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INVESTOR’SRESOURCEGUIDEWealth Management and Investment in The Bahamas

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INVESTOR’S RESOURCE GUIDE | The Bahamas Investor S3

ContentsWEALTH MANAGEMENT TOOL KIT

Introduction to private wealth management ............................................S4Corporate structures ...............................................................................S4International business companies ...........................................................S5Segregated accounts companies.............................................................S6Bahamian trusts......................................................................................S7Foundations ............................................................................................S9Executive entity.....................................................................................S10Private trust companies and family office ..............................................S11Insurance products ...............................................................................S12

INTERNATIONAL TAX PLANNING

Canada .................................................................................................S13United States ........................................................................................S16Mechanisms for information sharing .....................................................S18

INVESTMENT FUNDS

Funds industry overview .......................................................................S20Standard funds .....................................................................................S20Professional funds ................................................................................S21SMART funds ........................................................................................S22Recognized foreign funds......................................................................S23Investment Condominium......................................................................S23Securities Industry Act ..........................................................................S25

DOING BUSINESS IN THE BAHAMAS

Estate planning: probate & administration ............................................S26Investment environment and incentives ................................................S27Business licensing ................................................................................S28Residency and employment ..................................................................S29Property transactions ............................................................................S31


Strategic planning for business cycles is an essential element for any successfulbusiness. In The Bahamas, we believe thisprinciple is equally important for individualsand families.

At each stage of your financialdevelopment, various products, services and techniques are available, many of whichhave complementary characteristics to assist in the organization of your financialaffairs. The Bahamas offers a comprehensiverange of private wealth managementoptions, which may be usefully regarded as a Bahamas tool kit, and is available to design effective individual solutions.

In The Bahamas, we are committed toadding value to the personal financial plansof clients through dedicated service as wellas the appropriate application of financialplanning tools. For the purpose of thisguide, these professional services aretermed private wealth management.

Individuals who have an effective wealthmanagement strategy are better positionedto manage the impact of events such aschanging market conditions, familytransitions or planning for the future.

In The Bahamas, we do not believe thatprivate wealth management should focusmerely on the structuring of financial affairsto reduce or defer tax. While the ability to accrue profits within a tax-neutral

environment such as The Bahamas shouldbe recognized as a valuable advantage, webelieve the greater priority is the formationof a relationship fashioned on maximizingthe efficiency of your financial assets.Whether this is accomplished by increasingthe return, safeguarding against loss orensuring efficient distribution, it is clearly a business relationship that may spangenerations. The integrity and continuityoffered by institutions located in TheBahamas should be important factors whenconsidering a wealth management plan.

The financial services industry in The Bahamas is staffed and managed by a large pool of experienced professionals.With personnel committed to the localcommunity, the client may be confident that continuity of service, which lies at the heart of the successful professionalrelationship, will be more predictable than in locations largely dependent uponimported skills. Moreover, respect forpersonal confidentiality lies at the heart of private wealth management, and theBahamian government has long recognizedand valued the right of the individual toconfidentiality in financial matters. Clientsmay be assured that their affairs will behandled in a discreet, professional manner.

Modern legislation enables The Bahamasto remain at the forefront of the industry.

The legislative environment is constantlymonitored to ensure the jurisdiction retainsits competitive advantage. To this end, theability of an independent nation to set itsown legislative agenda is an importantconsideration when deciding the location for personal financial services.

This guide aims to highlight products that have a variety of uses and that inevitablyoverlap. It may be useful to remember that as wealth increases, the structuringalternatives available similarly increase and,as such, the tool kit expands. It shouldbecome clear, however, that successfulwealth management is a whole life processthat is most effective when started early andmanaged to achieve agreed long-term goals.A trust or company structure that may bevaluable for protecting assets during life can be equally effective at managing theirdistribution following death. Indeed, theearlier a wealth management strategy isembraced, the greater the potential benefits.

The Bahamas offers an ideal domicile forthe management of personal wealth. Thetradition of quality personal service coupledwith an investor-friendly, tax-neutralenvironment yields a unique set of benefits.As you read this guide and explore some ofthe wealth management facilities offeredfrom within The Bahamas, we hope you are encouraged to find out more.

WEALTH MANAGEMENT TOOL KIT

Introduction to private wealth management

SOURCE: B

AHAMAS FINANCIAL SERVICES BOARD ©

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The Bahamas provides individuals and institutions the ability to establishcustomized corporate structures tailored to the specific demands of their internationalbusiness transactions, asset management and estate planning. These range from the flexibility of the International BusinessCompany (IBC) to the sophisticatedSegregated Accounts Company (SAC).

Types of structuresThe IBC is a staple tool in creatingstructures to preserve and accumulatewealth. Its ability to adapt to the needs of the client is enhanced by the jurisdiction’stax-neutral platform and the judiciouscorporate governance requirements.

There are no income taxes, capital gains,gift, estate, inheritance or succession taxesin The Bahamas.

While companies established under theCompanies Act, 1992, and the International

Business Companies Act, 2000, are used byboth international and Bahamian investors, theIBC is the preferred vehicle, because there arefewer filing requirements for these companies.The IBC may transact business in The Bahamasor internationally.

Depending on the nature of the product andmarket, the corporate structure could beenhanced by the use of a Segregated AccountsCompany, or one limited by guarantee.

In an increasingly global economy, entities that transact business in multiple

Corporate structures


jurisdictions value the importance ofproperly structured corporate affairs to take advantage of regional and multilateraltrade opportunities, tax incentives and mitigation, transfer pricing and double taxation treaty enhancements.Consequently, creation of a permanentestablishment in a tax-neutral jurisdictionsuch as The Bahamas is an integral part of strategic planning.

Such planning may also extend tocompanies wishing to access internationalfinancing for operations in different parts of the world. The use of internationalcorporate structures to coordinate debt and equity financing and bond issues hasproven advantageous to both companies and investors when combined with trustsettlements as part of a broader estateplanning strategy.

It is vitally important to the successfuloutcome of transactions involvinginternational business and trade, financialand tax planning, estate planning, wealthmanagement, and private trust or familyoffices that the correct corporate structureis created in an accommodating and well-regulated jurisdiction, such as The Bahamas.

A comprehensive, Internet-basedregistration process has been introduced,making it fast and convenient to incorporatein The Bahamas.

Bahamas regulatory frameworkCompanies are required to maintain aregistered office and appoint a registered

agent in The Bahamas. These serviceproviders must be licensed as financial and corporate service providers.

WEALTH MANAGEMENT TOOL KITSOURCE: B


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International Business Companies (IBCs)The International BusinessCompany (IBC) Act provides a modern,simple and cost-effective corporate vehicledesigned to suit in most flexible terms theneeds of international business persons. TheIBC, although incorporated and domiciled inThe Bahamas, is designed to facilitate theundertaking of legitimate business anywhere inthe world, whether in its role as a holdingcompany, trading company, a private investmentvehicle, insurance company for non-domesticbusiness, or other uses, including its ability toform part of a more sophisticated structureinvolving a combination of trust, foundationor other specialized corporate elements.

Of particular importance, the IBC operatesin a responsible environment for both duediligence and corporate governance

requirements. As a part of the global effort to combat money laundering and all otherillegal activities, a Bahamian IBC must have a registered agent which is a licensed entityunder the Banks and Trust CompaniesRegulations Act of the Financial and CorporateService Providers Act. Such agents are underregulatory control of The Bahamas whichrequires that full compliance is maintained withestablished Know Your Customer standards.This information, although mandatory, is keptin confidential files of the registered agent.

Further, every IBC is required to maintain a registered office in The Bahamas. Thedirectors may decide where the corporaterecords of the company are to bemaintained and what they should consist ofbut copies of the Articles and Memorandum

of Association, the register of directors andofficers and the Share Register must be keptat the registered office. A copy of the registerof directors and officers must be filed with theRegistrar General’s office. There is no publicfiling of the register of shareholders.However, every IBC (and any othercompany incorporated in The Bahamas) isrequired to notify its registered agent of itsbeneficial owners. Every registered agent musttake reasonable steps to verify such beneficialowners, collect the prescribed information inrelation to such beneficial owners and maintainthe same on a database that is accessible by a secure search system established by theAttorney General in his capacity as thecompetent authority. Other key highlights of the IBC are provided on the next page.

The flexibility and attractive cost of the IBChave resulted in the predominant use of thisvehicle in wealth management, with a widevariety of applications:• Holding company. In many instancesthe IBC is used as a holding company forassets such as property, securitiesinvestments or personal luxuries.• Investment fund. In the investmentfunds industry, the structuring of a fund that is simply a customized corporate or partnership entity allows access tospecialized investment services andimproved efficiencies in the delivery ofinvestment management and administrationservices. The IBC is the vehicle of choicefor such structures. The BahamasInvestment Funds Act provides a regulatedenvironment at the cutting edge of moderninvestment fund administration.• Shipping company.The IBC is an idealstructure to hold title to a ship. The Bahamas’Ship Registry is ranked as the third largest inthe world, and is the number one choice forthe world’s leading cruise operators.

• Captive insurance company. Captiveinsurance companies are used to insure and reinsure the risks of subsidiaries and affiliatedcompanies. Captives also provide access toreinsurance markets and, when established in a tax-neutral environment such as The Bahamas, benefit from the accumulation of premium and investment income.• Private trust company. The IBC, as aprivate trust company, assumes the role astrustee for one or more family-related trustsettlements. It does not engage in any third-party business. Such a structure enables thesettlor to select the management of thetrust company and retain more controlover the operations than would be allowedunder normal corporate trusteearrangements.• Family office.The family office conceptuses the private trust company structure asa platform for the broader-based servicesto be provided for the family. • Other applications. IBCs can includejoint venture, patent and e-businesses.

Bahamian IBCs have many practical applications


Segregated Accounts Companies (SACs)



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Company Law

Corporate Legislation Source

Types of Company

Classes of Shares

Currency for Authorized Share Capital

Minimum Share Capital

Standard Share Capital

Shares of No Par Value

Minimum Number of Shareholders

Bearer Shares

Usual Incorporation Time

Liquidation Procedure

Due Diligence

Meetings

Company Name

Reservation of Company Name

Government Fees–Incorporation

Government Fees–Annual

Details held on public record

Redomiciliation

Liquidation/Dissolution Procedures

Exchange Control

International Business Companies Act, 2000 with amendments.

English Law

• A company limited by shares and/or guarantee. • An unlimited company • A segregated accounts company (protected cell in some other jurisdictions).

In addition to being designated as issued “without par value”, shares may have rights attached as voting, non-voting, preferred, redeemable, redeemable preference shares or shares entitled to participation only in certain assets of the company, and may include options, warrants or instruments of a certain nature.

Any Minimum Number of Directors One

None Required Corporate Directors Permitted Yes

US$5,000 Corporate Secretary No

Yes Audit Required by Law No

One Statutory Filing of Accounts No

No Filing of Annual Return No

2-3 Days Ready Made Companies Available No

Easy Dissolution Procedure Available Yes

Yes Certificates of Good Standing Available Yes

Annual General meetings (AGMs) are not required. AGMs may be held anywhere inside or outside of The Bahamas and can takeplace by telephone. Directors meetings are discretionary. Directors entitled to vote on resolutions at a duly constituted meeting need not formally attend but must pass such resolutions by unanimous written consent signed by all of the directors (provided that there is no restriction thereon in the Articles). Directors may attend meetings by telephone or video conference.

May end in Ltd., Corp., GmbH, Inc. or S.A. either in abbreviated form or in full.

$25 for 28 days; may be extended for two additional 14-day periods at $30 per period

Capital up to US$50,000 - $400; capital over US$50,000 - $1,200

IBC with authorized share capital of US$0 to US$50,000 - $350; IBC with authorized share capital of US$50,001 & above - $1,000

• Name of Company • Date of Incorporation • Memorandum and Articles of Association • Registered office and agent address • Directors and Officers • Authorized share capital and number of shares • Registered number • Register of Charges (optional

at election of company).

By way of continuation in and outside the jurisdiction in accordance with the laws of The Bahamas and the laws of the jurisdiction from or to which IBC is being continued.

Voluntary and Court supervised procedures available.

No - unless an IBC does business with a person resident in The Bahamas or where a person who is deemed to be resident of The Bahamas for exchange control purposes desires to purchase shares, debts of securities in the IBC.

A Segregated Accounts Company(SAC) is a company which is registered underthe Segregated Accounts Companies Act,2004. The SAC may create separate accountswith assets and liabilities which are segregatedfrom the assets and liabilities attributable to every other account and also from thecompany’s general assets and liabilities.

A segregated account is not a legal persondistinct from the SAC. It must inform anyperson with whom it deals that it is a SAC

and must identify the segregated accountwhich is connected to a particulartransaction. All assets linked by a SAC to asegregated account shall be held by thecompany as a separate fund which will not bepart of the general account of the company butheld exclusively for the benefit of the accountowners of the particular segregated account.Those assets will be available to meet the rightsof the account holders and satisfy the liabilitiesconnected to the particular segregated account.

The SAC will record what assets are in its general account and such assets shallbe the only assets of a SAC available tomeet the general liabilities of the SAC.Assets in the general account will not beavailable to satisfy liability which is linked to a segregated account.

The rights and obligations of accountowners in a segregated account arecontained in a governing instrument.

Key Highlights of the IBC Act




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The governing instrument may providefor conditions which must be complied within order for a person to become asegregated account holder and may alsoprovide for management of the segregatedaccount, appointments of one or moremanagers, and the orderly winding up of theaffairs and termination of the segregatedaccount. The governing instrument must begoverned by the laws of The Bahamas andthe parties to it must submit to thejurisdiction of the courts of The Bahamas.

The rights and obligations ofcounterparties dealing with the SACare evidenced in the form of contracts.

StructuresA company registered as SAC must begoverned by the Companies Act or theInternational Business Companies Act and that company:

1. must be engaged in the business of a. investment fundsb. issuing securities orc. insurance, or

2. is a subsidiary of a Bank or Trust Company (and not licensed by the Central Bank), or

3. is engaged in a business where the Minister responsible for companieshas prescribed a primary regulator.

No company licensed under the Banks and Trust Companies Regulation Act may register as a SAC.

