BAHAMAS: An Introduction
The Bahamas as a Strong and Dynamic International Financial Centre
The Bahamas has long been known as a strong and well-respected international financial centre, with adept industry professionals to assist in wealth planning and management and innovative legislation to set the jurisdiction apart. The jurisdiction boasts fantastic weather, English as a primary language, world-class hotels and close proximity to Florida, which makes it well-positioned for easy access to both North America and Latin America. The Bahamas has also been known to provide an idyllic lifestyle for high net worth (HNW) individuals looking for a place to call home.
However, in recent years, there have been a number of events which created economic challenges for the jurisdiction, such as the extreme devastation from Hurricane Dorian in 2019, the COVID-19 pandemic beginning in 2020 and blacklistings (for tax-related reasons) from various countries and the EU. Notwithstanding the above, the Bahamas has weathered the storm and cemented its place as a resilient, strong and dynamic international financial centre, and a safe and beneficial jurisdiction for high net worth individuals.
A recent outstanding accomplishment of The Bahamas was its removal from the EU list of noncooperative jurisdictions for tax purposes (also known as the “EU Blacklist”). The decision to remove The Bahamas from the blacklist was made in recognition of The Bahamas having implemented all of the necessary measures to address concerns identified by the OECD’s Forum on Harmful Tax Practices. One of the measures included the recent implementation of the Commercial Entities (Substance Requirements) Act 2023 and the Beneficial Ownership and Secure Search System, which brought the regulatory regime within accepted international standards. Currently, The Bahamas has been successful in meeting the tax-related demands implemented by the Global North while still ensuring that it is a safe and successful international financial centre.
Notwithstanding the above, The Bahamas has joined the clarion call for an equitable tax co-operation system globally that is sensitive to the realities of all countries, including small islands like The Bahamas. There is now the United Nations Framework Convention on International Tax Cooperation, where The Bahamas serves as a member of the open-ended ad hoc intergovernmental committee. The Bahamian government has viewed the United Nations as the appropriate body (instead of the OECD) to design and build a truly equitable and inclusive international tax administration architecture. The Bahamas’ Attorney General stated:
“An important area where we have committed ourselves to change the status quo and to be forceful in our international advocacy is the need for a fair and equitable tax governance system globally, a system that is not defined by a few elite countries, but one that is sensitive to the realities and concerns of small developing states like The Bahamas and countries in the Global South. We believe that established protocols and tax frameworks are discriminatory, they are not all inclusive, nor do they apply the tax rules evenly across different countries. The international tax establishment does not take into consideration Special & Differential Treatment for developing countries, low-income countries, and countries with unique characteristics such as small island developing states.”
Terms of Reference for the Framework Convention have recently been agreed, and the intergovernmental negotiating committee will commence meetings relating to the drafting and negotiating of the framework convention.
The Bahamas’ adherence to the OECD’s requirements while still pushing for the UN Framework Convention on International Tax Cooperation demonstrates The Bahamas’ strength as a leading international financial centre.
The Bahamas also implemented the Domestic Minimum Top-Up Tax Act 2024 (the “DMTT Act”) on 28 November 2024, which introduces a domestic minimum top-up tax (DMTT) in line with the OECD’s Pillar Two Framework. The DMTT Act introduces an effective tax rate of 15% for multinational entities (MNEs) operating in The Bahamas that have annual consolidated revenue of or above EUR750 million in two of the last four years.
Additionally, the government of The Bahamas has also recently foreshadowed new legislation to come in 2025. Firstly, it is anticipated that there will be new Bahamian legislation to bring the country in line with Recommendation 24 and Recommendation 25 from the Financial Action Task Force. Specifically, it is expected that there will be regulatory requirements with respect to nominee shareholders and directors and enhanced KYC/AML policies and procedures implemented nationwide with respect to trust structures. It is also expected that there will be amendments to the Arbitration Act following the well-known Volpi decision, which provided a spotlight on The Bahamas as a leader in trust arbitration. The implementation of the Movable Property Security Interests Bill and the launching of a movable assets and collateral registry are also anticipated, which will allow automatic perfection of a security interest in moveable assets such as inventory. Notwithstanding all the anticipated changes to the domestic and global landscape, the Bahamian financial services industry is adaptable and will ensure that the jurisdiction is a top choice for HNW individuals.
The Bahamas has also recently introduced a new corporate digital platform (Corporate Administrative Registry Services (CARS)) that modernises the companies’ registry, making it quicker and easier for corporate service providers and those looking to incorporate or continue corporations in The Bahamas.
There has undoubtedly been much change in the legal and regulatory landscape of the Bahamian financial sector in recent years. However, The Bahamas continues to be innovative, resilient and dynamic, with sector leaders constantly identifying markets that are experiencing disruption, which would allow The Bahamas to fill a void and attract new business.