied only to the Bahamian currency.  Other non-Bahamian entities such as offshore companies are allowed to import and export funds in all currencies without taxes being applied to these transfers, but all exchanges are recorded with the Exchange Control Department.  Due to this control the Bahamas have been given approved investment status.
The Central Bank announced the relaxation of taxation in 2006 for exchange controls in foreign real estate investments and the use of instruments from foreign sources.  The rates were reduced to around 12.5 – 10% concerning the use of these instruments for real estate (such as foreign mortgages).
Public companies must have at least three shareholders and private companies must have two shareholders.
The Bahamian government attempts to protect the interests of native citizens, while encouraging the lucrative offshore business.
Equity of Bahamian Companies listed on BISX can be cross listed on principal CARICOM exchanges (i.e. Barbados, Jamaica, ECU and Trinidad & Tobago), within prescribed limits. Foreign companies listed on principal CARICOM exchanges may list issued and outstanding equity securities on BISX.
The following statutes, among others, incorporate significant incentive structures:

  • The Industries Encouragement Act
  • The Export Manufacturing Industries Encouraging Act
  • The Bahamas Free Trade Zone Act
  • The Tariff Act
  • The Hotels Encouragement Act
  • Hawksbill Creek Agreement
  • The Agricultural Manufactories Act
  • The Export Manufacturing Industries Encouraging Act

There are also incentives for available exemptions as created by the National Investment Policy managed by the Bahamas Investment Authority.  There are free ports, tax, and duty free exemptions that can handle even the largest vessels.  These acts and treaties were completed to encourage import commerce.

  • The Lome Convention
  • Caribcan
  • The Caribbean Basin Initiative
  • The Generalised System of Preferences

Page 3 Investment and Incorporation Regulations

Incorporation laws and regulations are imposed under the Companies Act of 1992 based on English law, but reformed under the International Business Companies Act of 1989 to encourage greater offshore business.  Bohemian companies can be private or public.  Memorandum and Articles of Association must be filed at the Companies Registry.  A company is required to have a business license and have a minimum of two members.

The term “offshore” is not used in Bohemian legislation.  The delineation lies in whether or not a resident is involved in the business regardless of the type of entity.
The Bahamas' Stock Exchange
In May 2000, the Bahamas' new stock exchange (BISX) went live, initially with two traditional brokers and by the conclusion of 2005 there were nineteen companies listed on the exchange with a capitalization of around $2.6 billion. The BISX has an upgraded infrastructure from which remote trading across a secure private WAN.  However, the exchange has struggled to develop a secure fiscal foundation in the void of promised privatizations.
Business License Fees

Non-resident entities, International Business Companies, Limited Duration Companies and Exempted Limited Partnerships are not liable for license fees.

Business license fees are based on percentage annual gross profit percentage.  Businesses below $50,000 gross profit percentage are exempt.  Businesses pay on sliding scales, which makes for a complicated situation and local advice must be consulted to determine what the tax rate will be.  Businesses between $50,000 and $100,000 will pay between $250 to $800 USD.  Larger businesses may pay as much as 1%.  Mutual funds, insurance companies, holding companies and trust companies all have separate tax structures.
Public Companies

Public companies are permitted with three shareholders and are subject to an annual mandatory audit.  The list of all directors and officers and the required audits with financial statements must be filed with the Registrar General.

Domestic Limited Company

This is a general type of company used mostly by local business.  The company must file with the public register the list of all of the members and have two directors.  The company may file an annual audit listing the names of all members or they may file bearer shares with the Exchange Control.

Company Limited by Guarantee
The Company Limited by Guarantee does not require a list of members on the required annual return.  Control of the assets are by shares and in some Bohemian jurisdictions they are classified as capital gains rather than income.  The company must file a Memorandum of Association, which includes the list of two members who will guarantee the companies debt.  The remainder of shareholders may go unnamed, but may still be subject to taxation.
IBC
The IBC, International Business Company is most known and the most widely used form of private company used for offshore entities.  These offshore companies are governed by the International Business Companies Act of 1989 and were amended in 1994.  With the controls and regulations placed globally from international terrorism concerns, the regulations and registrations are much stricter.  IBCs are required to list and register at the Registrar of Generals Department and include the names and full identities, addresses and citizenship of all owners and directors.
The IBC and the LDC (above) are not permitted to do business with Bohemian residents.  They may file for certain activities involved with the island if the Minister of Finance will permit activity in the interest of the islands.
The requirements are the following.