Registration A SAC must file a request with the Registrarto be registered as a SAC containing theprescribed information and accompanied bythe consent of the primary regulator of therelevant business. Where the company hasconducted business prior to the applicationfor registration, a statutory declarationcontaining prescribed information must also be filed with the primary regulator along with evidence of the consent of 75%of the intended account holders and 75% of the would-be creditors of the SAC. The Registrar will issue a certificate ofregistration on completion of registration.

Requirements• A SAC representative who monitors

and reports on the activity of the SACmay be required where the primaryregulator is especially prescribed by the Minister responsible for companies.

• A SAC must maintain a private register ofaccount owners.

• A SAC must file an annual declarationstating that the company is in compliancewith the Segregated Accounts CompaniesAct.

• A SAC must maintain records inaccordance with generally acceptedaccounting principles. Records must be made available at least once a year to each account owner, unless waived by the account owner.

• A SAC must pay prescribed fees basedon the number of accounts.

The trust is a unique relationship thatallows an individual or a legal entity (thesettlor) to transfer assets–which may be ofalmost any type–to a third party (the trustee) tobe administered for the benefit of thosechosen by the settlor (the beneficiaries) in accordance with the provisions of adocument (the Trust Deed). The concept isbased on the separation of legal ownership of the trust assets (which rests with thetrustees) from the beneficial ownership(which rests with the beneficiaries).

The Bahamas advantageBahamian law recognizes trusts and the Supreme Court has a long history of upholding the principles of equity.

Many of the world’s largest and mostprestigious financial institutions havebranches or subsidiary operations in TheBahamas, taking advantage of the country’sstable political and economic system.

In establishing a Bahamian trust, plannersdo not need to take local taxes into

consideration, as there are no income, capitalgains or estate taxes in the jurisdiction.

Developments in trust legislation havestrengthened The Bahamas’ position as aninternational financial centre. Thesedevelopments include:

The Trustee Act, 1998This modern and standard-setting statuteplaces The Bahamas in the forefront ofinternational jurisdictions in terms ofpremier trust legislation. Today, it remains asone of the foremost international financialcentres and trust jurisdictions in the world.Key aspects of the Act include:Discretionary powers. The Act enables a settlor to retain certain discretionarypowers without compromising the validity of the trust. The most important includes thepower to revoke the trust or trustinstrument, or any powers granted by thetrust or trust instrument; to withdrawproperty from the trust; to add or removetrustees, protectors or beneficiaries; and to

give directions to trustees. As a result, thesettlor is able to ensure that the trust isproperly administered.Investment of trust assets. Trustees havebeen vested with wide discretionary powers of investment and of dealing with the trustproperty. In this regard, trustees have the fullpowers of investment and of changinginvestments as those possessed by individualbeneficial owners absolutely. Trustees mayappoint agents such as investment advisors,who, on their behalf and in accordance withthe trust instrument, may properly invest thetrust funds and give investment advice. SinceDec 30, 2011, trustees are afforded greaterprotection where the trust instrumentstipulates that the power of investment shallonly be exercised upon a direction by thepower holder, eg an investment advisor. In suchcases, when acting pursuant to an investmentdirection, the trustee is not liable for any lossarising as a result of following the direction,acting only pursuant to the direction or failingto act in the absence of an investment direction.

Bahamian trusts


Managing trustee/protector. The trustmay provide for a managing trustee, and aprotector may be appointed with widediscretionary powers, ensuring the wishes andintention of the settlor are carried out inaccordance with the trust instrument. The Actformally recognizes the role of the protector.Court advice. The Act allows a processwhereby a trustee may seek advice anddirections from a judge in chambers of theSupreme Court without the necessity offiling an action. This could facilitate quickresolution of questions relating to themanagement or administration of trustproperty, involving only such interestedpersons as the judge may find expedient, andsaving costs.Maintenance and advancement. Thepowers of maintenance and advancement canbe applied in respect to any minor who hasan interest in the income of trust property.Access. The Act creates certainty as towho may be able to have access to the trust documents.Income accumulation. Income may beaccumulated within the period allowed by therule against perpetuity, if applicable. In TheBahamas, the perpetuity period rule, whereapplicable, adopts a “wait and see” approachto “lives in being,” or it may be a fixed periodof 150 years.Risk. The Act provides for appropriate flightclauses so that if there is any political upheaval,or any serious activity that would place thetrust at risk, the trust and its administrationwould be transferred immediately andautomatically to another country.Registration. Trust instruments and

subsequent documents do not have to be registered (except for conveyances of Bahamian real property) under theRegistration of Records Act.

Trust legislation also provides for protectionof assets against potential creditors, avoidanceof forced heirship laws and indemnities fortrustees, as highlighted below.

The Trusts (Choice of Governing Law) Act, 1989This law provides that assets held in aBahamian trust may be protected from forcedheirship claims or the enforcement of otherforeign law rules, which are adverse to thefree disposition of property.

The Perpetuities (Amendment) Act, 2004 The Amendment Act of 2004 extended theperpetuity period from 80 to 150 years,enabling families to plan for five generations.

The Perpetuities (Abolition) Amendment Act, 2011 This Act abolished the rule againstperpetuities for all trusts made aftercommencement of the Act, ie after Dec 30,2011. For existing trusts, trustees may applyto the Supreme Court to disapply the ruleagainst perpetuities. Nothing would prevent anew trust from including a perpetuity period ifthe settlor so desires.

Fraudulent Dispositions Act, 1991This provides creditor protection to trustsettlors. Trust assets are generally protectedfrom all litigation in respect of existing claims

started more than two years after assets are placed into the trust.

In crafting this legislation, Parliament wascareful to ensure that the Act exists for thebenefit of “solvent” settlors seeking tosafeguard their property from possible futureclaims. The Act does not provide assistanceto proposed settlors wilfully seeking todefeat an existing or contingent obligationowed to a creditor, of which they had notice.

Settlors seeking to use the provisions ofthe Act should take steps to ensure that,under their relevant bankruptcy laws, atransfer into a Bahamian asset protectiontrust is lawful and acceptable with regard to their particular considerations andcircumstances that may exist at the time.

Purpose trustsWhile a focus on any of the various types oftrusts would be worthwhile, one of themost recent additions to The Bahamas toolkit of products within the trust sector, thePurpose Trust Act, 2004 (amended 2011) is worth highlighting.

Traditionally, private trusts have namedbeneficiaries or classes of beneficiaries.Purpose trusts do not fit this mould and are often compared to charitable trusts. A significant difference, however, is that,with limited exceptions, trusts will only be considered charitable if they are for the relief of poverty, the advancement ofreligion, the advancement of education orsome other purpose beneficial to thecommunity. Like many other internationaljurisdictions, The Bahamas has passedlegislation that recognizes trusts for non-charitable purposes.

The Purpose Trust Act, 2004 The law dealing with purpose trusts in The Bahamas is contained in the PurposeTrust Act, 2004. Authorized purpose trustsmust satisfy the following requirements:

1. The purpose must be possible andsufficiently certain to allow the trust to be carried out;

2. The purpose must not be contrary to public policy or unlawful.

Authorized applicants. The Act provides for authorized applicants–persons appointed as such under the trust instrument or the settlor of the trust or court-appointed person. These authorized applicants have rights



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Trusts are extremely versatile, and thisaccounts for their long-standing use inwealth management. Examples of trustsinclude asset protection, purpose trusts,pensions trusts, voting trusts andcharitable trusts. They provide thefollowing advantages:• Flexibility in the distribution of the

client’s assets following his or her death;• Wealth preservation for the next

generation;• Separation of income benefits from capital;• Avoidance of lengthy and complicated

probate court procedures;

• Retention of shares for employees;• Confidentiality;• Maintenance of property for those who

cannot hold it for themselves, eg, minors;• Avoidance of disputes among heirs and

beneficiaries by securing the services ofan impartial person to administer assets;and

• Protection of property and assets fromlegal and political actions that may be takenagainst the settlor and beneficiaries bytransferring legal ownership to the trustee.

Uses and advantages of trusts in The Bahamas




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FoundationsA foundation is a distinct legal entityregistered under the Foundations Act, 2004.Once registered, a foundation is deemed tobe resident and domiciled in The Bahamas.Foundations may be established for private,commercial or charitable purposes providedsame are lawful and include the managementof its assets. Foundations are created by the will of the founder or by the founderexecuting a charter which may, but need not,be filed in the registry of foundations.

Foundations may be used for mostpurposes for which trusts and companies are presently used: estate planning, taxplanning, preserving family wealth,segregating assets, perpetuating corporategovernance philosophy, subordinating debts,separating voting and economic benefits,investing in private companies with a pooreconomic performance, owning private trust companies and establishing charities.Foundations may also be used where anti-forced heirship and creditor protectionare important.

FeaturesThe founder of the foundation may be a natural or legal person and a nomineefounder may be used.

A foundation must appoint either orboth a secretary or foundation agent to conduct the necessary due diligence,provide the registered office, undertakeduties relating to anti-money laundering and counter-terrorism regulations andensure that the foundation complies with statutory requirements. The secretaryor foundation agent must either be alicensed trust company under the Banks and Trust Companies Regulation Act or a duly licensed financial and corporateservice provider under the Financial andCorporate Services Providers Act. If afoundation has a foundation agent and a secretary, but the latter does not perform any of the statutory duties, such a secretary need not be a licensedfinancial and corporate service provider or trust company.

1. Where there are no officers appointed,the foundation charter shall provide forthe appointment of a foundation council,which may consist of:a. two more natural personsb. a legal person and one or more natural persons, orc. a legal person by itself.

2. The foundation council’s members need not be located in The Bahamas and its functions include:

a. ensuring that the foundation and the officers comply with the charter and articles and

b. supervising the officers and their management of the foundation.

3. The Council is entitled to:a. access to the books and records

of the foundationb. be informed of all meetings

of the officersc. attend and be heard but not

vote at such meetingsd. be included in the circulation

of foundation documents ande. be informed of any delegation

of powers to an officer.Fiduciary and other responsibilities are

usually vested in a foundation council or similargoverning body and the foundation may alsohave a protector or committee of protectors.

A charter may reserve powers to thefounder, including the power to amend orrevoke same. Charters may appoint otherofficers in addition to the secretary, whoseduties will be mainly administrative. It may

(similar to beneficiaries of an ordinary trust)to enforce the trust and to make certainapplications to the court includingadministrative proceedings, proceedings forbreach of trust and also rights to information(unless excluded by the settlor).

An authorized purpose trust may createtrusts for one or more authorized purposesand one or more individuals, corporationsor charitable purposes. While individualsmay benefit indirectly from the authorizedpurpose trust, they do not necessarily have the status of an authorized applicant.Rule against perpetuities. This does notapply to authorized purpose trusts.

Uses of a purpose trustThe most interesting feature of purposetrusts is the fact that beneficial ownership isnot vested in any person or entity that mightreceive a benefit under such trusts.

Accordingly, an authorized purpose trust has many estate planning and commercial uses, including:

1. Holding shares of a private company,expressly authorized by the Act. In thisstructure, the settlor, members of thefamily and advisors may be appointeddirectors of the private trust company(see pg S11) and assume someresponsibility for the management ofthe trust. This is useful when assets areof an unusual nature.

2. A trust that has both philanthropic andcharitable purposes.

3. Asset purchase or financingtransactions to provide security for anentity that finances the purchase or tokeep the asset and correspondingliability from appearing on apurchaser’s balance sheet.

4. Separate voting from economic control.

Regulatory frameworkThe supervisory and regulatory regime for banks and trust companies asadministered by The Central Bank of The Bahamas includes corporategovernance, guidance on internal controlsand accounting standards, capital adequacy,risk management standards, controls onlarge financial exposures and self-dealingsafeguards against abuses of conflicts of interest and know-your-customer (KYC) requirements.

The Central Bank Act and the Banks and Trust Companies Regulations Actcollectively address these issues, as well as cross-border supervision andcooperation by the Central Bank with its international counterparts.


Executive Entity



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include in terrorem provisions.The procedures for appointing

beneficiaries may be included in the charterrather than the names of the beneficiaries.

A beneficiary with a vested interest in the assets of the foundation has the right to be notified of interests, request the charter,articles, any audit report, and any minutes of any meeting of the officers of the council or other supervisory body. A beneficiary hasthe right to confidentiality and the officers of the foundation council shall take allreasonable steps to secure such confidentiality.

Due diligence in respect of founder andbeneficiaries is required, but confidentialitywith regard to foundation information mustbe maintained.

Foundations are exempt from Bahamiantaxes and business license fees, stamp duties(excepting Bahamian real estate taxes) andexchange controls. They may redomicile to

or from The Bahamas. Articles are optional.If no articles, the Act applies. A foundationneed only keep such financial statementaccounts and records as the officersconsider necessary or desirable to reflectthe financial position of the foundation.

Foundations may be established for a fixed or indefinite period. Foundations may be formally liquidated or revoked.

Instruments of disposition may includerestrictions against alienation.

Registration formalitiesA registration statement contains the nameof foundation, date of charter, purposes andobjects, date of articles (if any), details offounder (could be nominee), secretary andfoundation council or other governing body or supervisory person, address of registeredoffice, period for which established and value

of initial assets.The only additional filing required is

a statement containing particulars of anyamendments to the initial registration statement.

Foundations must have initial assets of$10,000 which must be maintained. (Assetsof a foundation need not be transferred until after registration although there will be a commitment in the charter by the founderto transfer the assets).

Foundations must have a registered office and secretary or foundation agent in The Bahamas.

Fees per calendar year• $500 if registered in 1st quarter • $375 if registered in 2nd quarter • $250 if registered in the 3rd quarter• $125 if registered in the 4th quarter • Annual fee $500

The Executive Entity (EE) is a legal entityregistered under the Executive Entities Act,2011 to perform executive functions–theseare powers and duties of an executiveadministrative, supervisory, fiduciary andoffice holding nature. The EE institutionalizesthe governance of wealth structures andother entities in an entity with limited liabilitythat is specifically designed for this purpose.The EE therefore is an ideal solution in thematter of identifying a protector or enforcerof a trust or a director or shareholder of aprivate trust company.

Highlights and requirementsCharter

• There is no requirement that the charter be filed or registered in a public registry.

• The charter must contain the name of the founder and other pertinentinformation such as the purpose of the EE and mechanisms for appointing and removing officers and/or council members.

• The charter may provide for thereservation of rights to the founder andmay specify higher or lower levels ofexonerations and indemnifications thancontained in the Act.

