Bahamas Investor Guide - 2014

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Wealth Management and Investment in The Bahamas

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S2 Investor’s Resource Guide

Copyright © 2013 Information contained in this publication under Wealth Management Tool Kit and Investment Funds is copyright by the Bahamas Financial Services Board. Information contained in Tax Planning and Doing Business in The Bahamas is copyright Etienne Dupuch Jr Publications Ltd and the Bahamas Handbook and Businessman’s Annual.

The contents of this guide are intended to be an aid tounderstanding The Bahamas’ environment for wealth management.The contents do not in any way constitute legal advice. EtienneDupuch Jr Publications Ltd and the Bahamas Financial ServicesBoard, its members and directors do not and will not in any wayaccept responsibility or liability for any loss or damage arising from reliance on the information contained herein. Where adecision is to be made based on the effect of the new legislativeregime discussed herein or on any other legislation or common law rules, advice should be sought from qualified legal professionals.

Copyright © 2013 Etienne Dupuch Jr Publications LimitedAll rights reserved. No part of this publication, editorial matter or advertising, may be reproduced or transmitted without writtenpermission from the publisher.

Prices and information in this book are subject to change.

Dupuch Publications and the “D” device are registered trademarks of Etienne Dupuch Jr Publications Limited.

Investor’s Resource Guide S3

ContentsWEALTH MANAGEMENT TOOL KITIntroduction to private wealth management . . . . . . . . . . . . . . . . . . . . . . . . .S4Corporate structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S5International business companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S6Segregated accounts companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S7Bahamian trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S8Foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S10Executive Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S11Private trust companies and family office . . . . . . . . . . . . . . . . . . . . . . . . . .S12Insurance products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S13

INTERNATIONAL TAX PLANNINGCanada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S14The United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S17Mechanisms for information sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S20

INVESTMENT FUNDSFunds industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S22Standard funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S22Professional funds/SMART funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S23Recognized foreign funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S25Securities Industry Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S25

DOING BUSINESS IN THE BAHAMASEstate planning: probate & administration . . . . . . . . . . . . . . . . . . . . . . . . .S27Investment environment and incentives . . . . . . . . . . . . . . . . . . . . . . . . . . .S28Business licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S29Residency and employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S30Property transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S31


Strategic planning for businesscycles is an essential element for anysuccessful business. In The Bahamas webelieve this principle is equallyimportant for individuals and families. At each stage of your financial

development, various products, servicesand techniques are available, many ofwhich have complementary characteristicsto assist in the organization of yourfinancial affairs. The Bahamas offers acomprehensive range of private wealthmanagement options, which may beusefully regarded as a Bahamas tool kit,and is available to design effectiveindividual solutions.In The Bahamas, we are committed

to adding value to the personal financialplans of clients through dedicatedservice as well as the appropriateapplication of financial planning tools.For the purpose of this guide, theseprofessional services are termed privatewealth management.Individuals who have an effective

wealth management strategy are betterpositioned to manage the impact ofevents such as changing marketconditions, family transitions or planningfor the future.In The Bahamas, we do not believe

that private wealth management shouldfocus merely on the structuring offinancial affairs to reduce or defer tax.While the ability to accrue profitswithin a tax-neutral environment suchas The Bahamas should be recognizedas a valuable advantage, we believe thegreater priority is the formation of arelationship fashioned on maximizingthe efficiency of your financial assets.Whether this is accomplished byincreasing the return, safeguardingagainst loss or ensuring efficientdistribution, it is clearly a businessrelationship that may span generations.The integrity and continuity offered byinstitutions located in The Bahamas

should be important factors whenconsidering a wealth management plan.The financial services industry in The

Bahamas is staffed and managed by alarge pool of experienced professionals.With personnel committed to the localcommunity, the client may be confidentthat continuity of service, which lies atthe heart of the successfulprofessional relationship, willbe more predictable than inlocations largely dependentupon imported skills.Moreover, respect forpersonal confidentiality lies atthe heart of private wealthmanagement, and theBahamian government has longrecognized and valued the right of theindividual to confidentiality in financialmatters. Clients may be assured thattheir affairs will be handled in a discreet,professional manner.Modern legislation enables The

Bahamas to remain at the forefront ofthe industry. The legislativeenvironment is constantly monitored toensure the jurisdiction retains itscompetitive advantage. To this end, theability of an independent nation to setits own legislative agenda is an importantconsideration when deciding thelocation for personal financial services.This guide aims to highlight products

that have a variety of uses and thatinevitably overlap. It may be useful toremember that as wealth increases, thestructuring alternatives availablesimilarly increase and, as such, the toolkit expands. It should become clear,however, that successful wealthmanagement is a whole life process thatis most effective when started early andmanaged to achieve agreed long-termgoals. A trust or company structure thatmay be valuable for protecting assetsduring life can be equally effective atmanaging their distribution following

death. Indeed, the earlier a wealthmanagement strategy is embraced, thegreater the potential benefits.The Bahamas offers an ideal domicile

for the management of personal wealth.The tradition of quality personal servicecoupled with an investor-friendly, tax-neutral environment yields a unique set

of benefits. As you read this guide andexplore some of the wealthmanagement facilities offered fromwithin The Bahamas, we hope you areencouraged to find out more.

WEALTH MANAGEMENT TOOL KIT

Introduction to private wealth management

The website of the Bahamas FinancialServices Board provides a databaseof information for tax, estate andfinancial planning practitioners,including a directory of serviceproviders and legislation referencedin this guide at www.bfsb-bahamas.com.

Successful wealth management isa life process most effective whenstarted early and managed toachieve long-term goals

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The Bahamas provides individualsand institutions the ability to establishcustomized corporate structurestailored to the specific demands of theirinternational business transactions, assetmanagement and estate planning. Theserange from the flexibility of theInternational Business Company (IBC)to the sophisticated SegregatedAccounts Company (SAC).

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

enables the creation of LimitedDuration Companies (LDCs). An LDCis restricted to an existence of 30 yearsor less, to serve a clearly definedpurpose. It could be structured as apartnership for tax purposes, allowingprofits and losses to be attributedproportionally to individual membersrather than to the company itself.Both the IBC and LDC benefit from tax

exemptions for a period of years fromnormal fiscal measures in The Bahamassuch as business licence fees and stampduty. As with all entities and individuals inThe Bahamas, they are not subject toincome tax, capital gains, gift, estate,inheritance or succession taxes.While companies established under

the Companies Act are used by bothinternational and Bahamian investors,the IBC is the preferred vehicle. TheIBC and LDC may transact business inThe Bahamas or internationally.Depending on the nature of the

product and market, the corporatestructure could be enhanced by the useof a Segregated Accounts Company, anLDC or one Limited by Guarantee.

In an increasingly global economy,entities that transact business in multiplejurisdictions value the importance ofproperly structured corporate affairs totake advantage of regional and multilateraltrade opportunities, tax incentives andmitigation, transfer pricing and doubletaxation treaty enhancements.Consequently, creation of a permanentestablishment in a tax-neutral jurisdictionsuch as The Bahamas is an integral part ofstrategic planning.Such planning may also extend to

companies wishing to accessinternational financing for operations indifferent parts of the world. The use ofinternational corporate structures tocoordinate debt and equity financingand bond issues has provenadvantageous to both companies andinvestors when combined with trustsettlements as part of a broader estateplanning strategy.

It is vitally important to the successfuloutcome of transactions involvinginternational business and trade,financial and tax planning, estateplanning, wealth management, andprivate trust or family offices that thecorrect corporate structure is createdin an accommodating and well-regulatedjurisdiction, such as The Bahamas. A comprehensive, Internet-based

registration process has beenintroduced, making it fast and convenientto incorporate in The Bahamas.

Bahamas regulatory frameworkCompanies are required to maintain a registered office and appoint aregistered agent in The Bahamas. These service providers must belicensed as financial and corporateservice providers.


Bahamian IBCs have many practical applicationsThe flexibility and attractive cost of the IBC have resulted in the predominant use of thisvehicle in wealth management, with a wide variety of applications:• Holding company. In many instances the IBC is used as a holding company for assets suchas property, securities investments or personal luxuries.• Investment fund. In the investment funds industry, the structuring of a fund that is simplya customized corporate or partnership entity allows access to specialized investment servicesand improved efficiencies in the delivery of investment management and administrationservices. The IBC is the vehicle of choice for such structures. The Bahamas Investment FundsAct provides a regulated environment at the cutting edge of modern investment fundadministration.• Shipping company. The IBC is an ideal structure to hold title to a ship. The Bahamas ShipRegistry is ranked as the third largest in the world, and is the number one choice for theworld’s leading cruise operators.• Captive insurance company. Captive insurance companies are used to insure and reinsure the risks of subsidiaries and affiliated companies. Captives also provide access toreinsurance markets and, when established in a tax-neutral environment such as TheBahamas, benefit the accumulation of premium and investment income.• Private trust company. The IBC, as a private trust company, assumes the role as trusteefor one or more family-related trust settlements. It does not engage in any third-partybusiness. Such a structure enables the settlor to select the management of the trust companyand retain more control over the operations than would be allowed under normal corporatetrustee arrangements.• Family office. The family office concept uses the private trust company structure as aplatform for the broader-based services to be provided for the family. • Other applications. IBCs can include joint venture, patent and e-businesses.

Corporate structures

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International Business Companies (IBCs)

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The International BusinessCompany (IBC) Act provides a modernsimple 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 anywherein the world whether in its role as a holdingcompany, trading company, a privateinvestment vehicle, insurance company fornon-domestic business, or other uses,including its ability to form part of a moresophisticated structure involving acombination of trust, foundation or other specialized corporate elements.

Of particular importance, the IBCoperates in a responsible environment forboth due diligence and corporategovernance requirements. As a part of theglobal effort to combat money launderingand all other illegal activities, a Bahamian IBCmust have a registered agent which is alicensed entity under the Banks and TrustCompanies Regulations Act of the Financialand Corporate Service Providers Act. Suchagents are under regulatory control of TheBahamas which requires that full complianceis maintained with established Know YourCustomer standards. This information, although mandatory, is kept in confidentialfiles of the registered agent.