  • At least one director
  • Must have two shareholders from any nationality other then the Bahamas and a shareholder register must be kept
  • No minimum capital requirement but shares must be registered
  • Bearer shares are not permitted
  • Shareholders must meet, but may meet by telephone
  • The Memorandum and Articles of Association must be held on public record
  • IBC legislation provides Asset Protection from outside creditors

An IBC is exempt from Bahamian Exchange Control, stamp duty, other taxes and estate taxation for 20 years from the date of incorporation.  IBCs may employ the locals, have bank accounts and own shares in other Bahamian companies, but may not transact business with local residents.  There can be no ownership of real estate, but an IBC can lease an office and IBCs are barred from the banking, insurance (except for external insurance), re-insurance and investment business of financial instruments.

A company incorporated or (if foreign) registered under the Companies Act 1992 can switch to IBC status if it qualifies under the legislation.   IBC status is granted subject to certain conditions that are very strict about not transacting business with Bahamian residents because they are considered “offshore” entities.

Due to the complication, it is common to use local agents for registration, auditing and share declaration.  Generally, with the proper credential, incorporation can take place in a day.  The incorporation fees are $350 and annual fees are from $350 to $1,000 USD.

Limited Duration Company

In 1994, the International Business Company Act introduced the Limited Duration Company.  This company is fundamentally the same as the IBC, but has a limited duration and expires after 30 years.  Often this company is structured as a partnership and treated as such by the US and the IRS and can be considered to a Limited Liability Company or LLC.

Bahamas Foreign Company

A foreign company can operate as a trading branch without the requirements of registration.  The business must qualify as an “undertaking” under the Companies Act of 1992, by complying with regulations.  The foreign corporation is required to keep a notarized copy of the Memorandum and Articles of Association and business license for selling securities, keep a bricks and mortar place of business and declare the nature of the business.

If the foreign company intends to employ natives or trade within the Bahamas, it must apply for clearance under the Bahamas Investment Authority.

Limited Partnerships

A Bohemian Limited Partnership is very similar to the US concept of partnerships with a general partner carrying the liability.  The partnership agreement must be notarized and the partnership agreement must contain the identities and sum contributed by the limited partners.  Partnerships are required to file for and maintain a business license.

Exempted Limited Partnerships

The ELP is equivalent to the IBC with the same limitations the difference is that the general partner can also be the limited partner.  One of the general partners must be a Bohemian resident, a company incorporated under the Companies Act of 1992 or an IBC.  The registered names and address of all general partners must be filed and a certificate of exemption is issued for a 50-year term.  The fee for an ELP is $850 and the annual fee is $475 USD.   There is a requirement to file a declaration in a local trade journal one time a year.

Bahama Trusts
The trust law of the Bahamas dates back to 1893 with the Trustee Act based on English trust law.  The Trustee Act of 1993 repeals other updates and protects against forced heirs with a provision against forced inheritance claims. 
The Purpose Trust Act of 2004 introduced legislation dealing with the proper law civil law protecting the trust and making the trust immune to foreign judgments if declared in the trust deeds.  The perpetuity is 150 years.  A fraud against the settlor must be brought with in the Fraudulent Dispositions Act of 1991 in which the creditor has two years to bring forward the claim against the settlor.  There are many provisions that a settlor must follow to prevent forming a “sham” trust. 
In this statute the role of trustee’s indemnities are outlined.  There are extensive disclosure provisions with three important exemptions.  There is a $50 stamp fee on all trust deeds.

  • Exemption from all taxes and from stamp duty (an initial $50 stamp is required on all trust deeds);
  • Exemption from registration except where an interest in Bahamian property is to be protected;
  • Exemption from exchange control regulations for non-resident beneficiaries.

The Purpose Trust Bill provides that benefits must be for a purpose and that no assets or property may be vested to any other ownership.  The Bill creates an outline as to what is a legitimate trust structure.  Trusts Administrators must be licensed by the Central Bank under the Banks and Trust Company is Regulation Act of 1965. 
The minimum capital required for a corporation is $1 million USD and for an individual $100,000.  Capital is then expected to keep pace with a 5% requirement of cash to total assets added yearly and the Trust Administrator must file a bond for $1 million.  Trusts that do not hold real estate do not have to be registered.  Many Trust Administrators are affiliated with the banks and the 1998 Act provides for the appointment of a 'protector of trust', who is effectively a supervisor of the trustee(s).A foreign company can apply for a license as a branch, or with a subsidiary, which is necessarily a Bahamian-incorporated company (not an International Business Company).
The allowed purposes of a Bahamas Trust are as follows.