Agent, officers & council membersAn Executive Entity agent must be appointedwhich is either licensed under the Financialand Corporate Service Providers Act, or atrust company under the Banks and TrustCompanies Regulation Act.

The charter must provide for theappointment of an officer or a council. It mayprovide for the appointment of both officersand a council. The officers are charged withadministering the EE in furtherance of itspurpose and in accordance with the charter,articles and Act.

The council, if appointed, is charged withgenerally supervising the administration of theEE and ensuring compliance by the EE and theofficers with the provisions of the Act.

RegistrationAn EE is established by a charter which issigned by the founder of the EE. It attainsthe status of a legal entity upon registration.

To register an EE, submit the requiredfee along with a statutory declaration of compliance and statement signed by the EE agent or an attorney engaged in theformation of the EE containing the following:

1. the date of the charter and thedate of any amendments made tothe charter

2. the purpose of the EE3. a statement that the EE is

an Executive Entity4. the date of the articles

(if any) and the date of any amendments made to the articles (if any)

5. the name and address of the EE agent

6. the period for which the EE isestablished–definite or indefinite

7. other particulars the agent or attorney may wish to include

8. certificate of registration will be issued by the Registrar General with the name of the EE and the date of registration.

Distinguishing features of an EE Flexible capital structure. There is nospecific minimum capital that an EE isrequired to maintain; it must, however,maintain assets necessary to carry out itsexecutive functions.




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Family office The family office helps families achievetheir goals while dealing withregulations and complex issues oftaxation, distribution planning andcharitable giving. The trust is a toolused by the family office to facilitate thesmooth transition of assets from onegeneration to the next. Other essentialservices include: evaluating lifeinsurance needs; active coordination oflegal/tax/accounting matters of businessinterests; financial reporting and auditscoordinating the purchase of non-financial assets; and corporategovernance reporting.

Private trust companies and family office

An EE may hold shares, securities or otherownership interests in a legal person whosebusiness is to carry out executive functions.

The executive functions of an EE may beperformed only in relation to entities, trustsor other arrangements that are domiciled in

or regulated by the laws of The Bahamas ora jurisdiction specified in the first scheduleto the Financial Transactions Reporting Act.

The Act contains similar anti-forcedheirship provisions as are contained in theTrustee Act and Foundations Act.

Fees• Registration fee $550 (prorated)• Annual fee $500 (late fees apply)

See EE regulations for a complete listing of fees.

The Private Trust Company (PTC) is acompany incorporated under the Laws ofThe Bahamas to provide trusteeship to adefined class of trusts. The Central Bank actsas a regulator of the PTC. Legislative changeshave exempted the PTC from certainlicensing requirements. PTCs are governedby the Banks and Trust CompaniesRegulation (Amendment) Act, 2010 andBanks and Trust Companies (Private TrustCompanies) Regulations, 2007.

Highlights and requirements of PTCIncorporation. A PTC can beincorporated under either the CompaniesAct, 1992 or the International BusinessCompanies Act, 2000.

The Memorandum and Articles ofAssociation must provide for the PTC to actas trustee only for a trust or trusts createdby a designated person named in theprescribed designating instrument pursuantto the regulations.Designated person. Is an individual namedin the designating instrument.

If more that one designated person isnamed, then each designated person must bea blood relative of or related by some otherfamily relationship to the other designatedperson(s). Can be deceased and his trustestablished by testamentary disposition.Designating instrument. Names thedesignated person(s) and is kept at the office ofthe registered representative.Form of acknowledgement is requiredwhereby the prescribed settloracknowledges awareness that PTCs do not require:

• directors to possess expertise in trust administration

• capital exceeding $5,000• a fidelity bond• an annual audit

Registered representative must: • be a separate legal entity• be either a licensee of The Central Bank

of The Bahamas or a financial andcorporate service provider approved by the Central Bank

• be resident in The Bahamas• provide the services of a secretary,

director, or Bahamas agent• ensure that the PTC is established for

lawful purpose and that it operates as aPTC

• have minimum share capital of $50,000• retain copies of certain documents in

relation to the PTC• require verification and maintenance in

The Bahamas of records relating to theidentities of the following:

i. settlor and any person providing funds or assets subject to trust(s) administered by the PTCii. designated person(s)iii. protector of trust(s) of which the PTC is trusteeiv. any person with a vested interest under trust(s) of which the PTC is trustee.

• report suspicious transactions to the Financial Intelligence Unit

Special director. A person (who need not necessarily be resident in TheBahamas) of good reputation who must possess at least five years ofexperience in a discipline relevant to trust administration (law, finance,commerce, investment management, or accountancy).Distinguishing features of PTC. PTCsare distinguished from public, restricted andnominee trust companies as they are uniquevehicles operating under the regulatoryregime prescribed in the 2007 Banks andTrust Companies (Private Trust Companies)

Regulations. They are restricted fromcarrying out any other business other thanthat of a trusteeship to a trust or group oftrusts created by the designated person(s).The PTC must not amend its Memorandumand Articles of Association of the company,is not allowed to solicit trust business andmust comply with yearly compliance regulationsand fees. If the PTC fails to comply withdirections from the Central Bank or engagesin illegal conduct, the PTC or its registeredrepresentative will be liable to a fine up to$5,000 and can face an order from theSupreme Court compelling compliance orfurther sanctions. PTCs can transfer ordispose of their shares provided that theregistered representative maintains a currentshare register of all its shareholders.


Regulation of insurance activity in orthrough The Bahamas inclusive of the ongoingsupervision and regulation of insurers, agents,brokers, salespersons and external insurers andintermediaries rests with the InsuranceCommission of The Bahamas (ICB).

All local insurance operations (as distinctfrom international or captive insurance) arecovered by the Insurance Act, Chapter 347.Registered insurers writing local business pay a premium tax of 3% of gross premiums.General and health insurance premiums incur a 12% VAT charge.

As of Dec 2017, there were 29 activedomestic insurers and one association ofunderwriters licensed to write local business.In support of this activity, there were 46 agentsand brokers, five adjusters, 12 brokers, 21 sub-agents and 691 salespersons. Domesticinsurance companies are members of theBahamas Insurance Association and domesticagents and brokers are members of theBahamas Insurance Brokers Association.

In addition to a well established domesticinsurance market, The Bahamas has arecognized presence in the internationalinsurance market. At Dec 31, 2017, TheBahamas had 178 captive entities licensedunder the External Insurance Act, Chapter348. This included 10 stand-alone captives,six segregated account companies and 149captive cells. There are four non-captiveinsurers and eight insurance managers andone broker licensed under the External Act.

The ICB is a member of the InternationalAssociation of Insurance Supervisors (IAIS) and endorses the supervisory andregulatory requirements of the IAISInsurance Core Principles. The ICB alsomaintains membership in other regional andinternational bodies including the CaribbeanAssociation of Insurance Regulators (CAIR)and the Group of International InsuranceCentre Supervisors (GIICS).

External insurance and captivesAn external insurance company is licensedand regulated under the External InsuranceAct, Chapter 348. These insurers areincorporated in The Bahamas and manage the

business from within The Bahamas andinsure only risks located outside TheBahamas. Under the Act, captive insurancecompanies are classified as “restrictedexternal insurers” and mainly underwritethe risks of related entities. Captives are aform of self insurance and are typically usedas a risk transfer tool in a company’s orgroup’s overall risk management programmeof a company or group.

Captive insurance companies arealternative providers of protection againstinsurable losses, particularly for thosecompanies with a better loss history thanthe industry average. They minimize the costof risk management and may substantiallyreduce other expenses such as administrationand settlement of claims, loss control expenses,brokerage commissions and other acquisitioncosts and consulting fees.

The Bahamas offers a convenient andprofessionally administered location forcaptive insurance companies. There is a flexible and capable regulator in the ICB and a professional infrastructure to support such business.

All external insurers licensed in The Bahamas are required to appoint a resident representative, who is often one ofthe licensed insurance managers, and maintainbooks and records in The Bahamas. Before an international company may be licensed, the ICB must be satisfied:

1. the company is managed, owned and controlled by persons who are fit and proper;

2. its business plan is acceptable to the ICB;

3. adequate books and records will be maintained in The Bahamas;

4. there will be adequate management and control of operations; and

5. there will be adequate capital to support the business.

Once licensed, the insurer is required tomeet annual reporting and audit requirements.The minimum capital requirement for alicence is $100,000 for general business and$200,000 for long-term business. The ICBrequires companies to be established with,

and maintain a level of capital commensuratewith the size and risks of the operations.Other provisions of the Act include aconfidentiality clause to protect the policyholder and tax exemptions for a period of25 years from the date of first registration.

Interested parties are encouraged tomeet with the ICB prior to applying.Insurance managers can provide assistancewith the licensing applications, ongoingmanagement services and regulatoryrequirements. A list of licensed managerscan be found on ICB’s website.

Annual fees payable under the ExternalInsurance Act, Chapter 348:

Unrestricted external insurer.......$3,500Restricted external insurer ...........$2,500Insurance manager...........................$1,000Contact the Insurance Commission of

The Bahamas, Charlotte House, Charlotteand Shirley Sts, PO Box N-4844, Nassau, tel 397-4183, fax 397-1070, [email protected] or visit www.icb.gov.bs.

Insurance productsAdapted from the 2019 edition of the Bahamas Handbook


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Despite restrictions imposed byCanadian income tax law on the use of taxhavens, there are many circumstances inwhich The Bahamas retains its attractivenessfor Canadians. The islands continue to provea sound and durable base from which toinvest in Canada or the outside world orfrom which to conduct offshore operationsfor the benefit of Canadians.

In fact, increased investment outsideCanada, exports by Canadian firms and thegrowing number of multinational familieshave increased the scope for The Bahamasas a centre for international activity.

ResidenceIn Canada, residence remains the foundationof direct taxation for individuals. Thisbenefits Canadians wishing to take advantageof The Bahamas, especially as compared tothe US, which taxes on a citizenship basis.

Under the Canadian federal income taxsystem, individuals resident in Canada aretaxed on their worldwide income whereasnon-resident individuals are taxed onlythrough the withholding tax regime oncertain investment income, with respect to income from employment in Canada, abusiness carried on in Canada and from gains realized on the disposition of taxableCanadian property. They are not taxed withany reference to the fact that they are or are not Canadian citizens. A corporation notresident in Canada is subject to Canadianfederal or provincial tax only through thewithholding tax regime on certain investmentincome, on income from its business carriedon in Canada and from gains realized on thedisposition of taxable Canadian property.Like individuals, resident corporations aretaxed on their worldwide income.

Canadian companies incorporated afterApril 26, 1965, are automatically deemedresidents of Canada unless they are continuedunder the laws of another jurisdiction.Corporate continuance is treated as re-incorporation for tax purposes. Consequently,a company’s residence for Canadian incometax purposes may be affected by a change inits corporate status.

The Canadian government has enacted anincentive to lure international shippingcompanies to Canada. If a company derivingall or substantially all (ie 90%) of its revenuefrom an international shipping business isincorporated outside of Canada, (eg in TheBahamas) it can establish its place of centralmanagement and control in Canada and yetbe deemed a non-resident of Canada. In thisway, it avoids Canadian tax on its income.

Canadian withholding taxThe basic Canadian withholding tax is 25%.This applies to investment income, certainpensions, dividends, non-arm’s-lengthinterest, rent, certain types of royalties,income from a trust and certain other formsof revenue paid by Canadian residents topersons abroad. This tax must be withheldfrom the gross payment by the payer unlessthe recipient of the income resides in acountry with which Canada has a tax treaty.In that event, the withholding tax may bereduced to 15% or less, depending on theterms of the treaty. The Bahamas andCanada do not have a tax treaty.

Old-age security payments under the Canada or Quebec Pension Plans are subject to withholding tax.

Special exemption from withholding taxInterest paid by a Canadian residentcorporation to arm’s-length non-residentcreditors is exempt from Canadianwithholding tax. The exemption is grantedregardless of the currency of the loan orinterest. The interest must not becontingent upon the use of, or productionfrom, property in Canada.

Also, interest which depends in whole or in part on revenue, profit, cash flow orother similar criteria, or on dividends paid or payable on shares of a corporation, does not qualify for the exemption.

Thin capitalization provisionsThe “thin capitalization” provisionscontained in subsections 18(4), andfollowing, of the Income Tax Act

relate to the deductibility of interest paid on money borrowed from abroad byCanadian resident corporations and trusts.

Interest payments made to non-residentswho hold a substantial interest (ie 25% ofthe voting or equity shares) in a Canadiancompany, trust or partnership or whichotherwise do not deal at arm’s length withthe payor, are not always entirely deductiblein computing income in Canada. They will bedisallowed if the ratio of the payor’s equitycapital to the debt due to such non-residentshareholders or non-arm’s-length persons is less than 1.5:1.

Bahamas benefitsDespite the restrictive and wide-rangingnature of the Canadian fiscal law, TheBahamas continues to play an importantpart in Canadian tax planning. In particular,the use of testamentary trusts and certaininter vivos trusts can yield rewards.

There are not many tax havens that offer benefits comparable to The Bahamas in terms of flexibility of corporate structure, top-quality accounting and legalservices, readily available first-class financialand banking services, proximity to majorworld markets and good docking andharbour facilities.

The modernization and liberalizationof the Bahamian company and trust law and the introduction of foundation law now provide a flexibility previouslyunavailable in The Bahamas.

The Bahamas can offer a variety ofcorporate and settlement structures andprocedures that are equal to those in anyother jurisdiction. A number of Canadianslook to The Bahamas to conduct some of their business. Some achieve this bybecoming non-residents of Canada andsetting up their homes in The Bahamas.Once they do this, they suffer no income tax in Canada, except on income fromemployment in Canada, the profits frombusiness done there, gains from taxableCanadian property or the 25% withholdingtax on certain kinds of investment incomederived from Canada.

Tax planning for CanadiansBy Charles C Gagnon Reprinted from the 2019 edition of the Bahamas Handbook


Capital gains tax on non-residentsNon-resident individuals pay income tax toCanada at applicable personal rates on 50%of the capital gains realized by them on thedisposition of “taxable Canadian property.”

Taxable Canadian property is defined insubsection 248(1) of the Income Tax Act andincludes Canadian real estate and resourceproperties. Certain other types of propertyare also considered taxable Canadianproperty. In particular, the definition oftaxable Canadian property includes shares of corporations and interests in trusts whichderive their value principally from Canadianreal estate and resource properties.