Further, every IBC is required to maintaina 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 Memorandumof Association, the register of directors andofficers and the Share Register must be keptat the registered office. A copy of theregister of directors and officers must befiled with the Registrar General’s office.There is no public filing of the register ofshareholders. Other key highlights of theIBC are provided below:

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

Stamp Duty

Usual Incorporation Time

Liquidation Procedure

Due Diligence

Meetings

Company Name

Reservation of Company Names

Government Fees

Government Fees- Annual

Details held on public record

Taxation

Redomicilation

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 limited duration 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 1

None Required Corporate Directors Permitted Yes

US$5,000 Corporate Secretary Yes

Yes Audit Required by Law No

1 Statutory Filing of Accounts No

No Filing of Annual Return No

None Certificates of Good Standing Available Yes

2-3 Days Ready Made Companies Available Yes

Easy Dissolution Procedure Available Yes

Yes

Annual General meetings (AGMs) are not required. AGMs may be held anywhere inside or outside of The Bahamas and can take place 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.

Yes (may be reserved free of charge for 90 days).

Registration fee for registration of original Memorandum and Articles of Association with the Registrar of Companies - US$330

IBC with authorized share capital of US$0 to US$50,000 - US$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).

An IBC and its shareholders are not subject to any income tax, corporate tax, business license fees or stamp duty on transactions concerning in IBC, except that stamp duty is payable in relation to real property situate in The Bahamas which it owns, or is owned by any company in which it holds shares or for which it holds a lease. Statutory exemption valid for 20 years from date of incorporation.

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.

Find out more at www.bahamashandbook.com

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Segregated Accounts Companies (SACs)

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SnapshotA SAC is a company which is registeredunder the Segregated AccountsCompanies Act, 2004. The SAC maycreate separate accounts with assetsand liabilities which are segregated fromthe assets and liabilities attributable toevery other account and also from thecompany’s general assets and liabilities.

• A segregated account is not a legalperson distinct from the SAC.• A SAC must inform any person withwhom it deals that it is a SAC• A SAC must identify the segregatedaccount which is connected to aparticular transaction.• All assets linked by a SAC to asegregated account shall be held bythe company as a separate fundwhich will not be part of the generalaccount of the company but heldexclusively for the benefit of theaccount owners of the particularsegregated account. Those assets willbe available to meet the rights of theaccount holders and satisfy theliabilities connected to the particularsegregated account.• The SAC will record what assets arein its general account and such assetsshall be the only assets of a SACavailable to meet the generalliabilities of the SAC. Assets in thegeneral account will not be availableto satisfy liability which is linked to asegregated account.• The rights and obligations of accountowners in a segregated account arecontained in a governing instrument.The governing instrument mayprovide for conditions which mustbe complied with in order for aperson to become a segregatedaccount holder. The governinginstrument may also provide formanagement of the segregatedaccount, appointments of one ormore managers, and the orderly

winding up of the affairs andtermination of the segregated account.• The governing instrument must begoverned by the laws of TheBahamas and the parties to it mustsubmit to the jurisdiction of thecourts of The Bahamas.• The rights and obligations ofcounterparties dealing with the SAC are evidenced in the form of contracts.

StructuresA company registered as SAC must begoverned by the Companies Act or theInternational Business Companies Actand that companyi. must be engaged in the business of a. investment fundsb. issuing securities orc. insurance, or

ii. is a subsidiary of a Bank or TrustCompany (and not licensed by theCentral Bank), oriii. is engaged in a business where theMinister responsible for companieshas prescribed a primary regulator. No company licensed under the

Banks and Trust Companies RegulationAct may register as a SAC.

Registration A SAC must file a request with theRegistrar to be registered as a SACcontaining the prescribed informationand accompanied by the consent of theprimary regulator of the relevantbusiness. Where the company hasconducted business prior to theapplication for registration, a statutorydeclaration containing prescribedinformation must also be filed with theprimary regulator along with evidenceof the consent of 75% of the intendedaccount holders and 75% of the wouldbe creditors of the SAC. The Registrarwill issue a certificate of registration oncompletion of registration.

Requirement• A SAC representative who monitorsand reports on the activity of theSAC may be required where theprimary regulator is especiallyprescribed by the Ministerresponsible for companies.• A SAC must maintain a privateregister of account owners.• A SAC must file an annualdeclaration stating that the companyis in compliance with the SegregatedAccounts Companies Act.• A SAC must maintain records inaccordance with generally acceptedaccounting principles. Records mustbe made available at least once ayear to each account owner, unlesswaived by the account owner.• A SAC must pay prescribed feesbased on the number of accounts.

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The trust is a unique relationshipthat allows an individual or a legal entity(the settlor) to transfer assets–which maybe of almost any type–to a third party (thetrustee) to be administered for the benefitof those chosen by the settlor (thebeneficiaries) in accordance with theprovisions of a document (the TrustDeed). The concept is based on theseparation of legal ownership of the trustassets (which rests with the trustees) fromthe beneficial ownership (which rests withthe beneficiaries).

The Bahamas advantageBahamian law recognizes trusts, and theSupreme Court has a long history ofupholding the principles of equity.Many of the world’s largest and most

prestigious financial institutions havebranches or subsidiary operations in TheBahamas, taking advantage of the country’sstable political and economic system.In establishing a Bahamian trust,

planners do not need to take local taxes into consideration, as there are noincome, capital or estate taxes in the jurisdiction.Developments in trust legislation have

strengthened The Bahamas’ position as aninternational financial centre. Thesedevelopments include:

The Trustee Act, 1998(amended 2011)This modern and standard-setting statuteplaces The Bahamas in the forefront ofinternational jurisdictions in terms ofpremier trust legislation. Today, it remainsas one of the foremost internationalfinancial centres and trust jurisdictions inthe world. Key aspects of the Act include:Discretionary powers. The Act enablesa settlor to retain certain discretionarypowers without compromising the validityof the trust. The most important includesthe power to revoke the trust or trustinstrument, or any powers granted by thetrust or trust instrument; to withdrawproperty from the trust; to add or remove

trustees, protectors or beneficiaries; andto give directions to trustees. As a result,the settlor is able to ensure that the trustis properly administered.Investment of trust assets. Trusteeshave been vested with wide discretionarypowers of investment and of dealing withthe trust property. In this regard, trusteeshave the full powers of investment and ofchanging investments as those possessedby individual beneficial owners absolutely.Trustees may appoint agents such asinvestment advisors, who, on their behalfand in accordance with the trustinstrument, may properly invest the trustfunds and give investment advice. SinceDec 30, 2011, trustees are affordedgreater protection where the trustinstrument stipulates that the power ofinvestment shall only be exercised upon adirection by the power holder. In suchcases, when acting pursuant to a direction,the trustee is not liable for any loss arisingas a result of following the direction, actingonly pursuant to the direction or failing toact in the absence of a direction.Managing trustee/protector. The trustmay provide for a managing trustee, and aprotector may be appointed with widediscretionary powers, ensuring the wishesand intention of the settlor are carried outin accordance with the trust instrument.The Act formally recognizes the role ofthe protector.Court advice. The Act allows a processwhereby a trustee may seek advice anddirections from a judge in chambers of thecourt without the necessity of filing anaction. This could facilitate quickresolution of questions relating to themanagement or administration of a trustproperty, involving only such interestedpersons as the judge may find expedient,and saving costs.Maintenance and advancement. Thepowers of maintenance and advancementcan be applied in respect to any minorwho has an interest in the income of atrust property.Access. The Act creates certainty as to

who may be able to have access to thetrust documents.Income accumulation. Income may beaccumulated within the period allowed bythe rule against perpetuity. In TheBahamas, the perpetuity period ruleadopts a “wait and see” approach to“lives in being,” or it may be a fixedperiod of 150 years.Risk. The Act provides for appropriateflight clauses so that if there is anypolitical upheaval, or any serious activitythat would place the trust at risk, thetrust and its administration would betransferred immediately and automaticallyto another country.Registration. Trust instruments andsubsequent documents do not have to beregistered (except for conveyances ofBahamian real property or personalproperty) under the Registration ofRecords Act.Trust legislation also provides for

protection of assets against potentialcreditors, avoidance of forced heirshiplaws and indemnities for trustees, ashighlighted below.

The Trusts (Choice of Governing Law) Act, 1989This law provides that assets held in aBahamian trust may be protected fromforced heirship claims or theenforcement of other foreign law rules,which are adverse to the free dispositionof property.

The Perpetuities (Amendment) Act, 2004 The Amendment Act of 2004 extendedthe perpetuity period from 80 to 150years, enabling families to plan for fivegenerations.

The Perpetuities (Abolition) Amendment Act, 2011 This Act abolishes the rule againstperpetuities for all trusts made aftercommencement of the Act, ie after Dec30, 2011. For existing trusts, trustees may


Bahamian trusts

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apply to the court to disapply the ruleagainst perpetuities.

Fraudulent Dispositions Act, 1991This provides creditor protection totrust settlors. Trust assets are generallyprotected from all litigation in respect ofexisting claims started more than two years after assets are placed into the trust. Trust assets are immediately protectedfrom any claims arising after such assetsare placed in the trust.In crafting this legislation, parliament

was careful to ensure that the Act existsfor the benefit of “solvent” settlorsseeking to safeguard their property frompossible future claims. The Act does notprovide assistance to proposed settlorswilfully seeking to defeat an existing orcontingent obligation owed to a creditor,of which they had notice.Settlors seeking to use the provisions of

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

Purpose trustsWhile a focus on any of the various typesof trusts would be worthwhile, one of themost recent additions to The Bahamastool kit of products within the trustsector, the Purpose Trust Act 2004,(amended 2011) is worth highlighting.Traditionally, private trusts have named

beneficiaries 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 beconsidered charitable if they are for therelief of poverty, the advancement ofreligion, the advancement of education orsome other purpose beneficial to thecommunity. Like many other internationaljurisdictions, The Bahamas has recentlyintroduced legislation that recognizestrusts for non-charitable purposes.

The Purpose Trust Act, 2004(amended 2011). The law dealing withpurpose trusts in The Bahamas iscontained in the Purpose Trust Act, 2004(amended 2011). Authorized purposetrusts must satisfy the followingrequirements:• The purpose must be possible andsufficiently certain to allow the trust tobe carried out;• The purpose must not be contrary topublic policy or unlawful.