  • Holding shares of a private company and the settlor and members of the family may be appointed directors of the PTC, Private Trust Company
  • A philanthropic and charitable purpose trust
  • Protection required to separate voting control from economic or equity disbursement
  • temporary avoidance of controlled foreign corporation rules
  • discretionary trusts for corporate governance control
  • asset finance or purchase where the liability and asset ownership must remain separate from the purchaser’s balance sheet
  • debt subordination from creditors t o provide ranking and priority of assets

The PTC is considered a family trust.  A Designated Person(s) for classification of a PTC is an individual who is identified and established by the PTC as the person with whom all other settlors of trust for who the PTC acts as trustee must be related.
Bahamas Foundations
The Foundation Act of 2004 introduced Bahama Foundations.  There is no expiration term for a foundation unless the creator desires it.  Foundations redomiciled in other jurisdictions may redomicle to the Bahamas and Bahamas foundations may redomcile to other jurisdictions.

Foundations are permitted for the purpose of Estate Planning, to provide for subordinate debt, to hold benefit of warranties, changing class of investors, philanthropic and charitable purposes, to perpetuate a particular corporate governance policy and for separating voting rights and economic benefits.  Foundations allow for investment in family companies and ownership interests in trusts, for packaging of financial instruments and employee share option plans.

Registration is similar to the formation of a company; the Registrar General will determine if the foundation is legitimate.  Officers of the foundation must keep records and are subject to audits.  Confidentiality provisions restrict any person from acquiring the information from disclosing it to anyone with consent from the founder or beneficiaries.  The foundation may not have less then $10,000 Bohemian dollars in assets.

A Bohemian Segregated Account Company

A Segregated Account Company (SAC) (law passed in 2004) is used to separate the assets and liabilities of one account from the assets and liabilities of another account.  A good example for which it may be used is in intellectual property and the licensing rights afforded.

The accounts of an SAC are not separate legal entities

All assets held in segregated SAC accounts are to be held exclusively for the benefit of the account owners and will satisfy all of the liabilities of that account.  Assets in that account will not be available to satisfy the debts of another account.

The SAC will declare to everyone with whom it does business that it is an SAC account and company and keep all transactions separate.

A governing instrument must exist for the SAC Company and appoint the manager(s) of the separate SAC account.  This governing agreement must comply with the laws of the Bahamas.

Evidence of activity on all account of an SAC must be kept in separate documentation.