Liability to Canadian tax could betriggered by the death of an individual whohappens to own shares of a non-residentcorporation with Canadian assets.

All non-residents must reportdispositions of taxable Canadian property to the Canadian fisc, indicate the name ofthe person to whom the property is soldand pay an amount on account of Canadiantax or furnish acceptable security.

Upon payment of a tax instalment, a“certificate” is issued to the non-residentwhich protects a purchaser of the asset fromhaving to pay some of the tax that might nothave been paid by the non-resident.

Becoming a non-resident of CanadaIn order to become a non-resident ofCanada, an individual must generally give up his home and most attachmentswithin Canada such as employment,provincial medicare coverage, clubs, bankaccounts, credit cards and the like andacquire a residence in another jurisdictionby purchasing a home or renting anapartment in which he lives as his centralfamily headquarters.

Nevertheless, once a former Canadianresident has become a non-resident, he mayreturn to Canada each year for temporaryvisits without being taxed.

Thus, because The Bahamas imposes no income tax of any kind, a non-residentCanadian citizen may reside there with theadvantage of paying to Canada only 25% oncertain kinds of investment income derivedfrom Canadian sources and no withholdingtax on certain kinds of interest. Royaltiesand similar payments on or in respect of a copyright related to the production orreproduction of any literary, dramatic,

musical or artistic work are exempt fromCanadian withholding tax. The Bahamas is,therefore, appealing to Canadian writers,musicians, singers and artists as a place ofresidence. The same individual, if he wishesto continue his business activities in Canada,may do so as a non-resident and pay tax atthe personal graduated rates in Canada onthe profit from the business there.

The exit taxA problem that faces Canadians whoconsider taking up residence in The Bahamasis the exit tax imposed by Canada uponcapital gains deemed to arise from thenotional realization of certain capital propertyat the time they give up Canadian residence.

Corporations leaving Canada are alsosubject to exit rules. In particular, acorporation is treated as having disposed of all of its property at fair market value andto have notionally distributed its net equity.This fictitious distribution is assimilated to a liquidating dividend and subjected to a special tax in lieu of withholding tax.

Succession duty and estate tax advantagesThere are no estate and gift taxes in Canada.However, individuals are deemed to disposeof their property at fair market value at thetime of their death. Thus, a non-residentindividual may be liable to tax on capitalgains at the time of his death if he holdstaxable Canadian property directly.

If he resides in The Bahamas and holds no such property, then he would not sufferany Canadian tax at the time of his death.

Corporate uses of The Bahamas by CanadiansUnder Canadian tax law, a foreign companyis resident where its seat of managementand control is found (subject to restrictionson companies incorporated or continuedinto Canada set out previously). This is usuallyheld to be the place where the directors meetor from which the day-to-day managementinstructions emanate or are carried out.

In order to prevent a company frombeing legally resident in Canada and thereby paying tax, management and controlmust be exercised, bona fide and in fact,outside Canada.

A non-resident company may performuseful functions of an extraterritorial naturesuch as world advertising, worldwide selling,

the financing and organizing of sales abroad,the management and servicing of the facilitiesneeded to maintain the products sold abroadand the operation of ships or certain groupinsurance activities. In each case, it isimportant to determine whether the incomeof the Bahamian subsidiary is foreign accrualproperty income (commonly referred to asFAPI). The FAPI of a “controlled foreignaffiliate” of a Canadian resident is attributedto and taxed in the hands of its Canadianresident shareholders on an annual basis.

There have also been cases before theCanadian courts in which attacks made by theCanada Revenue Agency (CRA) on offshoresubsidiaries of Canadian corporations havebeen tested. The income of the subsidiarieshas been added, sometimes, to the incomeof the Canadian parent on the footing thatthe subsidiary was itself a sham or aninstrumentality. Transfer pricing is anotherline of attack increasingly favoured by CRA.These cases stand on their own facts andneed not pose a threat to normal activitiescarried on bona fide in The Bahamas,provided management and control of theBahamian corporation are not in Canada.

Foreign affiliatesThe foreign affiliate rules affect any foreigncorporation in which a Canadian residenthas a significant interest. A foreign affiliateis defined to include any non-residentcorporation in which a Canadian residentholds at least 10% of the shares of any class.A non-resident corporation will also beconsidered a foreign affiliate of a Canadianresident who holds 1% of the shares of anyclass where the equity interest of theCanadian resident together with relatedpersons is at least 10%.

When a foreign corporation qualifies as a foreign affiliate, the dividends that passupstream to a Canadian corporate shareholderare tax free when paid out of “exemptsurplus.” Exempt surplus is income derived bya company resident and carrying on business ina country with which Canada has a tax treatyor tax information exchange agreement (TIEA).

The Bahamas has a TIEA with Canada and as a result active business incomeearned by the Bahamian affiliates ofCanadian companies benefit from exemptsurplus treatment.

Passive income is treated quite differentlyfrom active business income. The concept ofFAPI is meant to tax the passive earnings of


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foreign affiliates controlled by Canadiantaxpayers. In many ways it is not unlike its American counterpart, “Subpart F” of the Internal Revenue Code. FAPI isessentially income from property or from a business other than an active business.Each year an appropriate share of the FAPIof a controlled foreign affiliate (and certaintrusts), if it exceeds $5,000, is included inthe income of Canadian taxpayers controllingthe foreign affiliate in the taxation year inwhich the foreign affiliate’s taxation year has terminated.

FAPI does not include interaffiliatedividends, active business income, andcertain amounts received from otheraffiliates. It similarly does not include capitalgains from the disposition of “excludedproperty” (property used principally in an active business and shares of foreignaffiliates, most of whose property is used in an active business).

Non-resident trustsA non-resident of Canada who has notresided in Canada during the 60-monthperiod preceding the end of a taxation yearcan establish, by will or gift, a Bahamianresident discretionary trust (NRT) for thebenefit of Canadian resident familymembers, which will escape the applicationof the income attribution rules governing offshore discretionary trusts. Distributionsof capital (which can include accumulatedincome) received by Canadian residentbeneficiaries from an NRT funded solely

by a non-resident should not be taxable.Bahamian trusts are particularly well-suitedfor this purpose.

Of course it is important that a trustestablished outside of Canada not beconsidered resident in Canada under thenormal rules regarding the residency oftrusts. This requires that central managementand control of the trust be located outsideCanada. Expert professional advice in thisarea is essential, but use of Bahamian trustscan pay substantial dividends.

Current attitudes towards tax planningThe Canadian law contains a number oftechnical provisions that narrow the field of manoeuvre for the taxpayer. Moreover,Section 245 of the Income Tax Act contains a general anti-avoidance rule (GAAR). The GAAR comes into play whenever a taxpayer engages in a transaction or series of transactions that results directly or indirectly in a “tax benefit” (as broadlydefined in that provision) unless thetransaction does not result in an abuse ormisuse of the provisions of the Income Tax Act. Thus, the uses made by Canadiansof Bahamian corporations must be limited to commercially defensible activities and notbe employed merely to hide or artificiallyminimize truly Canadian income. In thisfield, the area of manoeuvre is narrowing, so a conservative and realistic approachshould be taken.


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Charles C Gagnon is a Canadian tax lawyer in theMontreal andBarbados officesof BCF LLP. Hismain areas ofexpertise include:tax planning for

private businesses, structuring of inboundand outbound investments, tax issuesrelating to immigration and emigration,captive insurance, life insurance,international tax planning, and wills andtrusts. In addition to being a guest speakerat tax conferences and author of severalreports and publications, Gagnon is amember of the Canadian Tax Foundation,the International Fiscal Association and theSociety of Trust and Estate Practitioners(STEP). He was educated at McGillUniversity (BCL, LLB 1993), CanadianSecurities Institute (CIFC 1991), CollegeJean-de-Brebeuf (IB 1989) and CanadianSecurities Institute (CSC 1988). Gagnonwas admitted to the Barreau du Quebec in 1995 and the Law Society of BritishColumbia in 1994. He is listed in the latestedition of the Best Lawyers in Canada andWho’s Who Legal.


Companies formed in the United States(“domestic” companies) and individuals whoare either citizens or residents of the US for US income tax purposes are subject to US income tax on their worldwide income.Individual US income taxpayers and domesticcompanies can, in some instances, startinternational operations with relatively small amounts of capital and then expand with tax-free or low-taxed accumulations ofearnings instead of net-tax dollars earned in the US. Expansion abroad can be morerapidly accomplished with 100-cent tax-freedollars, instead of 65-cent dollars in the caseof a domestic company (using the currenttop marginal US corporate income tax rateof 35%) or potentially less in the case of anindividual (based upon the current topmarginal rate of 39.6% on ordinary income).

Controlled foreign corporation (CFC)If a Bahamian company is more than 50% (by vote or value) owned (directly, indirectly or constructively) by US shareholders it isknown under US tax laws as a “controlledforeign corporation” (CFC). A US shareholderis a US person who owns directly or indirectly(or constructively) 10% or more of the totalcombined voting power of a CFC. A USshareholder is subject to US income tax eachyear on his or her proportionate share ofcertain kinds of income of the CFC regardlessof whether dividends are distributed.

Some of the more common types offoreign-source income of a CFC which arecurrently taxable to its US shareholders(referred to as “Subpart F income”) include.

1. Passive income such as dividends, rents,interest, gains from the sale of propertywhich itself produced passive income,capital gains from the sale of stocks and securities, gains oncommodities and foreign currencytransactions, royalties, etc.

2. Income of the sale of inventory wherethe goods are either purchased from,or sold to, a “related person.”

3. Income from services if rendered to a “related person.”

The IRC provides specific rules fordetermining when someone is a relatedperson as to a CFC. Even so, because ofcertain exceptions and exclusions to theSubpart F income rules, the US shareholdersof a Bahamian CFC may still be able toobtain US income tax deferral with respectto their shares of stock until dividends aredistributed to them.

Investment opportunities for USshareholders of a Bahamian CFC The types of CFCs particularly suitable foroperations in The Bahamas are those thatgenerate income which qualifies for anexception to the Subpart F income rulessuch as the following:1. Sales of manufactured products.

Income from the sale of products orgoods manufactured, produced, grownor extracted in The Bahamas generally is not subject to current US income taxeven though purchases and sales mayinvolve related persons. Likewise,income from certain incidental servicesrendered by a related person which are directly related to a sale by theBahamian CFC of such products orgoods and which are performed inadvance of the sale may not be currently taxable in the US.

2. Sales of other inventory.If a related person is not involved inany way, then income from the sale ofinventory by a Bahamian CFC willescape current US income tax. Even ifa related person is involved, the profitsof a Bahamian CFC from the purchaseand sale of personal property (onbehalf of a related person) will not beconsidered Subpart F income of theproducts or goods sold are for use of,consumption or disposition in theBahamas. Certain presumptions applyin making this determination which canvary depending upon the type ofperson purchasing the products orgoods from the Bahamian CFC andtheir relationship to the Bahamian CFC

as well as the type of products or goods sold.

3. Insurance income. A Bahamianinsurance company can be considered a CFC if more than 25% of the votingpower or value of its stock is owned by US shareholders if the gross amountof premiums or other consideration in respect of the reinsurance or theissuing of “insurance or annuitycontracts” exceeds 75% of the grossamount of all premiums or otherconsideration in the respect of all risks.The US tax laws regarding offshoreinsurance companies are quite complexand have changed many times over theyears. Because different sets of rulesmay apply depending upon the natureof the insurance business and thesource of its profits, the advice of UStax counsel specializing in this area isrecommended in each case.

4. Services income. This potentiallybroad category may cover manydifferent types of Bahamian companiesthat render technical, managerial,engineering, architectural, scientific,skilled, industrial or commercialservices to consumers. Many types ofcompanies in The Bahamas fall into thiscategory. A partial list would includeengineering, sales promotion, salesengineering, merchandising andconsulting firms. Income from services of this nature which are rendered in The Bahamas either for or on behalf of a related person may be exempt fromcurrent US taxation.

5. Rents and royalties. Rent derived bya CFC in the active conduct of a tradeor business in The Bahamas frompersons not related to the CFC willnot be subject to current US taxationunder the Subpart F rules. Rent, evenwhen received from a related personto the CFC, also may meet theexception to Subpart F income if it is paid for use of property located inThe Bahamas, subject to certain

Tax planning for AmericansReprinted from the 2019 edition of the Bahamas Handbook


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limitations. Similar rules apply in thecase of income generated by the CFCwhich is properly classified as royaltyincome for US tax purposes.

6. Dividends and interest. Dividendand interest income received by aBahamian CFC from a relatedCorporation which is formed in The Bahamas and which uses asubstantial part of its assets in itsbusiness in The Bahamas may qualifyfor US income tax deferral.

Passive foreign investment company (PFIC)A Bahamian company is a PFIC if 75% ormore of its gross income is “passive” innature (ie subpart F type income), or 50% ormore of its assets produce, or are held forthe production of passive income. Mostoffshore mutual funds are classified as PFICsfor US tax purposes. Interestingly, even anactive business with a significant amount ofcash and securities on hand could be a PFICfor US tax purposes.

US taxpayers who own (or are consideredto own) shares of stock in a Bahamiancompany that is classified as a PFIC for US taxpurposes are subject to US income tax underthe excess distribution rules unless certainelections are made. The “excess distribution”rules impose an interest charge and US incometax on certain distributions from PFICs to theirUS owners (referred to as excess distributions).All gain recognized on the actual or deemeddisposition of PFIC stock (such as a sale, gift,exchange, liquidation, pledge, etc) is alsotreated as an excess distribution (ie, long-termcapital gains tax treatment is lost if it otherwisewould have applied and the gain is taxed asordinary income). A US owner of a PFIC mayavoid this result by making one of the followingtwo elections:

1. A US owner of a PFIC may be able toelect to be taxed currently on his prorata share of the PFIC’s earnings andprofits, classified as either ordinaryincome and capital gains, which will betreated as “previously taxed income”when distributed in a subsequent taxyear, known as a “qualified electingfund” or (QEF) election.

2. Alternatively, a US owner of a PFICmay be able to mark-to-market hisstock on an annual basis if such stock is “marketable.” PFIC stock is“marketable” for this purpose if it is:

a. stock regularly traded on a registered securities exchange;

b. stock that trades like an open-end mutual fund; or

c. stock of a fund (open-end orclosed-end) that publishes its net asset value at least annually. Themark-to-market election is lessfavourable than the QEF election,however, because all inclusionsare taxed as ordinary income.