Authorized applicants. The Actprovides for authorized applicants–persons appointed as such under thetrust instrument or the settlor of thetrust or court-appointed person. These authorized applicants have rightsto make certain applications to the courtincluding administrative proceedings,proceedings for breach of trust and alsorights to information (unless excludedby the settlor).An authorized purpose trust may

create trusts for one or moreauthorized purposes and one or more

individuals, corporations or charitablepurposes. While individuals may benefitindirectly from the authorized purposetrust, they do not necessarily have thestatus of an authorized applicant.

Rule against perpetuities. This doesnot apply to authorized purpose trusts.

Uses of a purpose trustThe most interesting feature of purposetrusts is the fact that beneficial ownershipis not vested in the trustee as the trust isnot for his/her benefit and there is no oneelse in whom beneficial entitlement in thetrust property is vested. Accordingly, anauthorized purpose trust has many estateplanning and commercial uses, including:• 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 companyand assume some responsibility for themanagement of the trust. This is usefulwhen assets are of an unusual nature.• A trust that has both philanthropic andcharitable purposes. • Asset purchase or financingtransactions to provide security for anentity that finances the purchase or tokeep the asset and correspondingliability from appearing on a purchaser’sbalance sheet.• Separate voting from economic control.

Regulatory frameworkThe supervisory and regulatory regimefor banks and trust companies asadministered by The Central Bank of TheBahamas includes corporate governance,guidance on internal controls andaccounting standards, capital adequacy,risk management standards, controls onlarge financial exposures and self-dealing, safeguards against abuses ofconflicts of interest and know-your-customer (KYC) requirements.The Central Bank Act and the Banks

and Trust Companies Regulations Actcollectively address these issues, as wellas cross-border supervision andcooperation by the Central Bank withits international counterparts.


Uses and advantages of trusts in The BahamasTrusts are extremely versatile, and this accounts for their long-standing use in wealthmanagement. Examples of trusts include asset protection, purpose trusts, pensions trusts,voting trusts and charitable trusts. They provide the following 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 of animpartial person to administer assets; and• Protection of property and assets from legal and political actions that may be takenagainst the settlor and beneficiaries by transferring legal ownership to the trustee.

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Foundations

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SummaryA foundation is a distinct legal entityregistered under the Foundations Act2004. Once registered, a foundation isdeemed to be resident and domiciled inThe Bahamas. Foundations may beestablished for private, commercial orcharitable purposes provided same arelawful and include the management of its assets. Foundations are created bythe will of the founder or by thefounder executing a charter which may, but need not, be filed in theregistry of foundations.Foundations may be used for most

purposes for which trusts andcompanies are presently used: estateplanning, tax planning, preserving familywealth, segregating assets, perpetuatingcorporate governance philosophy,subordinating debts, separating votingand economic benefits, investing inprivate companies with a pooreconomic performance, owning privatetrust companies and establishingcharities. Foundations may also be usedwhere anti-forced heirship and creditorprotection are important.

Features• The founder of the foundation maybe a natural or legal person and anominee founder may be used.• A foundation must appoint either orboth a secretary or foundation agentto conduct the necessary duediligence, provide the registeredoffice, undertake duties relating toanti-money laundering and counter-terrorism regulations and ensure thatthe foundation complies withstatutory requirements. Thesecretary or foundation agent musteither be a licensed trust companyunder the Banks and TrustCompanies Regulation Act or a dulylicensed financial and corporateservice provider under the Financialand Corporate Services ProvidersAct. If a foundation has a foundation

agent and a secretary, but the latterdoes not perform any of thestatutory duties, such a secretaryneed not be a licensed financial and corporate service provider ortrust company.• Where there are no officersappointed, the foundation chartershall provide for the appointment of a foundation council, which mayconsist of:i. two more natural personsii. a legal person and one or more natural persons, oriii. a legal person by itself.

• The foundation council’s membersneed not be located in The Bahamasand its functions include:i. ensuring that the foundation and the officers comply with the charter and articles and ii. supervising the officers and their management of the foundation.

• The Council is entitled to:i. access to the books and records of the foundationii. be informed of all meetings of the officersiii. attend and be heard but not vote at such meetingsiv. be included in the circulation of foundation documents andv. be informed of any delegation of powers to an officer.

• Fiduciary and other responsibilities areusually vested in a foundation council orsimilar governing body and thefoundation may also have a protectoror committee of protectors.• Charter may reserve powers to thefounder, including the power to amendor revoke same.• Charter may appoint other officers inaddition to the secretary, whose dutieswill be mainly administrative.• Charter may include terroremprovisions.• The procedures for appointingbeneficiaries may be included in the

charter rather than the names of the beneficiaries.• A beneficiary with a vested interestin the assets of the foundation hasthe right to be notified of interests,request the charter, articles, anyaudit report, and any minutes of anymeeting of the officers of the councilor other supervisory body. • A beneficiary has the right toconfidentiality and the officers of the foundation council shall take all reasonable steps to secure such confidentiality.• Due diligence in respect of founderand beneficiaries required, butconfidentiality with regard tofoundation information must be maintained.• Foundations are exempt fromBahamian taxes and business licensefees, stamp duties (exceptingBahamian real estate taxes) andexchange controls.• Foundations may redomicile to orfrom The Bahamas.• Articles are optional. If no articles,the Act applies.• A foundation need only keep suchfinancial statement accounts andrecords as the officers considernecessary or desirable to reflect thefinancial position of the foundation.• Foundations may be established for a fixed or indefinite period.Foundations may be formallyliquidated or revoked.• Instruments of disposition mayinclude restrictions against alienation.

Registration formalities• Registration statement contains nameof foundation, date of charter,purposes and objects, date of articles(if any), details of founder (could benominee), secretary and foundationcouncil or other governing body orsupervisory person, address ofregistered office, period for whichestablished and value of initial assets.


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• Only additional filing required isstatement containing particulars of any amendments to initialregistration statement.• Foundations must have initial assets of$10,000 which must be maintained.(Assets of a foundation need not be

transferred until after registrationalthough there will be a commitmentin the charter by the founder totransfer the assets).• Foundations must have registeredoffice and secretary or foundationagent 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

IntroductionThe Executive Entity (EE) is a legal entityregistered under the Executive EntitiesAct, 2011 to perform executivefunctions–these are powers and duties ofan executive administrative, supervisory,fiduciary and office holding nature. The EEinstitutionalizes the governance of wealthstructures and other entities in an entitywith limited liability that is specificallydesigned for this purpose. The EEtherefore is an ideal solution in the matterof identifying a protector or enforcer of atrust or a director or shareholder of aprivate trust company.

Highlights and requirementsCharter• There is no requirement that thecharter be filed or registered in apublic 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 founderand may specify higher or lower levelsof exonerations and indemnificationsthan contained in the Act.

Agent, officers & council membersAn Executive Entity agent must beappointed which is either licensed underthe Financial and Corporate ServiceProviders Act, or a trust company under the Banks and Trust CompaniesRegulation Act.

The charter must provide for theappointment of an officer or a council. Itmay provide for the appointment of bothofficers and a council. The officers arecharged with administering the EE infurtherance of its purpose and inaccordance with the charter, articles and Act.The council, if appointed, is charged

with generally supervising theadministration of the EE and ensuringcompliance by the EE and the officers withthe provisions of the Act.

Registration• An EE is established by a charterwhich is signed by the founder of the EE.• The EE attains the status of a legalentity upon registration.• To register an EE, submit therequired fee along with a statutorydeclaration of compliance andstatement signed by the EE agent oran attorney engaged in the formationof the EE containing the following: i. the date of the charter and thedate of any amendments made tothe charterii. the purpose of the EEiii. a statement that the EE is an Executive Entityiv. the date of the articles (if any) and the date of any amendments made to the articles (if any)v. the name and address of the EE agentvi. the period for which the EE is established–definite or indefinite

vii. other particulars the agent or attorney may wish to includeviii. 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 necessaryto carry out its executive functions.• An EE may hold shares, securities orother ownership interests in a legalperson whose business is to carryout executive functions.• The executive functions of an EE maybe performed only in relation toentities, trusts or otherarrangements that are domiciled inor regulated by the laws of TheBahamas or a jurisdiction specified inthe first schedule to the FinancialTransactions Reporting Act.• The Act contains similar anti-forcedheirship provisions as are contained inthe Trustee Act and Foundations Act.

Fees• Registration fee $550 (prorated)• Annual fee $500 (late fees apply)See EE regulations for a complete listingof fees.

Executive Entity



Private trust companies and family officeSnapshot: The Private Trust Company(PTC) is a company incorporated underthe Laws of The Bahamas to providetrusteeship to a defined class of trusts. The Central Bank acts as a regulator ofthe PTC. Legislative changes haveexempted the PTC from certainlicensing requirements. PTCs aregoverned by the Banks and TrustCompanies Regulation (Amendment)Act, 2010 and Banks and TrustCompanies (Private Trust Companies)Regulations, 2007.

Highlights and requirements of PTCIncorporation:• A PTC can be incorporated undereither the Companies Act, 1992 or the International Business CompaniesAct, 2000.• The Memorandum and Articles ofAssociation must provide for thePTC to act as trustee only for a trustor trusts created by a designatedperson names in the prescribeddesignating instrument pursuant tothe regulations.

Designated person:• Is an individual named in the designating instrument.• If more that one designated person isnamed, then each designated personmust be a blood relative of or relatedby some other family relationship to theother designated person(s). Can bedeceased and his trust established bytestamentary disposition.

Designating instrument:• Names the designated person(s) and iskept at the office of the registeredrepresentative.

Form of acknowledgement isrequired whereby the prescribedsettlor acknowledges awareness thatPTCs 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 CentralBank of The Bahamas or a financialand corporate service providerapproved by the Central Bank• be resident in The Bahamas• provide the services of a secretary,director, or Bahamas agent• ensure that the PTC is establishedfor lawful purpose and that itoperates as a PTC• have minimum share capital of$50,000• retain copies of certain documents inrelation to the PTC• require verification and maintenancein The Bahamas of records relating tothe identities 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 theFinancial Intelligence Unit

Special director is:• a person (who need not necessarilybe resident in The Bahamas) of goodreputation who must possess at leastfive years of experience in a disciplinerelevant to trust administration (law,finance, commerce, investmentmanagement, or accountancy)

Distinguishing features of PTC:• PTCs are distinguished from public,restricted and nominee trustcompanies as they are unique

vehicles operating under theregulatory regime prescribed in the2007 Banks and Trust Companies(Private Trust Companies)Regulations.