Captive Insurance Companies

A Captive Insurance Company is a legal entity in the Bahamas.  For a fee of $2,500 for registration annually, a Captive gains exemption from taxes for 15 years.  The External Insurance Act of 1983 regulates Captive Insurance Companies.  Registered Captives are also exempt from exchange controls.
The business environment and communications infrastructure provides everything needed for international business.  The economy depends heavily upon tourism and the financial sector encouraging the government to keep regulations as safe as possible for investors and companies.
However, the legislation allows businesses to operate freely with little intrusion without warrant.
Page 4 Banking Regulations
Banks
Approximately 360 financial institutions are licensed to do banking and financial trust representation in The Bahamas. The country is the leading offshore financial center in the world.  The Bahamas is one of the world's top ten international banking centers, with 300 licensed banks from more than 30 countries, and a total asset base nearing $1 trillion. Capital ratios average over 10%. The banking sector is substantial and the government has encouraged the growth of mutual funds, trusts, hedge funds and recently Captive Insurance Companies.
In 2000, the Offshore Economic Development Commission (OEDC) created world standards for anti-money laundering for which the Bahamas was criticized.   Since then the Bahamas government has paid attention to the regulations and responded to the criticism.  The government has increased their standards for regulation and they also began a shipping registry.
In 2004, the country launched an interbank electronic settlement system to modernize the banking system and reduce clearing times.  The Central Bank began an aggressive campaign to secure the banking system in response to a decline in the total number of banks and trust management companies registered in the Bahamas from 415 in 1999 to 284 in 2003, with the number of licenses revoked growing from 14 in 1999 to 29 in 2003.
The Bohemian government began to concentrate on investment management and regulations for private banks.  By 2005, the Bahamas had been released from the Financial Task Force of the OEDC and was considered status quo for monitoring money laundering.  By February 2006, the Bahamas was rated as a top IFC by leaders in the industry based now on anti- money laundering campaign, zero-tax jurisdiction, political stability and the legal, regulatory framework to make banking and incorporating in the Bahamas worthwhile.
The Central Bank of the Bahamas, under the Banks and Trust Companies Regulation Acts of 1965, regulates the banking system.  The system provides restricted and unrestricted licenses to a list of approved clients.  Restricted licensed are provided only to group treasury operations and the Central banks prefers to deal with unrestricted banking from reputable public banking sources.
It is not easy to form a restricted private bank in the Bahamas, as some may report.  A five year business plan with five shareholders of substantial net worth is only one of the rigorous control structures.  The minimum capital is $2 million USD and capital must keep pace at a 5% cash growth annually and only 15% of total assets may be invested or loaned in a year.  There are also annual registration fees.  A restricted (private) license is $100,000 USD.
Foreign banks are permitted to operate by subsidiary or by branch.  Local professionals manage most branches.  Banks operate in Bahamian dollars (the official currency) and pay to operate in other currencies as well as pay additional license fees to operate in foreign currency.  This was in response to the 2000 downgrade by the OEDC.  The Central Bank of the Bahamas 2000, provides additional regulation and supervision over the compliance of all banks both restricted and unrestricted.  On site inspections, audits and compliance with the Central Bank are routine occurrences in the banking sector and acts to provide information gathering powers to the Central Bank.  This also provides supervisory power to the Inspector of Banks and Trust Companies for compliance with all regulations and increases the collaborative ability of the Bahamian government with other foreign governments.
Bank Leu Limited
1755 Bank Leu is founded Starting life as "Leu et Compagnie", a state-owned banking institute, Bank Leu takes its name from its first chairman, Johann Jacob Leu, Master of the Purse and later Mayor of Zurich . On 15 April 1755, Leu & Compagnie begins operations in the Interest Commission Room of the Zurich town hall. The bank accepts interest-bearing deposits from the citizens and guilds of Zurich and issues them with securities called "Town Hall Bonds" in return. The bank's clients soon included European royalty, such as the Empress Maria Theresia of Austria.

Barclays Bank in the Bahamas
Barclays Bank PLC offers a broad range of banking, savings and investment services for personal and company clients. Barclays serves both Island residents and non-residents through the dedicated onshore and offshore banking units.

BNPPARIBAS Private Bank & Trust Bahamas Ltd

The Laurentian Bank & Trust, subsidiary of Laurentian Group Corporation of Canada, was established and incorporated in Nassau in 1986. It has been acquired in 1990 by Laurentian Bank of Canada, member of the same Group, and by BNP Paribas Paris on July 31st, 1997. This offshore Private Bank & Trust offers a variety of financial services to non residents.

CIBC Trust Company (Bahamas)
CIBC established a presence in The Bahamas with the opening of a branch office in Nassau in 1957. In 1973 CIBC Trust Company (Bahamas) Limited, a subsidiary of Canadian Imperial Bank of Commerce, was incorporated to add a comprehensive range of trust and investment services. Today this office employs 48 highly qualified and well experienced personnel.

Citco Bank and Trust Company (Bahamas) Ltd
The Citco Group Limited is an organization of financial service providers, comprised of international banks, trust and fund companies. For over sixty years, the company has served the growing needs of a diverse client base from its network of international offices.

Corner Bank (Overseas) Limited
The Corner Bank has a globally diversified strategy and takes account of risk diversification. Website available in English and Italian.

Credit Suisse (Bahamas) Ltd
Credit Suisse Group is a world-leading financial services company, advising clients in all aspects of finance, around the world, around the clock. 360° Finance. Offers a full range of banking and financial services

Finter Bank & Trust (Bahamas) Ltd
Finter Bank Zürich provides international and domestic clients with all the advantages of Swiss private banking.

Pictet Bank & Trust Ltd
Working out of a brand-new business park since 2000, our 80 qualified Nassau staff can provide clients with an entire range of banking services that bespeak the excellence expected from the Pictet Group.

The Private Trust Corporation Limited  ("PTC")
The Private Trust Corporation Limited ("PTC"), is a licensed Bahamian bank, trust company, securities broker-dealer and mutual fund administrator which specializes in the provision of a highly personalized, professional and comprehensive range of international financial services to corporate and private clients throughout the world.

Royal Bank of Cananda
Royal Bank of Canada was formed in 1869 by a group of Halifax merchants who needed a bank to facilitate their growing trade. From that humble origin, Royal Bank of Canada has grown to become the premiere bank and largest financial institution in Canada, among the top ten in North America and now ranks among the world’s leading banks.