Coordination rules also prevent a foreigncorporation from being classified as a PFIC asto any US owner during any period in whichsuch foreign corporation is classified as aCFC of which such US owner is considered a US shareholder.

Employment of US citizens living abroadUS income tax benefits may be available toUS citizens employed abroad who establish a “tax home” in a foreign country and whomeet certain other tests prescribed by theIRC (either a physical presence or residencytest with respect to the foreign country).Although a US citizen generally is subject toUS income tax on his worldwide income, aUS citizen employed abroad who satisfies theIRC tests described above may exclude fromgross income for any taxable year foreign-source earned income for wages or salaryfor services performed outside the US anamount adjusted annually for inflation(US$102,100 for 2019). For any taxable yearthat a US citizen is employed abroad, he orshe may also exclude from gross income aportion of the housing expenses paid for byan employer, or, if such expenses are notpaid for by an employer, deduct suchexpenses (subject to certain limitations).

SOURCE: B

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Mechanisms for information sharingAs a well-regulated and responsibleinternational financial centre, there existsmechanisms or gateways pursuant to variousstatutory measures by which financialinformation in The Bahamas may be accessed by foreign judicial and/orregulatory authorities, subject toappropriate safeguards.

Judicial gatewaysEvidence (Proceedings in OtherJurisdictions Act, 2000 (EPOJA).Under the EPOJA, an application from a foreign court may be facilitated by theSupreme Court of The Bahamas to obtainevidence in The Bahamas for purposes offoreign civil proceedings which either havebeen instituted or is contemplated to beinstituted (and for which investigations havealready commenced) before the requestingforeign court. The EPOJA contains provisionsto prevent wide-ranging discovery.

Criminal Justice (International Co-operation) Act, 2000 (CJICA). Underthe CJICA, an application from a foreigncourt may be facilitated by the SupremeCourt of The Bahamas to obtain evidence inThe Bahamas for purposes of foreigncriminal proceedings and investigations. Ineach case, the Attorney General of TheBahamas shall make applications on behalf ofthe requesting foreign court. Where theSupreme Court is satisfied that the requestis an appropriate one, it may make an orderfor the relevant evidence to be produced toor taken in deposition by the SupremeCourt. The evidence obtained by the courtwould thereafter be provided to theAttorney General of The Bahamas fortransmission to the requesting court.

Mutual Legal Assistance in CriminalMatters Act, 1988 (MLA). Pursuant tothe MLA, The Bahamas has treatyarrangements with the United States ofAmerica, Canada and the United Kingdom ofGreat Britain, “the requesting countries,”respectively, by which The Bahamas willfacilitate requests of the requestingcountries to obtain and to provide evidence

in/from The Bahamas for use in criminalproceedings. Fiscal offenses are outside ofthe scope of the MLA.

Regulatory administrative gatewaysBanks & Trust Companies

• Central Bank of The Bahamas Act, 2000(CBA); and

• Banks & Trust Companies Regulations Act,2000 (BTCRA)

The CBA and the BTCRA enable TheCentral Bank of The Bahamas and respectingBahamian banks and trust companies withinformation gathering powers and authorizesthe Central Bank to disclose information inspecified circumstances.

Per the CBA, the Central Bank mayrequire the production of specifiedinformation or documents from entities itregulates and their officers, employees andagents for its own regulatory purposes or to facilitate a request of an overseasregulatory authority. An overseas regulatoryauthority means an authority in a foreigncountry that exercises powers in thatforeign country corresponding to thatexercised by the Central Bank within TheBahamas. As a pre-requisite to disclosinginformation to an overseas regulatoryauthority, the Central Bank must: be satisfiedas to the confidentiality and restrictions onfurther disclosure by the overseas regulatoryauthority; have received an undertakingagainst further disclosure without the CentralBank’s consent; be satisfied that disclosure is required for a regulatory function (includingcivil or administrative investigations orproceedings) to enforce laws administered by the overseas regulatory authority; and besatisfied that the information will not be usedfor criminal proceedings against the personproviding the information.

The BTCRA also facilitates cross-bordersupervision by foreign banking regulators ofbranches or subsidiaries in The Bahamas ofentities that are regulated by that foreignregulator. Except in special circumstancesauthorized by the Bahamian inspector ofBanks & Trust Companies, the foreignregulator may not access informationrelating to assets under management or

deposit operations of individual customers.The BTCRA permits disclosure, “exceptionsto a duty of confidentiality,” of bankinginformation in the following circumstances:

1. to enable/assist the Central BankGovernor in functions conferred byBahamian law; and

2. for the institution ofa. criminal proceedings in

The Bahamas; orb. disciplinary proceedings in

The Bahamas or abroad relative to a lawyer, auditor, accountant, valuer or actuary or public officer or employee of the Central Bank.

Securities IndustrySecurities Industry Act, 2011 (SIA): Per the SIA, the Securities Commission of The Bahamas has authority (similar to thatgranted under the CBA to the Central Bank) to disclose information in the course of facilitating a request of an overseasregulatory authority. Under the SIA, anoverseas regulatory authority means anauthority in a foreign country that exercisespowers in that foreign country correspondingto that exercised in The Bahamas by theSecurities Commission of The Bahamas.

Investment Funds Act, 2003 (IFA): In relation to investment funds, the IFAprovides exceptions to a duty ofconfidentiality comparable to that providedunder the BTCRA relative to banks andtrust companies.

Financial IntelligenceFinancial Intelligence Unit Act, 2000 (FIUA):The FIUA established a Bahamian financialintelligence unit (FIU). The FIU is a centralagency to receive, analyse and disseminateto competent authorities disclosures of financial information concerning theproceeds of crime respecting offenses underthe Proceeds of Crime Act, 2018. In additionto receiving financial intelligence originatingfrom suspicious transaction reports made to the FIU by financial institutions and otherpersons, the FIU is empowered to issue,administratively, an order for the productionof information by persons.S

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Information in the possession of the FIU is subject to a duty of confidentiality,however, the FIU is authorized to disclose suchinformation to the Commissioner of Police orto a foreign FIU, subject to conditions as maybe imposed by the director of the FIU.

Tax informationThe above-mentioned gateways to Bahamianinformation are not used for purposes ofinternational cooperation in tax matters.The Bahamas would facilitate the provisionof information for purposes of foreignrevenue laws where a tax treaty has beenentered between The Bahamas and therelevant foreign jurisdiction.

In compliance with the Organisation forEconomic Co-operation and Development(OECD) standard for transparency andcooperation in tax matters, The Bahamas has a number of these treaties, called a TaxInformation Exchange Agreement (TIEA). The Bahamas has long sought a level playingfield on tax information exchange. Its decisionto endorse and meet the OECD standardwhen a level playing field was achievedreinforces The Bahamas’ unwaveringcommitment to be a trusted jurisdiction for clients and to be a responsible member of the international community.

All of the agreements signed by TheBahamas are in accordance with the OECDmodel TIEA and Double TaxationAgreement. As such, the basis on which TheBahamas will cooperate with countries is thesame as all countries that adopt Article 26. In particular, through the agreements, TheBahamas commits to cooperate only uponrequests where specific information isprovided. This requirement for specificinformation is critical in furtherance to The Bahamas’ stated position to prevent so called “fishing expeditions.”

The Bahamas is FATCA compliantOn Nov 3, 2014, The Bahamas and the USsigned their Agreement to ImproveInternational Tax Compliance (theAgreement) and to implement FATCA basedon the Model I IGA. To accommodate thenon-direct tax system in The Bahamas, theIGA is a model 1B (non-reciprocal) IGA. Asan IGA partner jurisdiction, Bahamas-basedfinancial institutions will not be subject to a 30per cent withholding tax on US sourceincome, unless they fail to meet the

requirements set out in the IGA and inBahamas domestic implementing legislation.

Under the terms of the Agreement,Bahamas financial institutions will provideThe Bahamas Competent Authority (BCA)with the required information. The BCA will forward that information to theCompetent Authority in the US. TheAgreement is an international instrument for exchange of information for tax purposesbetween The Bahamas and the US.

Automatic Exchange of Information(AEOI)/Common Reporting Standard (CRS)The Bahamas government on December 15,2017 signed The Multilateral Convention onMutual Administrative Assistance in TaxMatters (The MAC) in Paris, France. This stepfurther evidences the commitment of TheBahamas to transparency and cooperation andits resolve to enhance and transform theinternational financial services sector. TheMAC establishes a legal framework forinternational tax cooperation. The MultilateralCompetent Authority Agreement (MCAA)was also signed by The Bahamas’ government.The Bahamas exchanged information in 2018 in accordance with CRS on a non-reciprocal basis.

Base Erosion and Profit Shifting (BEPS)In December 2017, The Bahamas joined theInclusive Framework on Base Erosion andProfit Shifting (BEPS). BEPS has been definedby the OECD as tax avoidance strategies thatexploit gaps and mismatches in tax rules toartificially shift profits to low- or no-taxlocations. Under the inclusive framework,over 100 countries and jurisdictions arecollaborating to implement the BEPSmeasures and tackle BEPS.

ConclusionThe Bahamas remains strongly committed tothe principle that persons have a right toprivacy with respect to the conduct of theiraffairs. Moreover, respect for the rule of lawalways has been fundamental to the successand strength of the financial servicesindustry in The Bahamas. As such, clientscan be assured that The Bahamas will onlyexchange information on agreed andtransparent protocols.

• Argentina• Aruba• Australia• Belgium• Canada• China• Czech Republic• Denmark• Faroe Islands

• Finland• France• Germany• Great Britain and

Northern Ireland• Greenland• Guernsey• Iceland• India

• Indonesia• Ireland• Japan• Malta• Mexico• Monaco• New Zealand• Norway• Poland

• San Marino• South Africa• South Korea• Spain• Sweden • The Netherlands• United States

Tax Information Exchange AgreementsTIEAs have been signed with the following jurisdictions as of Dec 2018:

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Go to www.bfsb-bahamas.com to seewhy our advantage is your businessopportunity or call The Bahamas Financial Services Board for moreinformation (242) 393.7001 oremail [email protected]

There are many consideration in choosingan international financialcentre. If expertise, innovation, compliancewith international bestpractices and location are top of your list, The Bahamas is your clear choice.


INVESTMENT FUNDSSOURCE: B


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The Investment Funds Act, 2003, (the 2003 Act) positioned The Bahamas at the cutting edge of modern investment fundadministration. The Act updated the generallegislative and supervisory environment andintroduced an additional style of collectiveinvestment vehicle–The Bahamas SMARTFund–officially known as the Specific MandateAlternative Regulatory Test fund.

Providing financial services to a sophisticatedinternational clientele requires a sophisticatedlegislative approach. In drafting the 2003 Act,the Securities Commission of The Bahamaswas mindful of the need for flexibility toadequately cater to the evolving needs of the global marketplace.

The Act recognizes four classes of fund: 1. The Standard Fund. Anticipates

an offering to the general public, and is a highly regulated, moderninvestment vehicle designed to operate as a traditional collectiveinvestment scheme.

2. The Professional Fund. A classdesigned for sophisticated investors,and may be licensed by an authorizedadministrator (in addition to theSecurities Commission), therebyenabling faster time to launch.

3. The SMART Fund. A specificmandate alternative regulatory testfund suitable for innovative structuringof investment funds.

4. The Recognized Foreign Fund.An investment fund licensed orregistered in a prescribed jurisdictionand not suspended from operation.

These four classes of funds, coupled with a progressive approach to regulationand a reputation for quality administration,place The Bahamas at the forefront of thefunds industry.

Regulatory strengthThe Bahamas is an active member ofestablished international regulatory andpolicy-making bodies and devotesconsiderable resources to its participation in these bodies and adherence tointernational best practices.

Funds industry overview

Standard fundsA recognized legal structure in TheBahamas that issues or has equity interests inthe purpose or effect of which is the poolingof investor funds with the aim of spreadinginvestment risks and achieving profits or gainsfrom the acquisition, holding management ofdisposal of investments. This type of fund doesnot fit the definition of a Professional Fund, aSMART Fund or a Recognized Foreign Fund.

Equity interest• Equity interest held only by the investor.• No minimum investment by the investor.• A share, trust unit, partnership interest

or participation interest that carries anentitlement to participate in the profits or gains of the issuer and is redeemable or subject to be repurchased at the optionof the investor.

• Does not include closed-end issuers.• Close-end issuers may elect to be

licensed as an investment fund.

LicensorA Standard Fund must be licensed by the Commission. The licensing processshould take 6-8 weeks after submitting a completed application.

StructuresCompany (incl Segregated AccountsCompany), Limited Partnership, Unit Trust and Investment Condominium.

Requirements• Bahamian administrator–delegation to

foreign sub-administrator is acceptable.• Accounts prepared in accordance with

international accepted accounting standards(or other recognized GAAP).

• Prescribed disclosure requirements in the offering memorandum.

These are in line with best industry practices.

Open architecture• No local auditor requirement.• No local custodian requirement.• No restrictions on investments

or investment style.• No restrictions on leverage.• No direct taxation. Therefore no tax

on income, capital gains, dividendsearned by the fund or the investor.

• No stamp duty on transactions.• No public disclosure of investors

or the accounts.• No exchange controls.



Tel (242) 323-5665 • Fax (242) 323-5728


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Professional fundsA recognized legal structure in TheBahamas that issues or has equity intereststhe purpose or effect of which is the poolingof investor funds with the aim of spreadinginvestment risks and achieving profits orgains from the acquisition, holding,management or disposal of investments.

Equity interest• Equity interest held only by the

eligible investor.• No minimum investment by the

eligible investor.• A share, trust unit, partnership interest

or participation interest that carries anentitlement to participate in the profits orgains of the issuer and is redeemable orsubject to be purchased at the option of the investor.

• Does not include closed-end issuers.• Closed-end issuers may elect to be licensed

as an investment fund.

LicensorA Professional Fund must be licensed by one of:• Unrestricted Fund Administrator:

Same day once all documents approved by relevant parties (sponsors, lawyers,administrators) and due diligence is complete.

• Securities Commission of The Bahamas:Within 72 hours of a complete applicationand letter from the Bahamas administratoror legal counsel indicating the InvestmentFund is in compliance with Bahamian Law.