• They are restricted from carrying outany other business other than that ofa trusteeship to a trust or group oftrusts created by the designatedperson(s).• The PTC must not amend itsMemorandum and Articles ofAssociation of the company, is notallowed to solicit trust business andmust comply with yearly complianceregulations and fees.• If the PTC fails to comply withdirections from the Central Bank orengages in illegal conduct, the PTC orits registered representative will beliable to a fine up to $5,000 and canface an order form the Supreme Court compelling compliance orfurther sanctions. PTCs can transfer or dispose of their shares provided that the registered representativemaintains a current share register ofall its shareholders.

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Family office The family office helps familiesachieve their goals while dealingwith regulations and complex issuesof taxation, distribution planning andcharitable giving. The trust is a toolused by the family office to facilitatethe smooth transition from onegeneration to the next. Otheressential services include: evaluatinglife insurance needs; activecoordination of legal/tax/accountingmatters of business interests;financial reporting and auditscoordinating the purchase of non-financial assets; and corporategovernance reporting.

Visit us online

Responsibility for the regulationof insurance activity in or through TheBahamas rests with the InsuranceCommission of The Bahamas (ICB). It isresponsible for the ongoing supervisionand regulation of insurers, agents,brokers, salespersons and externalinsurers and intermediaries.All local insurance operations (as

distinct from offshore, or captive,insurance) are covered by the InsuranceAct, Chapter 347, which was amendedin 2009. Registered insurers writinglocal business pay a premium tax of 3% of gross premiums collected each quarter.As of Dec 2012, there were 24

active domestic insurers and oneassociation of underwriters licensed towrite local business. In support of thisactivity, there were 49 agents andbrokers, 37 sub-agents and six brokers.Domestic insurance companies,

agents and brokers are members of theBahamas Insurance Brokers Association.The ICB is a member of the

International Association of InsuranceSupervisors (IAIS) and endorsessupervisory and regulatoryrequirements of the IAIS InsuranceCore Principles. The ICB also maintainsmembership of other regional andinternational bodies including theCaribbean Assoc of InsuranceRegulators (CAIR) and Offshore Groupof Insurance Supervisors (OGIS).

Offshore insurance and captivesAn offshore insurer is an insurancecompany licensed and regulated underthe External Insurance Act, Chapter 348. It is incorporated in The Bahamasand manages its business from withinThe Bahamas but only insures riskslocated outside The Bahamas. As ofDec 2012, there were 15 insurancecompanies, five insurance managers andthree brokers registered under this Act.

Under the Act, captive insurancecompanies are classified as “restrictedexternal insurers” and mainlyunderwrite the risks of related entities.The Bahamas offers a convenient and

professionally administered location forcaptive insurance companies. There is awell-equipped and capable regulator inthe ICB and a professional infrastructureto support such business.All offshore insurers licensed in The

Bahamas are required to appoint aresident representative, who is oftenone of the licensed insurance managersand maintain books and records in TheBahamas. Before an offshore companymay be licensed, the ICB must besatisfied:1. the company is managed, ownedand controlled by persons who arefit and proper;

2. its business plan is acceptable tothe ICB;

3. adequate books and records willbe maintained in The Bahamas;

4. there will be adequatemanagement and control ofoperations; and

5. there will be adequate capital tosupport the business.

Once licensed, the insurer is requiredto meet annual reporting and auditrequirements.The minimum capital requirement for

a licence is $100,000 for generalbusiness and $200,000 for long-termbusiness. However, the ICB will requirecompanies to maintain a level of capitalcommensurate with the size and risks ofthe operations. Other provisions of theAct include a confidentiality clause toprotect the policy holder and taxexemptions for a period of 15 yearsfrom the date of first registration.Interested parties are encouraged to

arrange a meeting with the ICB prior toapplying. Insurance managers canprovide assistance with the licensingapplications, ongoing management

services and regulatory requirements.There are currently five licensedinsurance managers.Captive insurance companies are

alternative providers of protectionagainst the risk of damage or loss andthird-party liabilities. They differ fromtraditional firms in the nature of risksthey underwrite or reinsure. Theyminimize the cost of risk managementand may substantially reduce, or evenavoid, other expenses such asadministration and settlement of claims,loss control expenses, brokeragecommissions and other acquisition costsand consulting fees.Captives also allow self-insurance of a

company with a better loss history thanits industry average, plus centralizationand tailoring of a company’s riskmanagement programmes to improveloss control efficiency. Captives alsooffer cash flow benefits; access to thereinsurance market; wider coveragethan the conventional market–such asproviding coverage for a new orpotentially hazardous product–and thechance to diversify into open-marketinsurance services and generate profitsfrom outside or unrelated business.Annual fees payable under the

External Insurance Act Chapter 348:Unrestricted external insurer ......$3,500 Restricted external insurer ..........$2,500External insurance broker ............$1,000Underwriting manager....................$1,000For more information, contact the

Insurance Commission of The Bahamas,Charlotte House, Charlotte and ShirleySts, PO Box N-4844, Nassau, tel (242) 397-4183, fax (242) 397-1070,e-mail [email protected] or visitwww.icb.gov.bs.


Insurance productsAdapted from the 2014 edition of the Bahamas Handbook

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Despite restrictions imposed byCanadian income tax law on the use of tax havens, there are manycircumstances in which The Bahamasretains its attractiveness for Canadians.The islands continue to prove a soundand durable base from which to investin Canada or the outside world or fromwhich to conduct offshore operationsfor the benefit of Canadians.In fact, increased investment outside

Canada, exports by Canadian firms andthe growing number of multinationalfamilies have increased the scope forThe Bahamas as a centre forinternational activity.

ResidenceIn Canada, residence remains thefoundation of direct taxation forindividuals. This benefits Canadianswishing to take advantage of TheBahamas, especially as compared to theUS, which taxes on a citizenship basis.Under the Canadian federal income

tax system, individuals resident inCanada are taxed on their worldwideincome whereas non-residentindividuals are taxed only through thewithholding tax regime on certaininvestment income (discussed later),with respect to income fromemployment in Canada, a businesscarried on in Canada and from gainsrealized on the disposition of taxableCanadian property (also discussedlater). They are not taxed with anyreference to the fact that they are orare not Canadian citizens. Acorporation not resident in Canada issubject to Canadian federal orprovincial tax only through thewithholding tax regime on certaininvestment income, on income from itsbusiness carried on in Canada and fromgains realized on the disposition oftaxable Canadian property. Likeindividuals, resident corporations aretaxed on their worldwide income.

Canadian companies incorporatedafter April 26, 1965, are automaticallydeemed residents of Canada unless theyare continued under the laws of anotherjurisdiction. Corporate continuance istreated as re-incorporation for taxpurposes. Consequently, a company’sresidence for Canadian income taxpurposes may be affected by a change inits corporate status.The Canadian government has

enacted an incentive to lureinternational shipping companies toCanada. If a company deriving all orsubstantially all (ie 90%) of its revenuefrom an international shipping businessis incorporated outside of Canada, (egin The Bahamas) it can establish itsplace of central management andcontrol in Canada and yet be deemed anon-resident of Canada. In this way, itavoids Canadian tax on its income.

Canadian withholding taxThe basic Canadian withholding tax is25%. This applies to investment income,certain pensions, dividends, non-arm’s-length interest, rent, certain types ofroyalties, income from a trust andcertain other forms of revenue paid byCanadian residents to persons abroad.This tax must be withheld from thegross payment by the payer unless therecipient of the income resides in acountry with which Canada has a taxtreaty. In that event, the withholding taxmay be reduced to 15% or less,depending on the terms of the treaty.The Bahamas and Canada do not have atax treaty.Old-age security payments under the

Canada or Quebec Pension Plans aresubject to withholding tax.

Special exemption from withholding taxInterest paid by a Canadian residentcorporation to arm’s-length non-resident creditors is exempt from

Canadian withholding tax. Theexemption is granted regardless of thecurrency of the loan or interest. Theinterest must not be contingent uponthe use of, or production from,property in Canada.Also, interest which depends in

whole or in part on revenue, profit,cash flow or other similar criteria, or ondividends paid or payable on shares of acorporation, does not qualify for theexemption. Interestingly, there is norestriction preventing the guarantee ofthe debt by a non-resident person whois not at arm’s length with theborrower. Thus, Bahamians may lend toCanadians against the security of aguarantee by someone outside ofCanada not at arm’s length with theborrower, upon terms which mayexempt the interest paid from Canadianwithholding tax (the arrangement must,however, remain in law a guarantee andavoid being characterized as an agencybetween the guarantor and the lender).

Thin capitalization provisionsThe “thin capitalization” provisionscontained in subsections 18(4), andfollowing, of the Income Tax Act relate to the deductibility of interestpaid on money borrowed from abroad by Canadian residentcorporations and trusts.Interest payments made to non-

residents who hold a substantial interest(ie 25% of the voting or equity shares)in a Canadian company or which do notdeal at arm’s length with such ashareholder, are not always entirelydeductible in computing income inCanada. They will be disallowed if theratio of the company’s equity capital tothe debt due to such non-residentshareholders or non-arm’s-lengthpersons is less than 1.5:1.

Bahamas benefitsDespite the restrictive and wide-ranging

INTERNATIONAL TAX PLANNING

Tax planning for CanadiansBy Charles C Gagnon Reprinted from the 2014 edition of the Bahamas Handbook

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nature of the Canadian fiscal law, TheBahamas continues to play an importantpart in Canadian tax planning. Inparticular, the use of testamentarytrusts and certain inter vivos trusts canyield rewards. There are not many tax havens that

offer benefits comparable to TheBahamas in terms of flexibility of corporatestructure, top-quality accounting and legalservices, readily available first-class financialand banking services, proximity tomajor world markets and good dockingand harbour facilities.The modernization and liberalization of

the Bahamian company and trust law andthe introduction of foundation law nowprovide a flexibility previously unavailablein The Bahamas. The Bahamas can offer a variety of

corporate and settlement structures andprocedures that are equal to those in anyother jurisdiction. A number ofCanadians look to The Bahamas toconduct some of their business. Someachieve this by becoming non-residents ofCanada and setting up their homes in TheBahamas. Once they do this, they sufferno income tax in Canada, except onincome from employment in Canada, theprofits from business done there, gainsfrom taxable Canadian property or the25% withholding tax on certain kinds ofinvestment income derived from Canada.

