In the Bahamas there are no taxes on profits, dividends or income; there is no capital gains tax, no withholding tax and no sales tax. The taxes impinging on companies are business license fees, stamp duty, property taxes and import duty. Most offshore or non-resident entities are exempt from business license fees and many are exempt from stamp duty. Corporate entities pay incorporation or registration fees to the Government: see Types of Company and Offshore Legal and Tax Regimes for details of annual fees payable depending on status.
Bahamas Business License Fees
Under the Business Licenses Act 1980 (as amended) enterprises operating in the Bahamas are liable to pay annual license fees. Non-resident entities, International Business Companies, Limited Duration Companies and Exempted Limited Partnerships are not liable for these fees; nor are banks, trust companies, insurance companies, mutual funds or ship holding companies, all of which have their own separate fee regimes (see Offshore Legal and Tax Regimes).Business License Fees depend on annual turnover and gross profit percentage; the rules are complicated and professional advice is necessary. Some illustrative situations are as follows:
· Businesses with turnover below $50,000 are exempt;
· Businesses with turnover between $50,000 and $100,000 pay between $250 and $800 depending on the level of gross profit;
· Larger businesses pay gradually increasing amounts; a business with turnover of $30m and a high gross profit percentage might pay as much as $500,000 or 1% of turnover.
Bahamas Payroll Taxes
Under the National Insurance Act 1972 as amended, Bahamian employers, employees and the self-employed pay social security contributions. Employees pay 3.4% of earnings (up to maximum earnings of $13,000 pa); employers pay 5.4% of earnings to the same maximum; self-employed persons pay 8.8% of earnings to the same maximum. Although all employers and employees pay these contributions, whether or not they are resident, benefits can generally be claimed only by resident Bahamians. Even in Paradise, it seems, there are thorns on the roses. Expatriates returning home to die at 60 after a lifetime of service in the Bahamas may be able to get a refund of contributions, or can elect to receive a pension.
In a 2005 report, the Social Security Reform Commission, after a 10-month review, recommended sweeping changes to the 30-year-old benefits programme to ensure its sustainability. The Commission, which was appointed in October 2003, made 13 key recommendations, including increasing the contribution rate from 8.8 percent to 11.8 percent. The first increase would come into effect in January 2011, and there would be an increase by one percent every year until 2014.Commission Chairman Alfred Stewart has explained that since the Fund started in 1975, there has not been an increase in the contribution rate. It was also recommended that the retirement age be increased from 65 to 67 and that the contribution requirement for retirement pension be increased from 150 weeks (three years) to 500 weeks (10 years).
In addition, the Commission recommended that the ceiling on insurable wages be increased to $500 per week and thereafter adjusted annually in line with the average change in the national wage index over the previous three calendar years. The Commission had recommended that this come into effect in January 2006.
Bahamas Stamp Duties
Stamp duties are payable in a number of situations in the Bahamas. The most important of these are company incorporation, real estate transactions and overseas remittances of Bahamian currency. At the time of writing, stamp duty on the capital (initially and on subsequent increases) of a domestic limited company runs at $64 on the first $5,000 and $3 on each additional $1,000. Stamp duty on real estate transactions ranges from 2% on small amounts to 10% on sales over $250,000. It is normally shared between the parties. There is a 1% stamp duty on mortgages paid by the borrower. Bahamian currency exported from the jurisdiction is stamped at 0.25%.
Bahamas Real Estate Tax
Real estate tax is levied on the following types of land and real property:
· Developed real estate on the island of New Providence;
· Developed real estate on other islands if owned by non-Bahamian persons;
· Undeveloped real estate on New Providence owned by (you guessed it) non-Bahamian persons.
Real estate holdings must be declared annually to the Chief Valuation Officer.At the time of writing, the rates of tax are as follows:·
· Owner-occupied property:
|Value, $||Rate of tax, %|
|Up to 250,000||Nil|
|250,001 – 500,000||0.75|
|Over 500,000||1.0 (max $35,000)|
· Other property:
|Value, $||Rate of tax, %|
|Up to 500,000||1.0|
|Unimproved property in New Providence||3.0|
An amendment to the Stamp Act which provides for exemption from payment of stamp duty on certain financial transactions involving licensed lending institutions went into effect in 2008.
As of July 1, 2008, application may be made for exemption from stamp duty for any of the following: purchase of a dwelling home; purchase and financing of a dwelling home and mortgage; purchase and financing of a dwelling home combined with other domestic loans and mortgages; purchase of vacant land for the construction of a dwelling home; transfer of a home mortgage; and, transfer of a home mortgage combined with other domestic loans.
The government stated that applications for stamp duty exemption in respect of these transactions must be accompanied by a completed affidavit, a copy of a National Insurance card, the first page, signature page, and back sheet of conveyance, and/or first page, signature page, and back sheet of mortgage.
In New Providence, applications must be made to the Financial Secretary at the Ministry of Finance, or to a Family Island Administrator.
The Ministry reminded applicants that purchase or construction of the home must be in respect of a first time home ownership, and the home must be intended for owner occupancy.
“A dwelling house includes a condominium unit or a duplex, exclusive of any part that is not owner-occupied,” stated the Ministry.“The property must not be used for commercial purpose,” it added.