Thorand Bank & Trust Ltd
Thorand Bank & Trust Ltd., an independently owned financial institution, has served private clients from The Bahamas since 1960. Thorand is fully licensed to conduct business within the Commonwealth of The Bahamas and is subject to the supervision of the Central Bank of The Bahamas.

UBS (Bahamas) Ltd 
UBS is a premier global financial services firm offering wealth management, asset management and investment banking services to individual, corporate and institutional investors. With an understanding of your goals, we provide insight and solutions that help you to make financial decisions with confidence.
Winterbotham Trust Company Limited
Our banking division, The Winterbotham Merchant Bank, offers certain specialized banking services and develops and participates in structured financial solutions on behalf of its clients. The Winterbotham Merchant Bank is a division of The Winterbotham Trust Company Limited. The primary focus of our banking activities is to provide receipt and payment services and cash management to client companies under our administration. We are also experienced in structuring and implementing fiduciary loans and placements, and securities transactions

Investment Climate in Relation to Bank Products and Securities
There are over 90,000 IBCs in the Bahamas, as the Bahamas has become a leading IFC.  Many companies are holding companies that are subject to Controlled Foreign Corporation regulation if a mother company in a high-tax country owns the Bahamian company. 
The security industry is one of the fastest growing sectors of the Bahamas. The sector represents $130 billion USD and over 700 registered funds.  The Bahamas Financial Services Board overseas the legislative sector since December 2003 with the legislation provide by the Investment Funds Act (IFA).    The Securities Commission of the Bahamas (SCB) is authorized to classify and license securities for international compliance.  The Bahamas has created a risk-based fund regime and investment categories based on investment type.
The continuing growth of Bahamas’ Financial sector has contributed to the recent progress of the country. More and more investors are coming in to take advantage of Bahamas’ stable economy. To regulate and maintain the developments in the financial industry of the country, Bahamas is making a new legislation in BFSB’S (Bahamas Financial Services Board) attempt to establish an eye-catching, risk-based program.

The IFA  is based on the country’s four classes of funds: Professional, SMART, Standard and Recognized Foreign Funds.  The IFA serves to:

a) Regulate the four classes of funds.
b) Maintain dual licensing by enabling the Securities Commission of The Bahamas to grant license to all 4 classes of funds;
c) Grant authority for Unrestricted Fund Administrators (UFA) to certify Professional & SMART funds;
d) And establish a new environment for investment funds that are focused on the classes of investors rather than the value of their investment.

The classes of investment funds are:

1          Professional – for sophisticated investors.

2          SMART (Special Mandate Alternate Regulatory Test Fund) – an alternative for intermediaries and clients who do not fit a classification. This innovative category enables them to make an alternate mandate for their regime. The SMART fund serves two purposes in relation to the Investment Fund Act.
            a.         Standard fund – caters to the public and upon request of a client that doesn’t fit the category of Professional, Standard and Recognized Foreign Funds investment;
            b.         Recognized Foreign Fund – funds that are invested in another reliable jurisdiction n. This enables clients to have new and existing investments on outside sources managed and regulated by the Bahamas.

Mutual funds in the Bahamas can also exercise investment freedom. It provides advantages in taxation and control on exchange, which makes it a valuable commodity.
Professional Fund
The Professional Fund is the lead fund in the Bahamas and continues to develop in a dynamic global market.  Bahamas SMART Funds are a classification of retail and professional third party funds.  All have regulatory supervision by the SCB and are accessible to intermediaries. 
Special Mandate Alternate Regulatory Test Fund

SMART Funds were developed as an innovate answer to attract clients with different needs for investment and provide oversight that varies and evolves as clients and intermediaries.  The SMART Fund recognizes that not all funds require a predefined classification of retail or professional third party funds.
The Bahamas Securities Commission establishes the risk and then declares a mandate suitable for the funds regulation.  The Commission may make concessions such as waivers of standard requirements and may broaden the number of clients, which in turn may reduce the risk.
In 2003, the government updated the 1995 Mutual Funds Act and reclassified the categories of Mutual Funds into the following categories.

  • Exempt from Licensing Funds – Funds with no more than 15 investors – the majority can appoint and remove the fund manager.
  • Authorized Funds – Funds with a minimum subscription level of $50,000, registered with the Securities Board and listed on the stock exchange
  • Other Funds – Funds that require other licenses.