Capital gains tax on non-residentsNon-resident individuals pay income taxto Canada at applicable personal rateson 50% of the capital gains realized bythem on the disposition of “taxableCanadian property.” Taxable Canadian property is defined

in subsection 248(1) of the Income TaxAct and includes Canadian real estateand resource properties. Certain othertypes of property are also consideredtaxable Canadian property. In particular,the definition of taxable Canadianproperty includes shares of corporationsand interests in trusts which derive theirvalue principally from Canadian realestate and resource properties.Liability to Canadian tax could be

triggered by the death of an individual who

happens to own shares of a non-residentcorporation with Canadian assets. All non-residents must report

dispositions of taxable Canadianproperty to the Canadian fisc, indicatethe name of the person to whom theproperty is sold and pay an amount onaccount of Canadian tax or furnishacceptable security (this specialrequirement is not applicable to thedisposition of listed shares in aCanadian public corporation).Upon payment of a tax instalment, a

“certificate” is issued to the non-resident which protects a purchaser ofthe asset from having to pay some ofthe tax that might not have been paid bythe non-resident.

Becoming a non-resident of CanadaIn order to become a non-resident ofCanada, an individual must generallygive up his home and most attachmentswithin Canada such as employment,provincial medicare coverage, clubs,bank accounts, credit cards and the likeand acquire a residence in anotherjurisdiction by purchasing a home orrenting an apartment in which he livesas his central family headquarters.Nevertheless, once a former Canadian

resident has become a non-resident, hemay return to Canada each year fortemporary visits without being taxed.Thus, because The Bahamas imposes

no income tax of any kind, a non-resident Canadian citizen may residethere with the advantage of paying toCanada only 25% on certain kinds ofinvestment income derived fromCanadian sources and no withholdingtax on certain kinds of interest.Royalties and similar payments on or inrespect of a copyright related to theproduction or reproduction of anyliterary, dramatic, musical or artisticwork are exempt from Canadianwithholding tax. The Bahamas is,therefore, appealing to Canadianwriters, musicians, singers and artists asa place of residence. The sameindividual, if he wishes to continue hisbusiness activities in Canada, may do soas a non-resident and pay tax at the

personal graduated rates in Canada onthe profit from the business there.

The exit taxA problem that faces Canadians whoconsider taking up residence in TheBahamas is the exit tax imposed byCanada upon capital gains deemed toarise from the notional realization ofcertain capital property at the time theygive up Canadian residence.Corporations leaving Canada are also

subject to exit rules. In particular, acorporation is treated as havingdisposed of all of its property at fairmarket value and to have notionallydistributed its net equity. This fictitiousdistribution is assimilated to a liquidatingdividend and subjected to a special taxin lieu of withholding tax.

Succession duty and estate tax advantagesThere are no estate and gift taxes inCanada. However, individuals aredeemed to dispose of their property atfair market value at the time of theirdeath. Thus, a non-resident individualmay be liable to tax on capital gains atthe time of his death if he holds taxableCanadian property directly.If he resides in The Bahamas and

holds no such property, then he wouldnot suffer any Canadian tax at the timeof his death.

Corporate uses of The Bahamas by CanadiansUnder Canadian tax law, a foreigncompany is resident where its seat ofmanagement and control is found(subject to restrictions on companiesincorporated or continued into Canadaset out previously). This is usually heldto be the place where the directorsmeet or from which the day-to-daymanagement instructions emanate orare carried out.In order to prevent a company from

being legally resident in Canada andthereby paying tax, management andcontrol must be exercised, bona fideand in fact, outside Canada.A non-resident company may perform

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useful functions of an extraterritorialnature such as world advertising,worldwide selling, the financing andorganizing of sales abroad, themanagement and servicing of the facilitiesneeded to maintain the products soldabroad and the operation of ships orcertain group insurance activities. Ineach case, it is important to determinewhether the income of the Bahamiansubsidiary is foreign accrual propertyincome (commonly referred to asFAPI). The FAPI of a “controlled foreignaffiliate” of a Canadian resident isattributed to and taxed in the hands ofits Canadian resident shareholders on anannual basis.There have also been cases before the

Canadian courts in which attacks madeby the Canada Revenue Agency (CRA)on offshore subsidiaries of Canadiancorporations have been tested. Theincome of the subsidiaries has beenadded, sometimes, to the income of theCanadian parent on the footing that thesubsidiary was itself a sham or aninstrumentality. Transfer pricing isanother line of attack increasinglyfavoured by CRA. These cases stand ontheir own facts and need not pose athreat to normal activities carried onbona fide in The Bahamas, providedmanagement and control of theBahamian corporation are not in Canada.

Foreign affiliatesThe foreign affiliate rules affect anyforeign corporation in which a Canadianresident has a significant interest. Aforeign affiliate is defined to include anynon-resident corporation in which aCanadian resident holds at least 10% ofthe shares of any class. A non-residentcorporation will also be considered aforeign affiliate of a Canadian residentwho holds 1% of the shares of any classwhere the equity interest of theCanadian resident together with relatedpersons is at least 10%.When a foreign corporation qualifies

as a foreign affiliate, the dividends thatpass upstream to a Canadian corporateshareholder are tax free when paid out of“exempt surplus.” Exempt surplus is

income derived by a company residentand carrying on business in a countrywith which Canada has a tax treaty or taxinformation exchange agreement (TIEA).The Bahamas has a TIEA with Canada

and as a result active business incomeearned by the Bahamian affiliates ofCanadian companies benefit fromexempt surplus treatment.Passive income is treated quite

differently from active business income.The concept of FAPI is meant to tax thepassive earnings of foreign affiliatescontrolled by Canadian taxpayers. Inmany ways it is not unlike its Americancounterpart, “Subpart F” of the InternalRevenue Code. FAPI is essentiallyincome from property or from abusiness other than an active business.Each year an appropriate share of theFAPI of a controlled foreign affiliate (andcertain trusts), if it exceeds $5,000, isincluded in the income of Canadiantaxpayers controlling the foreign affiliatein the taxation year in which the foreignaffiliate’s taxation year has terminated.FAPI does not include interaffiliate

dividends, active business income, andcertain amounts received from otheraffiliates. It similarly does not includecapital gains from the disposition of“excluded property” (property usedprincipally in an active business andshares of foreign affiliates, most of whoseproperty 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 taxationyear can establish, by will or gift, aBahamian resident discretionary trust(NRT) for the benefit of Canadianresident family members, which willescape the application of the incomeattribution rules governing offshorediscretionary trusts. Distributions ofcapital (which can include accumulatedincome) received by Canadian residentbeneficiaries from an NRT funded solelyby a non-resident should not be taxable.Before, a Canadian resident could

also establish an NRT for beneficiarieswho did not reside in Canada. Income

of such a trust was not subject toCanadian tax provided a personresident in Canada who is related to thesettlor was not “beneficially interested”in the trust. Recent legislative attemptswere made to extend the reach of theCanadian fisc in this area by taxing theundistributed income of an NRT towhich a Canadian resident has loanedor transferred property irrespective ofwhether a person related to the settloris beneficially interested in the trust. It is still possible for an NRT

established by an immigrant ortemporary resident to avoid tax for thefirst five years of residency in Canada.Bahamian trusts are particularly well-suited for this purpose.Of course it is important that a trust

established outside of Canada not beconsidered resident in Canada underthe normal rules regarding theresidency of trusts. This requires thatcentral management and control of thetrust be located outside Canada. Expertprofessional advice in this area isessential, but use of Bahamian trusts canpay substantial dividends.

Current attitudes towards tax planningThe Canadian law contains a number oftechnical provisions that narrow the fieldof manoeuvre for the taxpayer. Moreover,Section 245 of the Income Tax Actcontains a general anti-avoidance rule(GAAR). The GAAR comes into playwhenever a taxpayer engages in atransaction or series of transactions thatresults directly or indirectly in a “taxbenefit” (as broadly defined in thatprovision) unless the transaction does notresult in an abuse or misuse of theprovisions of the Income Tax Act. Thus,the uses made by Canadians of Bahamiancorporations must be limited tocommercially defensible activities andshould not be employed merely to hide orartificially minimize truly Canadian income.In this whole field, the area of manoeuvreis narrowing, so a conservative andrealistic approach should be taken.


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Charles CGagnon is a taxlawyer at BCFLLP in Montrealand BCF(Barbados) Ltd.His main areas ofexpertise include:tax planning forprivatebusinesses,

structuring of inbound and outboundinvestments, tax issues relating toimmigration and emigration, internationaltax planning, and wills and trusts. Inaddition to being a guest speaker at taxconferences and author of severalreports and publications, Gagnon is amember of the Canadian TaxFoundation, the International FiscalAssociation and the Society of Trust and Estate Practitioners (STEP). He waseducated at McGill University (BCL, LLB, 1993), Canadian Securities Institute(CIFC, 1991), College Jean-de-Brebeuf(IB, 1989) and Canadian SecuritiesInstitute (CSC, 1988). He was admittedto the Barreau du Quebec in 1995 and the Law Society of British Columbiain 1994.