Eligible investors• A bank or trust company licensed in The

Bahamas or licensed pursuant to the laws or another jurisdiction.

• A securities firm registered in The Bahamasor registered pursuant to the laws ofanother jurisdiction.

• A Bahamian investment fund or investmentfund regulated pursuant to the laws ofanother jurisdiction.

• An insurance company licensed in TheBahamas or pursuant to the laws of another jurisdiction.

• Natural person (jointly w/ spouse) with a net worth of $1,000,000.

• Natural person who had minimum incomeof $200,000 for the last 2 years ($300,000w/ spouse) and has reasonable expectationof same for current year.

• A trust with minimum $5,000,000 in assets.

• An entity owned by any one of the above.

• An entity with net assets in excess of $5,000,000.

StructuresCompany (including Segregated AccountsCompany), Limited Partnership, Unit Trustor Investment Condominium.

Requirements• Bahamian administrator - delegation to

foreign sub-administrator is acceptable.• Accounts prepared in accordance

with international accepted accountingstandards (or other recognized GAAP).

• Prescribed disclosure requirements in the offering memorandum. These are in line with best industry practices.

Open architecture• No local auditor requirement.• No local custodian requirement.• No restrictions on investments or

investment style.• No restrictions on leverage.• No direct taxation. Therefore no tax.

on income, capital gains, dividends earned by the fund or investor.

• No stamp duty on transactions.• No public disclosure of investors

or the accounts.• No exchange controls.

Read The Bahamas Investor online. Click onthe “Latest issue. Turn page e-zine” button in the upper right corner of the landing page forwww.thebahamasinvestor.com

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SMART fundsA recognized legal fund structure in TheBahamas that issues equity interests thepurpose or effect of which is the pooling ofinvestor capital with the aim of spreadingvarious risks and achieving profits or gainsfrom the acquisition, holding, managementor disposal of investments.

Similar to other licensed fund structures,SMART funds can generate economies ofscale and other efficiencies for investmentstructures. Furthermore, SMART funds offerthe ability to achieve cost-based structuringby scaling the complexity of the fundstructure to meet the requirements of its promoter and investors.

In order for an investment fund, asdefined in the Investment Funds Act, to belicensed as a SMART Fund, it must satisfythe parameters and requirements of aspecific set of rules that are approved andpublished by the Securities Commission.

Equity interest and investmentEquity interests in this context are held by fund investors and represent a share,trust unit or partnership interest that carriesan entitlement to participate in the profits orlosses of the issuing fund. Such equityinterests are redeemable or subject to berepurchased by the fund at the option of the investor.

SMART Fund Models (SFMs)• SFM001: An investment fund where the

promoter is a financial institution and theinvestors in the investment fund are alsocustomers of the financial institution andparty to a Discretionary ManagementAgreement with the financial institution.

• SFM002: An investment fund that hasno more than ten investors who holdequity interests in the investment fundwho meet the criteria of an EligibleInvestor in a Professional Fund and themajority of whom have the power toappoint and remove the operators of the investment fund. The fund may belicensed and launched on the same daythrough an unrestricted fund administratoror have a 72-hour response through the Securities Commission of The Bahamas (the Commission).

• SFM003: An investment fund that has no more than 15 investors holding equityinterest in the investment fund, themajority of whom have the power toappoint or remove the operators of the investment fund and which wasoperating as an exempt mutual fundunder the Mutual Funds Act, 1995.

• SFM004: An investment fund with a maximum of five investors operating as a legal entity. May be used as a credible,licensed holding vehicle.

• SFM005: An investment fund with amaximum of five investors holding equity interests and operating as a privateinvestment structure for individuals/families. Each investor must be a personto whom a Professional Fund may beoffered, permitting same day launch by an unrestricted fund administrator or 72-hour response through the Commission.

• SFM006: A special purpose vehicledesigned to hold the illiquid or hard-to-value assets of another Bahamasinvestment fund which offers a significantlylighter administrative and cost-effectiveenvironment for the assets whilst respectingthe ownership rights of the investors andcreditors (if any) of the original fund.

• SFM007: An investment fund that may beoffered, on a private placement basis, to up to 50 super-qualified investors whomust each make a minimum initialsubscription of US$500,000. SFM007 has been designed for use mainly byinstitutional investors, such as pensionfunds, funds of funds and master-feederstructures; however natural persons andprivate entities are also eligible investors. Due to the very significant minimuminvestment amount per investor, this SFMhas a reduced structural risk profile andcounterparties may benefit from maximumflexibility with respect to appointment anddomicile of service providers.

LicensorA SMART Fund must be licensed by:

• Unrestricted Fund Administrator: Same dayonce all documents approved by relevantparties (sponsors, lawyers, administrators)and due diligence in complete, or

• Securities Commission of The Bahamas:SFM002, SFM005 and SFM006 SMARTFunds within 72 hours of a completeapplication and letter from the Bahamasadministrator or legal counsel indicatingthe investment fund is in compliance with Bahamian law. SFM001, SFM003 and SFM004 within 6-8 weeks of filing of a complete application.

StructuresCompany (including Segregated AccountsCompany), Limited Partnership, Unit Trust or Investment Condominium.

Requirements• Bahamian administrator required in

most cases–delegation to foreign sub-administrator is acceptable.

• Foreign Administrator–may be appointedfor SFM005 or SFM007.

• A SFM005 SMART Fund must appoint anadministrator that is a financial institution.

• SFM004, SFM006, and SFM007 do notrequire an administrator. The operatorsmay administer the fund but this will notbe treated as a self administered fund.

• SFM001 and SFM006 are not required tohave financial statements audited but theannual unaudited statements and the semiannual performance report must be filedwith Securities Commission.

• SFM002, SFM003, SFM004, SFM005 and SFM007 SMART Funds shall beaudited annually unless unanimouslywaived by the investors, and where there is such waiver a performancereport shall be filed with the Commissionwithin six months of the waiver and every six months thereafter as long as the waiver exists.

A term sheet is not required for a SFM001,SFM004 or SFM005 SMART Funds, however, if a term sheet is prepared it must containprescribed disclosure requirements. A termsheet or offering memorandum is requiredfor the SFM002, SFM003, SFM006 andSFM007 SMART Funds and must contain the prescribed disclosure requirements.




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A recognized legal structure in The Bahamas that issues or has equityinterests the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achievingprofits or gains from the acquisition, holding,management or disposal of investments.Where:

a. the equity interests are listed on asecurities exchange (including an over-the-counter market) prescribed by

the Commission by notice in The OfficialGazette and the fund is not licensed in The Bahamas;

b. it is licensed or registered in a jurisdictionprescribed by the SCB by notice in TheOfficial Gazette and not suspended fromoperation; or

c. it is incorporated or established and is in good standing in a jurisdictionprescribed by the Commission by notice in The Official Gazette.

Licensor• No licensing requirements.• The investment fund is to be registered in

The Bahamas with the Commission uponfiling the required application with theprescribed documents.

StructuresCompany (including Segregated AccountsCompany), Limited Partnership, Unit Trust.

Recognized foreign funds

An investment condominiumis established under the InvestmentCondominium Act, 2014. It is a contractualrelationship between one or moreparticipants who have pooled assets for the purposes of operating as an investmentfund, and an investment condominium mustbe licensed as an investment fund under theInvestment Funds Act. It may be formed tooperate as an open-ended fund (in whichparticipants can call for redemption of theirinterests) or a closed ended fund (in whichthey may not).

The ICON has no legal personality but,when represented by its administrator,is able to hold assets in its own name, enterinto agreements and sue or be sued in itsown name.

What are the governing regulations?The governing regulations set out the terms under which the investmentcondominium will operate. There arespecific contents prescribed by law, whichinclude the following:

• Its name;• The name and address of its administrator;• Its duration (which may be limited

or unlimited);• The number of participation interests

it can issue and the currency in which the interests will be issued;

• Whether it will issue classes or series ofparticipation interests, who is authorized to determine the number of classes/seriesand what the powers, rights and preferences of such interests are:

• How the administrator will handle itsadministration and whether it will have a governing administrator and a generaladministrator;

• Audit provisions (which are subject to the Investment Funds Act);

• How the governing regulations may be ended;

• The liability of the participants in theinvestment condominium, including how it is limited (if at all);

• Provisions for valuation of theinvestment condominium's assets;

• Provisions for termination of theinvestment condominium; and

• Any other provisions required under the Investment Funds Act.The governing regulations are not required

to be filed with the Registrar General, andtherefore are not a public document.

How does the ICON act?An investment condominium, having no legal personality, is represented by itsadministrator. The administrator, acting onits behalf, executes all letters, contracts,agreements, deeds and documents for theinvestment condominium. The administrator

also has the power to do all other acts andthings which are necessary or conducive tothe investment condominium's activities. Asa general rule, the administrator's acts bindthe investment condominium.

What are the obligations of an ICON’s administrator?The administrator’s obligations depend on therole it fills for the investment condominium.An investment condominium is required tohave a general administrator and a governingadministrator, and these roles may be filled bya single entity or by two separate entities.

A governing administrator is deemed tobe the investment condominium’s operatorfor purposes of the Investment Funds Act,and has all the powers and duties of anoperator for this purpose. A governingadministrator must be either:

1. an administrator licensed by theSecurities Commission (restrictedor unrestricted);

2. a licensee under the Financial andCorporate Service Providers Act;

3. a licensee under the Securities Industry Act;

4. a bank or trust company licensed by the Central Bank; or

5. a foreign entity licensed by or registeredwith a regulatory body with functionsand powers equivalent to the SecuritiesCommission or Central Bank.

Investment Condominium

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The governing administrator is thereforeakin to a general partner, director or trustee of the equivalent entity licensed as aninvestment fund. The general administrator,by contrast, must be an administratorlicensed by the Securities Commission(restricted or unrestricted) and acts as theinvestment condominium’s administrator for purposes of the Investment Funds Act.

If the administrator incurs any debts orobligations in conducting the investmentcondominium's business, they are obligationsor debts of the investment condominium andnot the administrator personally.

How does an ICON operate?An investment condominium may have anunlimited number of participants, but theminimum number is one.

Participation interests may, but need not, carry voting rights, and such rights are as specified in the governing regulations.Participation interests are personal property,and enforceable by the participants as a chose in action.

Books and records must be kept by theadministrator, and include a register ofparticipation interests as well as reliableaccounting records retained for a minimumfive-year period.

Annual meetings of the participants mustbe called by the investment condominium’sadministrator, and such meetings may beheld in The Bahamas or elsewhere.

Publicly available information on aninvestment condominium is generally limitedto the information contained in its certificate

of establishment, which sets out its name, the name of its administrator(s),the date of establishment, a statement that it shall be licensed as a fund and the addressin The Bahamas at which the investmentcondominium can be served.

Can an ICON make distributions?An investment condominium may not makeor declare dividends or other distributions toits participants. Participants therefore recouptheir investment only upon redemption oftheir participation interests, which may takeplace in whole or in part on the terms setout in the governing regulations.

Is an ICON liable for local taxes?An investment condominium is not liable for estate, inheritance, succession, gift orstamp taxes, provided that its participationinterests are held (directly or indirectly)only by persons deemed non -resident forexchange control purposes and that theinvestment condominium does not own(directly or indirectly) real property situatein The Bahamas. It is intended thatinvestment condominiums meeting theseconditions will also be exempted from VAT.

Can an existing entity be convertedto an ICON?Existing entities may become ICON Funds,and the conversion can be achieved withouta termination event triggering a capital gain orother adverse tax consequence. Bahamianentities as well as entities presentlyestablished under the laws of other

jurisdictions are able convert into aninvestment condominium and be licensed as a investment fund. Therefore, it is possible:

1. to convert a Bahamian trust, exemptedlimited partnership or company to aninvestment condominium;

2. to accommodate the redomiciliation of an investment fund establishedelsewhere to The Bahamas and topermit its conversion to a condominiumonce successfully redomiciled; and

3. to allow for unbroken continuity of thefund, while changing the character ofthe legal structure that underpins it.

Note that equivalent entities establishedunder the laws of another jurisdiction must take advantage of existing continuationprocedures in the International BusinessCompanies Act or the Exempted LimitedPartnership Act, or utilize the power tochange governing law contained in the trust instrument.

How is an ICON wound up?An investment condominium may bedissolved either voluntarily on the termscontained in the governing regulations, or compulsorily by the court. Voluntarydissolution is permitted where the investmentcondominium is solvent; involuntarydissolution is required where the investmentcondominium is insolvent, the participants so request or the regulator so petitions, or where the court believes it just andequitable that it be so dissolved.




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The Securities Industry Act, 2011, (the2011 Act) repealed the Securities IndustryAct, 1999. The 2011 Act modernized andupdated the law governing the regulation of securities in The Bahamas, enhanced thepowers of the Securities Commission (theCommission) and promoted confidence andefficiency in the capital markets, makingthem a more attractive prospect todomestic and foreign investors.

HighlightsDefinitionsThe first schedule of the 2011 Act definessecurities and the activities giving rise to theobligation to register. Part 2 of the firstschedule sets out four types of activitieswhich constitute securities business:

1. dealing in securities;2. arranging deals in securities; 3. managing securities and4. advising on securities.

Part 3 of the first schedule exempts anumber of activities from registration, eg trading for one’s own account and Part 4 lists exempt persons, eg receivers,executors or lawyers where such activitiesare incidental to their profession.

Securities CommissionThe Commission’s powers remain the same;however, the 2011 Act provides for morecomprehensive powers along with greaterclarity, independence and accountability.

Assistance to domestic and foreignregulatory authoritiesThe 2011 Act allows the Commission toprovide any information already on file andto obtain information from anyone in thejurisdiction in response to a request from anoverseas regulatory body. Information mayalso be passed on to another person in theoverseas authority’s jurisdiction if certainpreconditions are met. The powers of theCommission to require a person to provideinformation are written to overrule theprovisions of any other law regarding secrecyand recognize a person’s right not to havecompelled statements used against them incriminal matters or the right to claim legalprivilege on the appropriate documents.

Investigations and inspectionsThe 2011 Act substantially expanded thepowers of the Commission to investigatea regulated person or firm to determine if the person or firm has, is, or is about tocontravene any provision of Bahamiansecurities laws. An investigation may also be initiated for the administration of Bahamian securities laws or to assist in the administration of securities lawsof another jurisdiction.