The Mutual Funds Administrator is licensed by the Securities and issues licenses for all Mutual Funds.  In 2004, the government passed The Segregated Accounts Companies Bill and in 2005 the SCB published guidelines for the fast tracking of licensing issue for accredited investors to encourage investment.  Fast track is processed in 72 hours and the reason due diligence is faster is that the investors are accredited. 
Trust Management in the Bahamas
The trust industry in the Bahamas is very active and has made a large swing from only the wealthy to a much greater number.  Since the trust has become known as an effective and legal tool in Asset Protection, the Bahamas’ trust business has skyrocketed.  The Bahama government has changed and adapted trust laws to accommodate the middle class with Wealth Preservation and Asset Protection with the Trustee Act of 1998.
Trust service companies must be registered under the Banks and Trust Companies Act of 1965.  However, individuals can provide trust services without registration.  Foreign and Bahamian companies can obtain licenses issued by the Central Bank, but there is a strict list of rules.  A licensed trust company may be private or public.  Private companies are “restricted” require less capital, but have stricter rules then public companies.
Bahamian trusts do not have to register unless they hold real estate.  The 1998 Act states that non-resident settlors, donors, beneficiaries and trustees are not subject to the Exchange Control Regulations. 
The 1998 Act also provides for a “protector of the trust.”  The protector is the supervisor of the trustee(s) the successor trustee(s).  In 2004, the Purpose Trust Bill was enacted to allow special purpose trusts as a vehicle for use in off-balance sheet transactions and securitizations.
Comprehensive new Private Trust Companies legislation passed both houses of parliament in the Bahamas in December 2006 and again in 2007. Under the legislation, a Bahamian Private Trust Company, PTC, like other structures such as foundations, does not require regulatory approval. The PTC need only arrange its affairs with a regulated Bahamian service provider or Registered Representative.

Under the legislation, this class of trust is defined by reference to the Designated Person(s). The Designated Person(s) is an individual(s) who is identified at the establishment of the PTC and with whom all other settlors of trusts, for whom the PTC acts as trustee, must be related. With the requirement that the Designated Persons must be related, and that all other settlors of trusts, for whom the PTC acts as trustee, must be related, the PTC can act as Trustee for an unlimited number of trusts and can benefit anyone (subject to due diligence requirements) from the assets of the trusts.

The Bahamas Insurance Industry

The insurance sector is well developed with over 60 registered and licensed and the Captive Insurance Company sector is still growing.  Insurance companies are prohibited from being IBCs.  There are statutory minimums for capitalizations and solvency ratios.

Insurance Law in the Bahamas

Under the External Insurance Act 1983, licenses are issued by the Finance Minister by the Registrar's recommendation after a thorough application process.  Bahama Captive Insurance Companies are licensed by and regulated by the Office of the Registrar of Insurance.  The identification and details of principles in insurance companies must be registered.
The external Insurance Acts sets forth the requirements for net worth.  Generally, the minimum is $250,000.  Insurance companies are not permitted to use the International Business Company, IBC and must use the Companies Act for formation.  IBCs are not permitted to participate in insurance activity.
Bahamas Maritime Operation, Ship Registry and Management

The Merchant Shipping Act of 1976 established the Bahamas as a shipping registry.   Since then, the Bahamas has built the third largest world fleet with more then 1,500 vessels registered.   The registry is run by the International Maritime Organization in London and maintains national standards for labor and security.  The registry supervises ship safety throughout a worldwide network to survey for adequate training, skill levels and safety among the crews of the Bahamian fleet.
Registration fees are as follows:

  • $1.20 USD  per net registered ton for vessels up to 5,000 tons;
  • $1.10 USD  per net registered ton for vessels over 5,000 tons with a maximum of $27,500 USD
  • Annual tonnage dues are 10% of the initial fee plus $1,500 USD for vessels up to 25,000, and $0.11 USD per ton for vessels over 25,000 tons, plus $1,500 USD.

Page 5 Security Regulations and Global Status

International Standing

In June 2000, the Bahamas was placed on the Financial Action Task Force, FATF, blacklist of 15 jurisdictions suspect to money laundering by the US State Department.  They were also placed on the OEDC’s list of 35 offshore jurisdictions offering “unfair” tax competition.

Subsequent to the Bahamas being placed on the FATF and OECD 'blacklists' in 2000, the government extensively revised its legislative structure to bring the nation into conformity with tougher international standards, and the Bahamas was removed from both lists as a result.