Companies formed in the UnitedStates and individuals who are eithercitizens or residents of the US for USfederal income tax purposes are subject toUS federal income tax on their worldwideincome. US taxpayers and domesticcompanies can, in some instances, startinternational operations with relativelysmall amounts of capital and then expandwith tax-free or low-taxed accumulationsof earnings instead of net-tax dollarsearned in the US. Expansion abroad can bemore rapidly accomplished with 100-centtax-free dollars, instead of 65-cent dollars(which is net after the 35% US federalcorporate tax. For individuals, the topmarginal rate of US federal income taxrate is currently 39.6% and 20% for long-term capital gains and qualified dividends(plus an additional 3.8% surtax on certaintypes of “net investment income.”) Withcareful tax planning, US investors canachieve the tax advantages of income taxdeferral in The Bahamas. The US federal income tax

advantages are available by reason ofcertain exceptions to the anti-deferralprovisions of the Internal RevenueCode (IRC), which set forth conditionsunder which the US will not tax certainitems of foreign-source income on acurrent basis so that US federal income tax on such foreign-sourceincome is deferred until distributions are made. To be eligible for the US income tax

advantages, Bahamian business venturesmust be operated by a Bahamiancompany. If a Bahamian or otherforeign company (except a passiveforeign investment company or PFIC) isnot engaged in a US “trade or business,”and at least 50% of the voting powerand value is owned by non-US persons(insurance companies are an exception),US shareholders of such company maynot be subject to US federal income taxon such company’s foreign sourceincome on a current basis unless and

until dividends are paid, assets of the company are distributed or shares are sold.If a Bahamian or other foreign

company is more than 50% (by vote orvalue) owned (directly or indirectly) by US shareholders it is known under US tax laws as a “controlled foreigncorporation” (CFC). A US shareholder is aUS person who owns directly or indirectly(or constructively) 10% or more of thetotal combined voting power of a CFC. AUS shareholder is subject to US federalincome tax each year on theirproportionate share of certain kinds ofincome of the CFC regardless of whetherthere is a distribution to such person.The kinds of income currently taxable

are, generally:1. Income from the insurance orreinsurance of risks.

2. Passive income such as dividends,rents, interest, gains from the sale ofproperty which itself producedpassive income, capital gains from thesale of stocks and securities, gains oncommodities and foreign currencytransactions, royalties, etc.

3. Sales income where the goods areeither purchased from, or sold to, arelated person.

4. Income from services if rendered toa related person.

5. Increases in investments in US property.

6. Income attributable to internationalboycotts.

7. Income attributable to the bribery offoreign government officials.

8. Income that is foreign oil or gas-related.

Even so, there are many exceptions andexclusions to the above. In other words,even if the Bahamian company is US-controlled, its US shareholders may not berequired to include foreign-source incomeof the CFC in their annual taxable incomeif an exception applies.

Tax planning for Americans© 2013 Etienne Dupuch Jr Publications Ltd


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Everything you needto know about The

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Seven vehicles for investing in The BahamasThe types of CFCs particularly suitable foroperations in The Bahamas are thosewhich earn income which qualifies fordeferral in the hands of a US shareholderincluding, among others, the following:1. Manufacturing production.Income from the sale of products orgoods manufactured or produced inThe Bahamas generally is not subjectto US taxation even thoughpurchases and sales involve theparent corporation or other related persons.The same applies to rental income

where such products or goods areleased to an unrelated party insteadof sold, provided certain “active-business” tests are met. In addition,rental income from the lease of suchproducts or goods to a related partygenerally is not subject to UStaxation provided that the productsor goods are used in The Bahamas.Likewise, income from certainincidental services rendered before asale or in connection with an effortto sell such products or goods is notcurrently taxable.

2. Sales of products and goods.If the parent corporation or otherrelated person is not involved in thepurchase or sale of products orgoods, then income from such salesis not subject to current US taxation,no matter where, or by whom, theproducts or goods weremanufactured, where the sales aremade or where such products orgoods are used or consumed.Even if a related person is

involved, the sales income is free ofcurrent tax if the products or goodsare manufactured, produced, grownor extracted in The Bahamas, or ifthey are for use, consumption ordisposition in The Bahamas.

3. Insurance. A Bahamian insurancecompany is considered a CFC ifmore than 25% of the voting poweror value of its stock is owned by US10% shareholders. Income earned bya Bahamian insurance or reinsurance

company, which is a CFC, is taxableonly to a US 10% shareholder.In addition, unless certain

exceptions are met, if a Bahamianinsurance company is at least 25%US-owned, all US shareholders (evenif such shareholders own less than10%) must include in income theirpro rata share of the company’s“related person insurance income”(premium or investment income oninsurance policies where the personinsured, directly or indirectly, is a USshareholder or related person).Related person insurance incomealso includes income fromreinsurance if the ceding company orits insured is a US shareholder in theBahamian insurer.A Bahamian insurance company

that is a CFC can elect to be treatedas a US corporation for all US taxpurposes. If this election is made, USshareholders will not be taxed on thecompany’s income until distributed asdividends. The charge for electing is0.75% of capital and surplus as of Dec31, 1987, up to a max charge of US $1.5 million.The Bahamas government

provides advantages and incentivesfor insurance companies insuring andreinsuring non-Bahamian risks.

4. Banks and finance companies.Passive income of a Bahamian bankor finance company that is a CFCthat is “predominantly engaged in theactive conduct of a banking, financingor similar business” (as defined in theIRC) and conducts substantial activitywith respect to such business is notsubject to current US taxation.Interest earned by a Bahamian bankthat is a CFC in connection withexport financing for related USpersons, with certain exceptions, isnot subject to US tax.

5. Service companies. This is a broad category and includes anyBahamian corporation renderingservices that are technical,managerial, engineering, architectural,scientific, skilled, industrial,commercial or the like.

Many types of companies in The Bahamas fall into this category. A partial list would includeengineering, sales promotion, salesengineering, merchandising,consulting, etc. With reference tosuch companies, income from suchservices, rendered outside the USand performed for persons who arenot related without substantialassistance of related US persons, isexempt from current US taxation.Income from services rendered

within The Bahamas is also exempteven though such services arerendered for, or on behalf of, a related person. Income fromservices rendered by a foreigncompany in The Bahamas before a sale or in connection with an effortto sell products or goodsmanufactured, produced, grown or extracted by it are also exemptfrom current US tax even thoughsuch income is received from arelated person.

6. Leasing and royalties. Rentsderived in the active conduct of atrade or business in The Bahamasand received from persons notrelated are not subject to currentUS taxation. Rents are also soexempt even when received from a related person if such rents are for use of property located in The Bahamas.Royalties–eg payments in

connection with patents, copyrights,inventions, models, designs, secretformulas or processes–are currentlyexempt from US taxation whenderived in the active conduct of atrade or business in The Bahamasand received from persons who arenot related. Royalties are alsoexempt, even when received from a related person, if suchroyalties are for the use of property or property rights within The Bahamas.

7. Certain investment income.Dividend and interest incomereceived from a related foreigncorporation generally is exempt from


current tax if both payer and payeeare incorporated in The Bahamasand the payer has a substantial partof its assets used in the business inThe Bahamas.

Passive foreign investmentcompany (PFICs)A Bahamian company is a PFIC if 75%or more of its gross income is “passive”income (dividends, interest, etc), or50% or more of its assets are held toproduce passive income. Thus, a mutualfund, and even a manufacturingcompany with significant cash on handor securities, could be a PFIC.US shareholders in a Bahamian PFIC

may be subject to additional taxes (plusinterest) on certain PFIC distributionsor on a disposition of PFIC stock. A USshareholder of a PFIC may avoid thisresult by making one of the followingtwo elections. First, a PFIC shareholdercan elect to be taxed currently on hispro rata share of PFIC ordinary incomeand capital gains, which then can bedistributed tax free. If a USshareholder of a PFIC makes thiselection, he also can elect to defer thecurrent tax but must pay interest onthe deferred taxes. Second, a USshareholder of a PFIC may elect tomark-to-market his stock on an annualbasis if such stock is marketable(regularly traded on a nationalsecurities exchange registered with the SEC). The mark-to-market electionis less favourable because all inclusionsare taxed as ordinary income.Coordination rules also prevent USshareholders of a CFC from beingtaxed twice on the same item ofincome with respect to such CFC stockin cases where the CFC also qualifies asa PFIC.

Employment of US citizens abroadTax benefits are available to US citizensemployed abroad who establish a taxhome in a foreign country (the foreigncountry is the taxpayer’s principal placeof business) and who meet certainother tests prescribed by the IRC(either a physical presence or residency

test with respect to the foreigncountry). Although a US citizengenerally is subject to US income tax onhis worldwide income, a US citizenemployed abroad who satisfies the IRCtests described above may excludefrom gross income for any taxable yearforeign-source earned income (wagesor salary for services performedoutside the US) an amount equal to theproduct of $80,000 and the inflationfactor determined under section 1(f) (3) of the IRC; US$97,600 for the 2013tax year. For any taxable year that a US citizen is employed abroad they may also:1. Exclude from gross income a portionof the housing expenses paid for byhis employer, or

2. In the event such expenses are notpaid for by his employer, deduct suchexpenses (subject to certainlimitations).



Steven L Cantoris the managingpartner ofMiami-based lawfirm Cantor &Webb PA. Hispractice focuseson representinginternationalprivate clientsand high-net-

worth families predominantly from LatinAmerica, the Caribbean and Europe inthe areas of international tax and estateplanning, foreign trusts with assetsand/or beneficiaries in the United States,pre-residency planning and structuring offoreign investment in US real property. He was one of the earliest

professionals from the US asked to jointhe London-based Society of Trust andEstate Practitioners (STEP) in 1994 andfounded and served as chairman of theSTEP Miami branch. He also helpedestablish the STEP Caribbean Conferenceand served on its Steering Committee. In2011, he received the STEP Founder’sAward for Outstanding Achievement.Cantor is a frequent author in diverse

publications and has lecturedinternationally on behalf of the BahamasFinancial Services Board, the CaymanIslands Bankers Association, PanamaBankers Association, the Private ClientForum and over 20 STEP branches inEurope, the Caribbean, Latin Americaand Canada.

He has been recognized as one of theworld’s leading international privateclient attorneys by Chambers Global andChambers USA and as one of the top 50foreign lawyers for Latin America by theLatin Business Chronicle. Cantor is listed inCitywealth magazine’s Leaders List, LegalWeek’s International Trusts & PrivateClient Elite List and has been quoted byThe Wall Street Journal.

Sarah BSindledecker isan associate atMiami-based lawfirm Cantor &Webb PA,specializing in tax and estateplanning for high-net-worthindividuals,

foreign trusts administration, advisinginternational trust companies on USmatters, and cross-border real estatetransactions for international families.She has participated at meetings

of STEP (Miami) and has also taken aleadership role with Geneva GroupInternational (GGI), a network of well-established law firms committedto providing clients with specialistsolutions for their international business requirements.Born and raised in Boca Raton, FL,

Sindledecker was educated at FloridaState University (BS, summa cum laude,2005) and the University of Miami Schoolof Law (JD, 2008; LLM, 2011). She wasadmitted to the Florida Bar in 2008.

