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Taxation in Bahamas
 
 
 

General

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.

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.

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% to 11.8%. The first increase would come into effect in January 2011, and there would be an increase by one percent every year until 2014.

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.

Stamp Duties

Stamp duties are payable by individuals in a number of situations in the Bahamas. The most important of these are real estate transactions and overseas remittances of Bahamian currency.

At the time of writing, stamp duty on real estate transactions ranges from 2% on small amounts to 8% on sales over $100,000. 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%.


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