The Bahamas and the United States signed a Tax Information Exchange Agreement in 2002.  Following this, the Bahamian government became a fully compliant Offshore Financial Center (OFC)

The Bahamas cooperates with the United States, Canada and the UK in Mutual Assistance Treaties, which provide for the exchange of information and disclosure of information concerning criminal matters.  Tax evasion is not a crime in the Bahamas.  The Bahamian statute Reciprocal Enforcement of Judgments Act 1924 allows Commonwealth judgments to be enforced in the Bahamas, but revenue matters are excluded.

In June 2000, the Bahamas was placed on the FATF blacklist of 15 jurisdictions suspect to money laundering by the US State Department.  They were also placed on the OEDC’s list of 35 offshore jurisdictions offering “unfair” tax competition.  By August 2000, an Amendment was added to the Evidence Act that allowed international investigators access to information with local and foreign banks, including bank accounts and financial information.  In January 2002, the Bahamas signed an information exchange agreement with the United States in order to allow both countries to pursue tax evaders and money launderers more effectively.
Information Exchange Regulations
By 2002, the Bahamas was granted a six-year term for Qualified Jurisdiction (QJ) status by the United States.  The decision to grant the six-year term was made on the basis of an IRS determination that 'Know Your Customer' rules.  The goal was to put an end to the money laundering and tax evasion of United States citizens.

To many in the financial sector this was the end of banking secrecy.  However, after much work by the Bahama legislation, in October 2005, it was announced that the Bahamas had been removed from the Financial Action Task Force’s monitoring list of countries with weak anti-money laundering or terrorist financing laws

Similar agreements have followed between the US and Antigua, Barbuda, and the Cayman Islands. The United States administration campaign has pushed to clamp down on terrorist financing. All emphasis is to allow the US Internal Revenue Service to pierce stringent banking secrecy rules in the Bahamas in certain circumstances.
Page 6 Political Climate
The very rapid recent growth in IBC incorporations has been fed by political instability in Latin and Central America, and more recently the handover of Hong Kong to mainland China. Many of these newer IBCs have been formed as asset protection vehicles, sometimes in association with trusts, either to hold shares or other types of asset. The Bahamas are one of the most popular jurisdictions for these markets, because of the flexible IBC legislation, good secrecy, good reputation, and high-quality professional services.
Following pressure from the OECD in 2000, Bahamas passed the the International Businesses Companies Act 2001 under which IBCs are required to submit their identities, addresses and names of directors and owners to the Registrar General's Department.
Bahama Trust Law
The government has taken an expansive approach to trust law to encourage compliance with regulations and protection of investors
The Choice of Governing Law Act of 1989 protects Bahama Trusts from forced inheritance claims. If proper law of a trust deed so declares, and makes the trust immune to foreign judgments.  The Fraudulent Dispositions Act 1991 establishes a 2-year limitation period for creditors' attacks on asset protection trusts; the attacker has to prove fraud against the settlor.
The Trustee Act of 1998 has provided the following provisions.

  • The range of purposes for which a trust may be formed
  • The use and role of a “protector” of a trust
  • The extensive disclosure provisions
  • Trustee powers
  • Exemptions for registration for non-Bohemian residents
  • Exemptions from exchange control regulations for non-Bohemian residents
  • Indemnification of Trustees

The Purpose Trust Bill, 2004, added another dimension for a purpose rather than persons or entities.  Most of the trust work in the Bahamas is under the supervision of y Public or Restricted Trust Administration companies, which are often affiliated to or owned by banks.  Public Trust Administrators must post a fidelity bond of $1 million USD. Trusts may be formed for the following purposes.

  • Philanthropic and Charitable Purpose
  • Holding shares of a private company shares, which is expressly included in the act
  • Separating voting control from economic distribution
  • Debt subordination to provide ranking among creditors
  • Discretionary trusts
  • Asset Protection
  • Temporary avoidance of controlled foreign corporation rules

Bahamas Legislation

Bahamas has legislated to comply with the OEDC since the violations by the OEDC and the FAPT.  They have strived to maintain a balance of confidentiality and privacy with personal data and with compliance to the emphasis on money laundering and terrorism.  Consistent with the OECD's principles on Privacy, the Act requires that information should be obtained by fair and lawful means and used in a manner consistent with that for which it has been collected.