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Mechanisms for information sharing

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SummaryAs a well-regulated and responsibleinternational financial centre, thereexists mechanisms or gateways pursuantto various statutory measures by whichfinancial information in The Bahamasmay be accessed by foreign judicialand/or regulatory authorities, subject toappropriate safeguards.

Judicial gateways• Evidence (Proceedings in OtherJurisdictions Act, 2000 (EPOJA):Under the EPOJA, an applicationfrom a foreign court may befacilitated by the Supreme Court ofThe Bahamas to obtain evidence inThe Bahamas for purposes of foreigncivil proceedings which either havebeen instituted or is contemplated tobe instituted (and for whichinvestigations have already commenced)before the requesting foreign court.The EPOJA contains provisions toprevent wide-ranging discovery.• Criminal Justice (InternationalCo-operation) Act, 2000(CJICA): Under the CJICA, anapplication from a foreign court maybe facilitated by the Supreme Courtof The Bahamas to obtain evidence inThe Bahamas for purposes of foreigncriminal proceedings andinvestigations. In each case, theAttorney General of The Bahamasshall make applications on behalf ofthe requesting foreign court. Wherethe Supreme Court is satisfied thatthe request is an appropriate one, itmay make an order for the relevantevidence to be produced to or takenin deposition by the Supreme Court.The evidence obtained by the courtwould thereafter be provided to the Attorney General of TheBahamas for transmission to therequesting court.

• Mutual Legal Assistance inCriminal Matters Act, 1988(MLA): Pursuant to the MLA, TheBahamas has treaty arrangementswith the United States of America,Canada and the United Kingdom ofGreat Britain, “the requestingcountries,” respectively, by which The Bahamas will facilitate requestsof the requesting countries to obtainand to provide evidence in/from The Bahamas for use in criminalproceedings. Fiscal offenses areoutside of the scope of the MLA.

Regulatory administrative gatewaysBanks & Trust Companies• Central Bank of The Bahamas Act,2000 (CBA); and• Banks & Trust CompaniesRegulations Act, 2000 (BTCRA)

The CBA and the BTCRA enable TheCentral Bank of The Bahamas andrespecting Bahamian banks and trustcompanies with information gatheringpowers and authorizes the Central Bankto disclose information in specifiedcircumstances.Per the CBA, the Central Bank may

require the production of specifiedinformation or documents from entitiesit regulates and their officers,employees and agents for its ownregulatory purposes or to facilitate arequest of an overseas regulatoryauthority. An overseas regulatoryauthority means an authority in aforeign country that exercises powersin that foreign country correspondingto that exercised by the Central Bankwithin The Bahamas. As a pre-requisiteto disclosing information to an overseasregulatory authority, the Central Bankmust: be satisfied as to theconfidentiality and restrictions onfurther disclosure by the overseasregulatory authority; have received anundertaking against further disclosurewithout the Central Bank’s consent; be

satisfied that disclosure is required for aregulatory function (including civil oradministrative investigations orproceedings) to enforce lawsadministered by the overseas regulatoryauthority; and be satisfied that theinformation will not be used for criminalproceedings against the personproviding the information.The BTCRA also facilitates cross-

border supervision by foreign bankingregulators of branches or subsidiaries inThe Bahamas of entities that areregulated by that foreign regulator.Except in special circumstancesauthorized by the Bahamian inspector ofBanks & Trust Companies, the foreignregulator may not access informationrelating to assets under management ordeposit operations of individualcustomers. The BTCRA permitsdisclosure, “exceptions to a duty ofconfidentiality,” of banking informationin the following circumstances:i. to enable/assist the Central BankGovernor in functions conferred byBahamian law; andii. 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 Industry• Securities Industry Act, 2011 (SIA):Per the SIA, the SecuritiesCommission of The Bahamas hasauthority (similar to that grantedunder the CBA to the Central Bank)to disclose information in the courseof facilitating a request of an overseasregulatory authority. Under the SIA,an overseas regulatory authoritymeans an authority in a foreigncountry that exercises powers in thatforeign country corresponding to

that exercised in The Bahamas by theSecurities Commission of TheBahamas.• Investment Funds Act, 2003 (IFA): Inrelation to investment funds, the IFAprovides exceptions to a duty ofconfidentiality comparable to thatprovided under the BTCRA relativeto banks and trust companies.

Financial Intelligence• Financial Intelligence Unit Act, 2000(FIUA): The FIUA established aBahamian financial intelligence unit(FIU). The FIU is a central agency toreceive, analyse and disseminate tocompetent authorities disclosures offinancial information concerning theproceeds of crime respectingoffenses under the Proceeds ofCrime Act, 2000.

In addition to receiving financialintelligence originating from suspicioustransaction reports made to the FIU byfinancial institutions and other persons,the FIU is empowered to issue,administratively, an order for theproduction of information by persons.Information in the possession of the FIUis subject to a duty of confidentiality,however, the FIU is authorized todisclose such information to theCommissioner of Police or to a foreignFIU, subject to conditions as may beimposed by the director of the FIU.

Tax informationThe above-mentioned gateways toBahamian information are not used forpurposes of international cooperation intax matters. The Bahamas wouldfacilitate the provision of informationfor purposes of foreign revenue lawswhere a tax treaty has been enteredbetween The Bahamas and the relevantforeign jurisdiction.In compliance with the Organisation

for Economic Co-operation andDevelopment (OECD) standard for

transparency and cooperation in taxmatters, The Bahamas has a number ofthese treaties, called a Tax InformationExchange Agreement (TIEA). TheBahamas has long sought a level playingfield on tax information exchange. Itsdecision to endorse and meet theOECD standard when a level playingfield was achieved reinforces TheBahamas’ unwavering commitment tobe a trusted jurisdiction for clients andto be a responsible member of theinternational community.All of the agreements signed by The

Bahamas are in accordance with theOECD model TIEA and DoubleTaxation Agreement. As such, the basison which The Bahamas will cooperatewith countries is the same as allcountries that adopt Article 26. In particular, through the agreements,The Bahamas commits to cooperateonly upon requests where specificinformation is provided. This requirement for specificinformation is critical in furtherance toThe Bahamas’ stated position toprevent so called “fishing expeditions.”

ConclusionThe Bahamas remains stronglycommitted to the principle that personshave a right to privacy with respect tothe conduct of their affairs. Moreover,respect for the rule of law always hasbeen fundamental to the success andstrength of the financial servicesindustry in The Bahamas. As such,clients can be assured that The Bahamaswill only exchange information onagreed and transparent protocols.

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TIEAs have been signed with the following jurisdictions as ofDec 2012:

• Argentina• Aruba• Australia• Belgium• Canada• China• Denmark• Faroe Islands• Finland• France• Germany• Great Britain• Northern Ireland• Greenland• Guernsey• Iceland• India• Japan• Korea• Mexico• Monaco• New Zealand• Norway• San Marino• South Africa• Spain• Sweden • The Netherlands• United States

Tax InformationExchangeAgreements


The Investment Funds Act, 2003(amended 2011) positions The Bahamas atthe cutting edge of modern investmentfund administration. The Act updates thegeneral legislative and supervisoryenvironment and introduces an additionalstyle of collective investment vehicle–TheBahamas SMART Fund– officially known asthe Specific Mandate AlternativeRegulatory Test fund.Providing financial services to a

sophisticated international clientelerequires a sophisticated legislativeapproach. In drafting the new Act, theSecurities Commission of The Bahamaswas mindful of the need for flexibility toadequately cater to the evolving needsof the global marketplace.

The Act recognizes four classes of fund: 1. The Standard Fund. Anticipatesan offering to the general public,and is a highly regulated, moderninvestment vehicle designed tooperate as a traditional collectiveinvestment scheme.

2. The Professional Fund. A classdesigned for sophisticatedinvestors, and may be licensed byan authorized administrator (inaddition to the SecuritiesCommission), thereby enablingfaster time to launch.

3. The SMART Fund. A specificmandate alternative regulatory testfund suitable for innovativestructuring of investment funds.

4. The Recognized Foreign Fund.An investment fund licensed orregistered in a prescribedjurisdiction and not suspendedfrom operation.

These four classes of funds, coupledwith a progressive approach toregulation and a reputation for qualityadministration, place The Bahamas atthe forefront of the funds industry.

Regulatory strengthThe Bahamas is an active member ofestablished international regulatory andpolicy-making bodies and devotesconsiderable resources to itsparticipation in these bodies andadherence to international best practices.

Funds industry overview

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Standard fundsSnapshotA recognized legal structure in TheBahamas that issues or has equityinterests in the purpose or effect ofwhich is the pooling of investor fundswith the aim of spreading investmentrisks and achieving profits or gains fromthe acquisition, holding management ofdisposal of investments. This type offund does not fit the definition of aProfessional Fund, a SMART Fund or aRecognized Foreign Fund.

Equity interest• Equity interest held only by investor• No minimum investment by the investor.• A share, trust unit or partnershipinterest that carries an entitlement toparticipate in the profits or gains ofthe issuer and is redeemable orsubject to be repurchased at the

option of the investor.• Does not include closed-end issuers.• Close-end issuers may elect to belicensed as an investment fund.

LicensorA Standard Fund must be licensed bythe Commission. The licensing processshould take 6-8 weeks after submitting acompleted application.

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

Requirements• Bahamian administrator–delegationto foreign sub-administrator isacceptable.• Accounts prepared in accordancewith international accepted

accounting standards (or otherrecognized GAAP).• Prescribed disclosure requirementsin the offering memorandum. These are in line with the best

industry practices.

Open architecture• No local auditor requirement.• No local custodian requirement.• No restrictions on investments orinvestment style.• No restrictions on leverage.• No direct taxation. Therefore no taxon income, capital gains, dividendsearned by the fund or the investor.• No stamp duty on transactions.• No public disclosure of investors orthe accounts.• No exchange controls.


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Professional fundsSnapshotA recognized legal structure in TheBahamas that issues or has equityinterests the purpose or effect of whichis the pooling of investor funds with theaim of spreading investment risks andachieving profits or gains from theacquisition, holding, management ordisposal of investments.