The Commission is not required to givenotice of these inspections nor does theCommission have to suspect a breach of the2011 Act, however, the regulated person orfirm bears the expense of inspection.

Registration of persons carrying on a securities businessEntities formed under either the InternationalBusiness Companies Act, 2000, or theCompanies Act, 1992, are eligible to apply for registration as a registered firm.

Registered firms may carry on one or more categories of securities businessdescribed in Part 2 of the first schedule of the 2011 Act.

Individuals employed by registered firmsto engage in securities business must beregistered with the Commission–asdiscretionary management, advising ortrading representatives. Each registered firmmust also register a chief executive officerand compliance officer, both of who must beregistered in The Bahamas.

Distributions and prospectusesThe 2011 Act requires an issuer to file both a preliminary prospectus and a prospectusto the Commission in connection with atrade that would be a distribution of a security,ie the purchase or sale in The Bahamas forvaluable consideration of a security of anissuer that was not previously issued; thathas been redeemed, purchased or donatedto that issuer; or in a previously issuedsecurity of an issuer by a control blockholder (Prospectus Filing Requirement),unless the trade is exempt.

Upon issuance of a receipt for thepreliminary prospectus, the issuer maydistribute and solicit the preliminary

prospectus, however, not until a receipthas been issued for the prospectus may a binding agreement be entered into withprospective purchasers for the purchase of the security.

There are various exemptions from theProspectus Filing Requirement in the 2011Act including distributions:

1. of securities issued by the governmentof The Bahamas;

2. of securities issued by a privatecompany, securities of an investmentfund registered under the InvestmentFund Act, 2003, or exempt fromregistering under that Act;

3. by issuer of its own securities that aredistributed to holders of its securitiesas a dividend;

4. by approved foreign issuers and 5. to accredited investors.A distribution of securities issued or to

be issued by an issuer under the laws of The Bahamas that is made outside TheBahamas must be made in accordance withthe laws of the country in which thedistribution is made.

Continuing obligations of public issuersThe 2011 Act strengthened the obligationsimposed on public issuers to inform thepublic of any material changes, file annualand interim financial statements, annualreports and on proxy solicitation. It alsointroduced the requirement that publicissuers send financial statements and annualreports to their security holders.

Takeover bidsA long-standing gap in the securitiesindustry’s laws has been the lack oflegislative control of takeover bids. The new regulations set out a framework of controls and guidelines for the industry,including a road map for the conduct oftakeover bids to ensure all security holdersare treated in a fair and equitable mannerupon change of control. Draft TakeoverRules were recently circulated for industrycomment. It is anticipated that these will befinalized for introduction in 2019.

Securities Industry Act


The Probate and Administration ofEstates Act, 2011 governs the distribution of estate assets and immoveable properties.Personal properties are distributedaccording to the law of the place of aperson’s domicile at date of death.

Statutory provisionsThe Bahamas is a common law jurisdictionand probate and administration of estateslegislation is based on the laws of Englandand Wales. The Supreme Court issues grantsof representation for the estates of personsdomiciled outside The Bahamas in respect ofBahamian assets upon their demise.

There are several testamentarydispositions by which an investor may dealwith Bahamian assets. However, a personcan only have one domicile at a time:

• An investor can make a Bahamian will solely in respect of his Bahamianassets with a provision that the will mustbe construed and interpreted withBahamian laws. The Court will issue a grant of probate.

• If appropriate, an investor can declare in the will that he is domiciled in The Bahamas. The Court will issue a grant of probate.

• If residing as a permanent resident in The Bahamas, the will can be administeredunder Bahamas law. The Court will issuea grant of probate.

• An investor can settle Bahamian assets in an Inter Vivos Trust which can beincorporated as a part of a last will andtestament. The investor should appoint the trustees named in the trust asexecutors and trustees of the last will and testament. Alternatively, a Trust can be created in the will. The provisionsunder the Trustees Act apply.

• Where domiciled outside The Bahamas in different circumstances, there areother provisions under Bahamian lawwhich would be applicable.According to the Act, the Court has

jurisdiction with the eligibility of personsentitled to obtain a grant of representation in the estate of a deceased person and requires that a notice of a proposed grant

application be published in The OfficialGazette on three consecutive occasionsprior to submitting the application to theCourt for processing.

An estate executor/administrator residentor domiciled outside of the jurisdiction willneed to appoint a local attorney in TheBahamas by deed of power of attorney to acton behalf of the estate executor/administrator.

Where a local trust company is executor,the trust company can designate two officersto undertake the application.

Upon issue of the grant, the powers andduties similar to an executor enables theadministrator to distribute the estate as setout in the will.

Resealed grants of representationThe Court issues a resealed grant in respectof any grant of probate or other testamentarydisposition issued by another common lawjurisdiction eg the UK, the US, Australia, NewZealand, Canada and any Commonwealthcountry provided the requisite certified andauthenticated copies of such foreign grant, etc are produced to support the application.

The Court also issues a grant of letters of administration with the will annexed wherea deceased testator owns Bahamian assets butis not necessary to apply for a grant in respectof the will in the place of domicile.

Where a person dies intestate in a commonlaw jurisdiction, the Court will issue a grant of letters of administration in respect of theestate in the first instance to the survivingspouse or another person approved by theCourt and grant the administrator withpowers and duties similar to an executor.

Grants issued in a civil law jurisdictionThe Court will not reseal grants issued in acivil law jurisdiction. However, although TheBahamas is a common law jurisdiction, the lawprovides for administration of estates fromcivil law jurisdictions such as the Europeancountries (eg Switzerland, Germany, France),South American countries (eg Argentina,Brazil, Chile) and other territories such as theDutch Antilles and Quebec.

Where a person dies intestate domiciled ina civil law jurisdiction, the Court issues a grantof letters of administration.

An application for a grant in respect ofeach of the above must be accompanied bythe civil law testamentary disposition andsupporting documents must be translatedinto English by a certified, notarized andauthenticated translator.

The local attorney will advise the client as to the appropriate grant for which anapplication should be made and the exactcivil law documents, certificates, etcrequired to support the application.

Executors, trustees, devisees and beneficiariesFull names, current address and occupation ofeach executor, trustee, devisee and beneficiarymust be given to the attorney by the personalrepresentative for each application.

Administration of assetsThere is no inheritance tax in The Bahamas.Upon issue of a grant of representation thepersonal representative of the estate must:

1. settle the estate’s debt includingpayment of real property taxes, if applicable;

2. deal with assets as settled in the trust, if applicable; or distribute thepersonal assets as set out in the will to local and/or foreign beneficiaries;

3. or in the case of an intestacy, distribute the personal assets under the Inheritance Act, 2002;

4. arrange transfer or settling of corporate shares;

5. obtain Exchange Control approval totransfer pecuniary legacies, inBahamian currency, to beneficiariesoutside The Bahamas; and

6. execute deeds of assent where realproperty of the deceased will be legallyvested in the devisees, apply for therequisite certificate of registration orpermit in respect of a non-Bahamiandevisees’ acquisition and obtainpermission from Exchange Control in respect of the administration andcomplete the return for filing with theregistrar as prescribed by the Act.

Estate planning: probate & administration

DOING BUSINESS IN THE BAHAMASSOURCE: B


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DOING BUSINESS IN THE BAHAMAS

In 1994, the government introduced a National Investment Policy (NIP) to support an investment-friendly climate and foster the economic growth and development. An edited version of the policy follows:

Investment environmentTo support the National Investment Policythe government will provide:

1. a politically and economically stableenvironment conducive to privateinvestment;

2. an atmosphere where investments are safe and the expropriation ofinvestment capital is not considered;

3. a legal environment based on a longtradition of parliamentary democracy,the rule of constitutional and statutelaws, and where security of life and personal property are guaranteed;

4. a stable macroeconomic environmentbolstered by prudent fiscalmanagement, a stable exchange rate,flexible exchange control rules andfree trade;

5. an environment in which freedom fromcapital gains, inheritance, withholding,profit remittance, corporate, royalty,sales, personal income, dividends,payroll and interest taxes is ensured;

6. essential public services, an adequatelyequipped police constabulary; modernhealth and education facilities, andother social services;

7. dependable public utilities; and 8. essential public infrastructure

such as roads, ports and airports.With specific regard to the financial

services sector, the government iscommitted to enhancing the image of The Bahamas as an international financialcentre. To this end, the government will useinternational best practices as it:

1. maintains The Bahamas as a leadingfinancial centre;

2. monitors developments in internationalfinancial markets and amend rules,regulations or legislation to preserveand enhance competitiveness;

3. ensures the operation of a cleanfinancial centre with rules andregulations to prevent laundering of criminally derived assets;

4. supports The Central Bank of TheBahamas in its commitment to banksupervision and promoting highstandards of conduct and soundbanking practices; and

5. supports the self-regulatory measuresof the Association of InternationalBank and Trust Companies (AIBT),particularly, the established code ofconduct for bank and trust companies.

Investment incentivesInvestment incentives under the followingActs include: exemption from the paymentof customs duties on certain constructionmaterials, related equipment and approvedraw materials; and real property taxes forperiods of up to 20 years.

• Export Manufacturing Industries (Encouragement Act)

• Industries Encouragement Act• Agricultural Manufactories Act• Tariff Act• Free Trade Zone Act

• City of Nassau Revitalization Act• Hotels Encouragement Act• Family Islands Development

(Encouragement Act)• Spirits and Beer Manufacturers Act• Bahamas Vacation Plan and

Time-Sharing Act

Areas targeted foroverseas investorsFollowing is a list of investment areas targetedfor international investors. The list is notexhaustive, and investors interested in areasnot included should consult BIA. Joint ventureswith Bahamian partners are encouraged, withthe choice of partner being at the discretion ofthe investor.

1. Touristic resorts2. Upscale condominium, timeshare and

second home development3. International business centres4. Marinas5. Information/data processing.6. Assembly industries7. High-tech services8. Ship registration, repair and

other ship services9. Light manufacturing for export

Investment environment and incentivesAdapted from the 2019 edition of the Bahamas Handbook

1. name of corporation and beneficialowner and address, includingtelephone/fax;

2. executive summary of project;3. type of business–whether share

company, partnership, individual orjoint venture;

4. principals–investors, major beneficialshareholders, including dates andplaces of birth, copies of passports orsocial security numbers, annual reportsor audited financial statements,description of investor’s business;

5. proposed location;6. land requirements;

7. start-up date;8. employment projections–number of

Bahamian and non-Bahamian employees;9. management/personnel requirement

–years of experience, training and workpermits* for key personnel;

10. financial arrangements for project,including bank reference;

11. environmental impact–toxic waste,disposal procedures, toxic input; and

12. concessions sought/investmentincentives if applying under aparticular Act or programme.

13. local representative: attorney,accountant or agent.

What’s required in an investment proposal?

* Necessary work permits for key personnel will be granted. Businesses requiring permits for persons other than key personnel are encouraged to consult BIA in advance.

An international investor seeking to do business in The Bahamas should submit to the Bahamas Investment Authority a project proposal containing:

SOURCE: B

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10. Agro-industries11. Food processing12. Mariculture13. Banking and other financial services14. Captive insurance15. E-commerce16. Aircraft services17. Pharmaceutical manufacture18. Offshore medical centres

Areas reserved for Bahamians1. Wholesale* and retail operations2. Commission agencies engaged in the

import/export trade3. Real estate and domestic property

management agencies4. Domestic newspapers and magazines5. Domestic advertising and public

relations firms6. Nightclubs and restaurants except

speciality gourmet and ethnic restaurants;restaurants operating in hotel, resortcomplex or tourist attractions

7. Security services8. Domestic distribution of building supplies9. Construction companies, except for

special structures for which internationalexpertise is required

10. Personal cosmetic/beauty establishments11. Commercial fishing12. Auto and appliance service operations13. Public transportation* International investors may engage in the wholesale

distribution of any product they produce locally.

Commercial Enterprises Act (CEA)To improve the ease of doing business andattract new and diverse businesses, Parliamentpassed legislation to streamline and fast-trackthe start-up of businesses in specified areas ofthe economy. The Commercial EnterprisesAct (CEA), 2018, is available to Bahamians andnon-Bahamians.

The CEA, provides for the designation of specified commercial enterprises andspecified economic zones in The Bahamasand seeks to liberalize the granting of workpermits to an enterprise that wishes toestablish itself in The Bahamas, and requireswork permits for its management team andkey personnel. The legislation enables aspecified commercial enterprise to obtain an Investments Board certificate granting aspecific number of work permits for certainpositions. The minimum investment of anybusiness seeking to make application

pursuant to the Act is $250,000. The CEAdefines specialized commercial enterprisesas businesses in:

1. Captive insurance2. Reinsurance3. Mutual fund administration4. Arbitration5. Wealth management6. International trade7. International arbitrage8. Computer programming9. Software design & writing

10. Bioinformatics & analytics11. Nano technology12. Biomedical industries13. Boutique health facilities14. Data storage or warehousing15. Aviation approved

maintenance operations;16. Aviation registration17. Call centres18. Manufacturing or assembly

of manufacturers19. Maritime trade

The Business Licence Act, 2010, made it mandatory for anyone operating a business to obtain a licence.

Annual business licence renewal applicationsare due on or before Jan 31 and payments aredue on or before Mar 31 every year. All business licences expire on Dec 31 (excludingoccasional and temporary licences). A licenseewho fails to make requisite filings or paymentsby the due date is liable to pay penalty fees:

1. $100 for late filing of renewal applicationand late notification of inactivation orcessation of a business;

2. 10% tax liability for late payment of business licence tax; and

3. Interest of 5% of tax liability per annumon payments made 30 days or more after the due date.

For most businesses, taxes are based ongross turnover; and calculated from $100for a petty business to 0.50% to 1.50% forbusinesses with turnovers from $50,000 to$50 million and greater. Where the businessis registered as an insurer under the InsuranceAct, in lieu of business licence tax, pay withinfour weeks of the end of each quarter of afinancial year, a sum of 3% of the grosspremiums collected in respect of localpolicies or $25, whichever is the greater.

Companies designated non-residentunder the exchange Control Regulations Actpay an annual tax of $300 other than acompany incorporated or continued underthe International Business Companies Act(Chapter 309).