The Financial Intelligence Unit Act 2000 provided for the establishment of a Financial Intelligence Unit (FIU) in the Bahamas, its function being to receive, analyze, obtain and disseminate information relating to the proceeds of offences; all disclosures of information required to be made under the Proceeds of Crime Act 2000 must be made to the FIU.

The Financial and Corporate Service Providers Act 2000, sought to have all financial services providers (attorneys, accountants, management companies, brokers, insurance companies) adhere to know-your-customer rules in a manner similar to the Banks and Trust companies. Above all, every participant in the financial services industry in The Bahamas has undergone some type of training to become familiar with the new requirements of the legislation.
Comprehensive new Private Trust Companies legislation distinguishes the Bahamian PTC from those that are available in other jurisdictions, and allows for exclusive interaction between the client and its Registered Representative without additional regulatory involvement. As a result, client information need only be delivered to the offices of the client’s service provider.

Page 6 Political Climate

Queen Elizabeth II remains the head of state and appoints a Governor-General.  Bahamian law has evolved from common English Law into a parliamentary democracy.  The model has an elected House of Assembly headed by a Prime Minister and a cabinet of eight ministers elected every five years.  Members of the upper house Senate are appointed by the Governor.

There is an independent judiciary. English common law forms the basis of legislation, but many Bahamian statutes have been added over the years. The highest local court is the Supreme Court, and there is a Court of Appeal; final appeals can be made to the Privy Council in London.

Legislative Branch

Bicameral Parliament consists of:

  • Senate - 16-member body appointed by the governor general upon the advice of the prime minister and the opposition leader for five-year terms
  •  House of Assembly - 40 seats; members elected by direct popular vote to serve five-year terms
  •  Elections last held 2 May 2007 - next to be called by May 2012
  • Judicial branch Supreme Court; Court of Appeal; Magistrates Courts
  • Political parties Free National Movement or FNM (majority); Progressive Liberal Party or PLP (minority)

 

21 districts as follows: Acklins and Crooked Islands, Bimini, Cat Island, Exuma, Freeport, Fresh Creek, Governor's Harbour, Green Turtle Cay, Harbour Island, High Rock, Inagua, Kemps Bay, Long Island, Marsh Harbour, Mayaguana, New Providence, Nicholls town and Berry Islands, Ragged Island, Rock Sound, Sandy Point, San Salvador and Rum Cay

 

Page 7 Employment and Labor Climate

The economy depends heavily upon the tourist and financial industries.  Four million people visit the Bahamas every year.  GDP was 8.3 billion in USD in 2007.  According to the IMF, the future for the economy looks bright, with GDP set for 4% growth in 2008 in real terms.  The Bahamas depend heavily on imports and regional trade to the extent of trade deficit. 

The Government controls access to the labor market by using a system of work permits.  Unemployment and local housing are an ongoing problem.  Previously locals were discouraged from owning land.  Acquisition of a single family dwelling or up to 5 acres of vacant land for construction of a dwelling no longer needs an advance permit, but can be registered after purchase. Rules for inheritors of Bahamian properties have been lightened.

People wishing to stay for long period and obtain residency must obtain a permit from the Immigration Department.  All non-Bohemians must obtain work permits

Owners of properties worth more than $500,000 receive accelerated treatment of residence applications.  Homeowners can obtain an annually renewable Home Owner's Residence Card, which acts as a visa for entry, and residence during its validity.
Following the growth of the financial sector, the Bahamian government too steps to control immigration.  In November 2007, the Minister of State for Immigration announced that the government’s comprehensive immigration policy was “well underway”, and was addressing the challenges facing the Department of Immigration in the areas of illegal migration and the processing of work permits.
Page 8 Geographical Climate and Lifestyle

The Bahamas is a well-known tropical vacation spot surrounded by coral reefs in the Caribbean.  The population of the Bahamas is 302,000 (July 2005), The Bahamas comprise 700 islands, roughly 50 miles south-east of Florida.  About 30 of the islands are inhabited and the larger islands host major resorts.

In 1973 the Commonwealth of the Bahamas became an independent nation and a member of the Commonwealth; it is a member of the UN.  English is the official and everyday language, although Creole is also spoken.

The time zone is 5 hours behind GMT, (US Eastern Standard Time). There are international airports in Nassau on New Providence and Freeport on Grand Bahama.

One of the main attractions in the Bahamas is that there is no income tax, capital gains tax, purchase or sales tax, VAT or capital transfer tax. Employees pay national insurance contributions, and there is stamp duty on property and mortgage transactions, and a tax on real property; customs duties are quite high on most imported goods.