Application for a new business license iscompleted online at www.VAT.revenue.gov.bs

and must have attached: proof of Bahamiancitizenship (copy of valid passport); copy ofthe certificate of incorporation (with proofthat the company is 100% beneficiallyBahamian owned); National Insurance Board(NIB) registration number for the business;NIB card for the applicant; if applicant ownsthe property on which the business islocated real property tax must be up to dateor an arrangement for payment of arrearsmust be in place; lease or rental agreementfor the business location or proof ofownership (copy of conveyance) along withapprovals from: Department of PhysicalPlanning (zoning); Ministry ofWorks/Building Control (inspection);Department of Environmental HealthServices (sanitation); and Royal BahamasPolice Force/Licensing Section (if alcoholic

Business licensingAdapted from the 2019 edition of the Bahamas Handbook


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The government’s immigration policyis aimed at ensuring the reasonable security,well-being and economic progress of TheBahamas and its people.

The government considers citizenship,permanent residency and work permits fornon-Bahamians. Accelerated consideration isgiven to applications for annual or permanentresidence by major international investorsand to “fit and proper” owners of residencesvalued in excess of $1.5 million.

As The Bahamas is a major touristdestination, every effort is made to keepvisitors’ immigration formalities to aminimum. Non-Commonwealth citizensshould inquire at the Ministry of ForeignAffairs for entry requirements, as they varyfrom country to country.

Visitors entering The Bahamas must fill outan embarkation-disembarkation card. The

designated portion is retained and must besurrendered upon departure from the country.

Visitors must be in possession of a returnticket to their homeland or to some othercountry where they would be accepted. As a part of the admittance process, visitorsmay be required to produce evidence thatthey are able to sustain themselves while inThe Bahamas.

Visitors may stay for a maximum of eightmonths, provided they can show means offinancial support for this period. Visitors arenot allowed to engage in any form of gainfuloccupation while in The Bahamas.

Anyone found guilty of the smuggling, orassisting in the smuggling of, or harbouring,illegal immigrants may be fined up to $10,000and sentenced to a maximum of five years inprison plus confiscation of any aircraft orboat used in the act.

Obtaining a permit to reside*Persons wishing to reside in The Bahamason an annual basis may qualify under one of four categories:Category 1Spouse or dependent of a citizen of The Bahamas;

If an applicant is married to a Bahamiancitizen, a resident spouse permit may beissued. The resident spouse permit is issuedfor a maximum period of five years.

After five years an application may bemade for permanent residence or citizenship.Category 2Spouse or dependent of a permit holder.Category 3Independent economic resident.

For an annual permit to reside, a head-of-household pays for head of householdand for each dependent.


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Residency and employmentAdapted from the 2019 edition of the Bahamas Handbook

beverages are being sold and/or music anddancing). For a regulated business, grant of approval in writing under the law regulatingthat business.

The processing time for a business licence(new/renewal) is seven working daysprovided all requirements are met and taxpayment made.

A non-Bahamian company must first obtainapproval from the National Economic Council(NEC)/Bahamas Investment Authority (BIA),before the application can be processed.

Temporary licenceA temporary business is a businessundertaking of a specific contract for aspecified period not exceeding three years.

Non-Bahamians who contract to carryout a business must apply for a temporarylicence and pay a tax of 1.5% of the value ofthe business contract. Temporary licencesare not granted unless all outstanding licencefees under previous licences are paid andthe application is approved by the Ministerof Finance. It is an offence for a foreignperson to carry on a business without atemporary licence.

Occasional licenceOccasional licences may be granted for the following purposes:

1. to carry on a sales business;2. o act as a travelling salesman

(non-resident individual);3. to stage a business event at

any place or premises of public dancing, singing, music or other such public entertainment;

4. to stage a trade show or expo;5. to vend at a regatta,

farmer’s market or other national or community event.

Occasional licences are taxed at $25 and granted for any period not exceedingseven days up to four times a year undersuch terms, and conditions and subject torestrictions as the secretary for revenuedeems fit.

Business licence tax scheduleFor a bank or trust company licensed underthe Bank and Trust Companies RegulationAct and licenced as an authorized dealer, tax is calculated at 3% of turnover.

Businesses licensed under the Bank andTrust Companies Regulation Act– which arenot authorized dealers (banks or trust) andhave paid the requisite fees under the Banksand Trust Companies Regulation Act–do notpay the annual business license tax.

The taxes for gas stations range between$1,000, where total revenue does notexceed $500,000, and $35,000 where totalrevenue is $15 million and over. A tax rateof 0.75% of turnover is applied to FamilyIsland gas stations where owners are notimporters of fuel.

Telecommunications services businessesare taxed at a rate of 3% of turnover.

Businesses whose annual turnoverexceeds $50,000 are required to maintainaccounting records for at least five years.

If turnover is $100,000 or more,certification by a person who is qualified inaccounting, and who has no interest in thebusiness to which the certificate relates,must accompany the application.

For further information visit the Dept of Inland Revenue online at www.inlandrevenue.finance.gov.bs


Category 4Resident homeowner, including seasonalresident homeowner. Under this category,non-Bahamians who own second homes in TheBahamas may apply to the director ofimmigration for a homeowner’s residence card.This card is renewable annually and entitles theowner, spouse and any minor child/children,endorsed on the owner’s card when travellingwith the owner, to enter and remain in TheBahamas for the validity of the card. The card is intended to facilitate entry into The Bahamaswith minimal formalities by:

1. obviating the need for return tickets;

2. obviating provision of proof ofmaintenance ability upon entering the country; and

3. entitling the holder to visit for a stay of up to one year.

Successful applicants in any of thesecategories are not permitted to engage in employment.

*Applicants in any of these categories are not permitted to engage in employment.

Procedures for obtaining a work permitAn inflexible principle of The Bahamasgovernment is that no expatriate may beoffered a position that a suitably qualifiedBahamian is available to fill.

Employers with vacant posts are requiredto advertise locally and consult The BahamasEmployment Exchange. If unsuccessful infulfilling their requirements by these methods,they may apply to the Dept of Immigrationfor permission to recruit outside The Bahamas.

Normally, an application will not beprocessed if the prospective employee is alreadyin The Bahamas, having entered as a visitor.

Work permit fees range from $1,000 to$12,500 per year, depending on the category.The Bahamas Immigration BahamianizationPolicy, which is critical to the granting ofwork permits, provides that:

1. Whenever there is a position that a Bahamian is qualified to fill, he shouldbe given the position in preference toanyone else.

2. The Bahamian must be given that job onthe same terms and conditions as hisexpatriate counterpart.

3. Where the company has a careerstructure, whether here or abroad, theBahamian employee must be given the

same opportunities for advancement aswould be afforded other employees.

4. The Bahamian must be helpedwhenever possible to broaden his skillsin the individual’s chosen field ofendeavour by constant exposure tofurther training at home and abroad.

Where work permits have been granted,each employer will be required to identify asuitable Bahamian to understudy the expatriateso that the Bahamian trainee will fill theexpatriate’s position within a reasonable time.

Genuine investors usually have littledifficulty in complying with these requirements.

Employers may obtain permits for longerperiods than the standard one-year period inrespect to certain key personnel on contract.Such contracts should indicate their renewalwould be subject to obtaining the necessaryimmigration permission, and they may beendorsed to the effect that the employee is expected to train or be replaced by asuitable Bahamian within a stipulated period.

Each permit issued by the Immigration Board relates to a specific post. Permits are not altered by the director of immigration toreflect change of employment or residence.However, a person holding a work permitmay make application for a new one (his new employer having been unsuccessful inrecruiting a qualified Bahamian to fill the post)without having to leave the islands, providingthe current work permit is still valid.

The renewal of a permit on expiration isnot automatic. Generally, no expatriate maybe continually employed in the country in anycapacity for more than five years. However,there are likely to be cases where hardshipwill be caused by rigid implementation of this policy. According to government, this factor will be kept in mind in applyingthe regulations.

An employer must inform the Dept of Immigration within 30 days that a non-Bahamian employee is no longer employedor be liable to a fine.

A non-Bahamian who ceases to beemployed must take his permit to the Dept of Immigration for cancellation within seven days of ceasing to beemployed. The permit shall be deemedcancelled with effect from expiration ofthat seven-day period. An employee failingto comply with this regulation is liable toprosecution and may, if convicted, be liableto a fine.

The holder of a permit shall report anychange of address to the Director ofImmigration within 14 days of such change.

If an applicant is married to a Bahamiancitizen, a resident spouse permit may be issued. The resident spouse permit isissued for one to five years. This permitallows the applicant to work anywhere inThe Bahamas.

BondingA bond is required for each person granteda work permit, if necessary, to repatriate theemployee and his dependents and to pay anypublic charges, including medical expenses,incurred by the employee.

Annual travelling salesrepresentative permitTravelling sales representatives planning to dobusiness in The Bahamas must obtain workpermits from the Dept of Immigration as wellas a licence from the Licensing Authority.

Permanent residenceApplicants for this status of residency mustbe of good character and prepared to showevidence of financial support. Such an applicantmust also state that he intends to residepermanently in The Bahamas.

Persons may apply for permanent residencein any of the following categories provided theysatisfy statutory requirements of The Bahamas:

1. As the spouse of a citizen of TheBahamas, and in the case of a male, hemust have been married for not lessthan five years. Women married toBahamians may apply at any time after marriage.

2. As an economic applicant; that is, one who seeks to permanently residein The Bahamas because of:

a. investment/business or home, orb. established roots through

family ties.People who held valid certificates of

permanent residence prior to theImmigration Act, 1975, continue to holdsuch status automatically.


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In New Providence, real estate agentscharge a 10% commission on the sale ofundeveloped property; 6% on developedproperty–residential or commercial; and10% for Family Island property–land, home or commercial.

As of July 1, 2018, stamp duty on propertyconveyances or realty transfers was set at 2.5% on transactions valued at $100,000or less, and 10% on transactions valued inexcess of $100,000. VAT is not charged astransactions are subject to stamp duty.

In property sales, the vendor andpurchaser each pay half the stamp dutyunless otherwise agreed. Sellers generallypay commission, stamp duty and legal fees.Sometimes property owners list a net salesfigure, in which case the agent adds those charges to the price quoted toprospective buyers.

Stamp duty on mortgages is payable at a rate of 1% on the amount borrowed.

The Bahamas Bar Association follows aminimum scale fee for conveyances andmortgage transactions at 2.5% of the saleprice plus out-of-pocket expenses.

VAT is charged on buyers’ and sellers’attorney fees and realtor fees.

International Persons Landholding Act, 1993Amended in 2007, The International Persons Landholding Act made it easier for non-Bahamians and companies undertheir control to own property.

1. A non-Bahamian or permanentresident who purchases or acquires aninterest in a condominium or propertyto be used by him as an owner-occupiedproperty, or for construction of premisesto be used as an owner-occupiedproperty, must apply to the secretaryto the Investments Board (IB) toregister the purchase. Application forCertificate of Registration Form I mustbe filed with the Bahamas InvestmentAuthority (BIA), Office of the PrimeMinister. Contact BIA for a completelist of the required documentation that must accompany the application

along with the original receipt from the Public Treasury showing payment of the requisite fee of $250.

2. Upon receipt of the above, theacquisition is registered and acertificate of registration issued.

3. A permit to acquire property is requiredif the property is undeveloped land and the purchaser would become theowner of two or more contiguous acres.A permit is also required if the non-Bahamian intends to acquire land or aninterest therein by way of freehold orleasehold, when the acquisition is not inaccordance with item 1.

4. Non-Bahamians who own homes inThe Bahamas may apply for an annualhomeowner’s residence card.* Thiscard entitles the owner, spouse anddependent children to enter andremain in The Bahamas for theduration of the validity of the card(one year). This facilitates entry–itdoes not confer resident status in The Bahamas.

All applications for permits, Form 3, are to be submitted to BIA for considerationby the IB. If approved, a letter is issued andpayment of the requisite fee of $500 is paid at the Public Treasury and the originalreceipt returned to BIA. The permit is thenissued by the Secretary to the Board. Fee schedule is as follows:Permit ............................................................$500The certificate of Registration..................$250Annual homeowner’s

residence card ........................................$250Certificate of registration or permit (with

acquisition documents) must be recorded atthe Registrar General’s Dept.

*Permanent residence may be granted ifcertain conditions are met.

Property transactionsReprinted from the 2019 edition of the Bahamas Handbook


Bahamas HandbookPO Box N-7513

Nassau, The BahamasTel (242) 323-5665 Fax (242) 323-5728



All The Bahamas in one book!

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Bahamas Financial Services BoardA broadly based and highly skilled private sector creates a dynamic mix of banking, trust,fund administration, investment advisory and insurance services in The Bahamas. Augmentedby professional advisors from legal, accounting, realty, information and communicationtechnology firms, The Bahamas is a complete international centre.

The Bahamas Financial Services Board (BFSB) represents an innovative commitment by the financial services industry and the government of The Bahamas to promote a greaterawareness of The Bahamas’ strengths as an international financial centre. BFSB, a private-sector-led body, and its member firms enjoy a strong partnership with The Bahamasgovernment. This partnership is focused on ensuring that the country’s regulatory andbusiness environment is suitable for both clients and the international stature of TheBahamas as a member of the community of nations.

For further information contact:

Bahamas Financial Services BoardPhone: [email protected]

Since 1960, the Bahamas Handbook has documented the development of a nation byrecording and analysing significant events and providing a snapshot of culture, art, business,history and politics in The Bahamas. This richly illustrated annual publication has grown to 600 pages, earning a reputation as the most comprehensive source of information onliving and doing business in The Bahamas.

The Bahamas Investor was introduced as an international supplement to the BahamasHandbook in 2006 to serve the needs of investors and wealth management professionalsconducting business in the evolving offshore financial marketplace. The magazine focuses on wealth management strategies, opportunities for direct investment and the lifestyleadvantages of doing business in The Bahamas–a practical resource designed for financialplanners and other advisors to share with their own clients. Etienne Dupuch Jr PublicationsLtd is the leading publisher of business and tourism information in The Bahamas. For morethan 50 years the company has created a wide range of high-quality, informative andrespected publications, reliably delivered to their targeted audiences. Books, magazines,maps and travel guides produced by Dupuch reach a majority of vacation and businesstravellers visiting The Bahamas.

For further information contact:

Etienne Dupuch Jr Publications LtdPO Box N-7513 Nassau, The BahamasPhone: [email protected]

Bahamas Handbook & The Bahamas Investor

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