Equity interest• Equity interest held only by eligible investor• No minimum investment by theeligible investor• A share, trust unit or partnershipinterest that carries and entitlementto participate in the profits or gainsof the issuer and is redeemable orsubject to be purchased at the optionof the investor.• Does not include closed-end issuers• Closed-end issuers may elect to belicensed as and investment fund.

LicensorA Professional Fund must be licensed byone of:• Unrestricted Fund Administrator: Same day once all documentsapproved by relevant parties(sponsors, lawyers, administrators)and due diligence is complete

• Securities Commission of TheBahamas: Within 72 hours of acomplete application and letter fromthe Bahamas administrator or legalcounsel indicating the Investment Fundis in compliance with Bahamian Law

Eligible investors• A bank or trust company licensed inThe Bahamas or licensed pursuant tothe laws or another jurisdiction• A securities firm registered in TheBahamas or registered pursuant tothe laws of another jurisdiction• A Bahamian investment fund orinvestment fund regulated pursuantto the laws of another jurisdiction• An insurance company licensed inThe Bahamas or pursuant to the lawsof another jurisdiction• Natural person (jointly w/ spouse)with a net worth of $1,000,000• Natural person who had minimumincome of $200,000 for the last 2years ($300,000 w/ spouse) and hasreasonable expectation of same forcurrent 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 SegregatedAccounts Company), LimitedPartnership, Unit Trust.

Requirements• Bahamian administrator - delegationto foreign sub-administrator isacceptable.• Accounts prepared in accordancewith international acceptedaccounting standards (or otherrecognized GAAP).• Prescribed disclosure requirementsin 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 orinvestment style• No restrictions on leverage• No direct taxation. Therefore no taxon income, capital gains, dividendsearned by the fund or investor• No stamp duty on transactions• No public disclosure of investors or the accounts• No exchange controls.

SMART fundsSnapshot: A recognized legal fund structure inThe Bahamas that issues equityinterests the purpose or effect of whichis the pooling of investor capital withthe aim of spreading various risks andachieving profits or gains from theacquisition, holding, management or

disposal of investments. Similar to other licensed fundstructures, SMART funds can generateeconomies of scale and otherefficiencies for investment structures.Furthermore, SMART funds offer theability to achieve cost-based structuringby scaling the complexity of the fund

structure to meet the requirements ofits promoter and investors.In order for an investment fund, as

defined in the Investment Funds Act, tobe licensed as a SMART Fund, it mustsatisfy the parameters and requirementsof a specific set of rules that areapproved and published by theSecurities Commission.


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Equity interest and investmentEquity interests in this context are heldby fund investors and represent a share,trust unit or partnership interest thatcarries an entitlement to participate inthe profits or losses of the issuing fund.Such equity interests are redeemable orsubject to be repurchased by the fundat the option of the investor.

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

where the promoter is a financialinstitution and the investors in theinvestment fund are also customers ofthe financial institution and party to aDiscretionary Management Agreementwith the financial institution.• SFM002: An investment fund that

has no more than ten investors whohold equity interests in the investmentfund who meet the criteria of an EligibleInvestor in a Professional Fund and themajority of whom have the power toappoint and remove the operators of theinvestment fund. The fund may be licensedand launched on the same day through anunrestricted fund administrator or have a72-hour response through the SecuritiesCommission of The Bahamas (the Commission).• SFM003: An investment fund that

has no more than 15 investors holdingequity interest in the investment fund,the majority of whom have the powerto appoint or remove the operators ofthe investment fund.• SFM004: An investment fund with

a maximum of five investors operatingas a private investment company. May be used as a credible, licensedholding vehicle.• SFM005: An investment fund with a

maximum of five investors holdingequity interests and operating as aprivate investment structure forindividuals/families. Each investor mustbe a person to whom a ProfessionalFund may be offered, permitting sameday launch by an unrestricted fundadministrator or 72-hour responsethrough the Commission.• SFM006: A special purpose vehicle

designed to hold the illiquid or hard-to-

value assets of another Bahamasinvestment fund which offers asignificantly lighter administrative andcost effective environment for theassets whilst respecting the ownershiprights of the investors and creditors (ifany) of the original fund.• SFM007: An investment fund that

may be offered, on a private placementbasis, to up to 50 super-qualifiedinvestors who must each make aminimum initial subscription ofUS$500,000. SFM007 has been designed for use mainly by institutionalinvestors, such as pension funds, fundsof funds and master-feeder structures;however natural persons and privateentities are also eligible investors. Due to the very significant minimuminvestment amount per investor, thisSFM has a reduced structural riskprofile and counterparties may benefitfrom maximum flexibility with respectto appointment and domicile of service providers.

LicensorA SMART Fund must be licensed by:• Unrestricted Fund Administrator:Same day once all documentsapproved by relevant parties(sponsors, lawyers, administrators)and due diligence in complete, or• Securities Commission of TheBahamas: SFM002, SFM005 andSFM006 SMART Funds within 72hours of a complete application andletter from the Bahamas administratoror legal counsel indicating theinvestment fund is in compliance withBahamian law. SFM001, SFM003 andSFM004 within 6-8 weeks of filing of a complete application.

StructuresCompany (incl Segregated AccountsCompany), Limited Partnership, UnitTrust.

Requirements• Bahamian administrator required inmost cases–delegation to foreign sub-administrator is acceptable.• Foreign Administrator–may be

appointed for SFM005 or SFM007.• A SFM005 SMART Fund mustappoint an administrator that is afinancial institution.• SFM004, SFM006, and SFM007 donot require an administrator. Theoperators may administer the fundbut this will not be treated as a selfadministered fund.• SFM001 and SFM006 are notrequired to have financial statementsaudited but the annual unauditedstatements and the semi annualperformance report must be filedwith Securities Commission.• SFM002, SFM003, SFM004, SFM005 andSFM007 SMART Funds shall be auditedannually unless unanimously waived bythe investors, and where there is suchwaiver a performance report shall befiled with the Commission within sixmonths of the waiver and every sixmonths thereafter as long as the waiver exists.

A term sheet is not required for aSFM001, SFM004 or SFM005 SMARTFunds; however if a term sheet isprepared it must contain prescribeddisclosure requirements. A term sheetor offering memorandum is required forthe SFM002, SFM003, SFM006 andSFM007 SMART Funds and mustcontain the prescribed disclosurerequirements.

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SnapshotA recognized legal structure in TheBahamas that issues or has equityinterests the purpose or effect of whichis the pooling of investor funds with theaim of spreading investment risks andachieving profits or gains from theacquisition, holding, management ordisposal of investments.

Where: a. the equity interests are listed on asecurities exchange (including an over-

the-counter market) prescribed bythe Commission by notice in TheGazette and the fund is not licensed in The Bahamas;b. it is licensed or registered in ajurisdiction prescribed by the SCB bynotice in The Gazette and notsuspended from operation; orc. it is incorporated or established and is in good standing in a jurisdictionprescribed by the Commission bynotice in The Gazette.

Licensor• No licensing requirements.• The investment fund is to beregistered in The Bahamas with theCommission upon filing the requiredapplication with the prescribeddocuments.

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

Recognized foreign funds

OverviewThe Securities Industry Act, 2011repealed the Securities Industry Act,1999. The 2011 Act modernizes andupdates the law governing theregulation of securities in The Bahamas,enhances the powers of the SecuritiesCommission (the Commission) andpromotes confidence and efficiency inthe capital markets, making them amore attractive prospect to domesticand foreign investors.

HighlightsDefinitionsThe first schedule of the 2011 Actdefines securities and the activitiesgiving rise to the obligation to register.Part 2 of the first schedule sets out fourtypes of activities which would constitutesecurities business and include i. dealings in securitiesii. arranging deals in securities iii. managing securities andiv. advising on securities.Part 3 of the first schedule exempts anumber of activities from registration,eg trading for one’s own account andPart 4 lists exempt persons, egreceivers, executors or lawyers where

such activities are incidental to theirprofession.

Securities CommissionThe Commission’s powers remain thesame; however, the 2011 Act providesfor more comprehensive powers alongwith greater clarity, independence andaccountability.

Assistance to domestic & foreignregulatory authoritiesThe 2011 Act allows the Commissionto provide any information already onfile and to obtain information fromanyone in the jurisdiction in responseto a request from an overseasregulatory body. Information may alsobe passed on to another person in theoverseas authority’s jurisdiction ifcertain preconditions are met. Thepowers of the Commission to require a person to provide information arewritten to overrule the provisions ofany other law regarding secrecy andrecognize a person’s right not to havecompelled statements used againstthem in criminal matters or the right to claim legal privilege on theappropriate documents.

Investigations & inspectionsThe 2011 Act substantially expandedthe powers of the Commission toinvestigate a regulated person or firmto determine if the person or firm has,is, or is about to contravene anyprovision of Bahamian securities laws.An investigation may also be initiatedfor the administration of Bahamiansecurities laws or to assist in theadministration of securities laws ofanother jurisdiction.The Commission is not required to

give notice of these inspections nordoes the Commission have to suspect abreach of the 2011 Act, however, theregulated person or firm bears theexpense of inspection.

Registration of persons carryingon a securities businessThe 2011 Act and the Securities IndustryRegulations, 2011, entities formed underthe International Business CompaniesAct, 2000 (IBC Act) who conductsecurities business are now eligible forregistration as broker-dealers (registeredfirms). The old Act only permittedentities formed under the CompaniesAct, 1992 to register.

Securities Industry Act


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Furthermore, registered firms will nolonger be required to be licensed toundertake specific types of securitiesbusiness as provided for in the previousAct. Registered firms may now carry onone or more categories described inPart 2 of the first schedule of the Act.Registered firms with licenses soclassified will now be afforded expandedpowers of dealing, ie Class I registeredfirms may now carry on all categories ofsecurities business. Class II may nowcarry on all categories of securitiesbusiness except those set out in Section1b of Part 2 of the first schedule of the2011 Act, which include buying, selling,subscribing for or underwritingsecurities as principals. Formersecurities investment advisors will bealso authorized to engage in themanaging and advising of securities.Previously registered firms will not be

required to re-register.The categories of registration for

individuals have changed as well; thecurrent categories of broker-dealer,trader, broker, stock-broker andsecurities investment advisor withoverlapping permitted activities havebeen replaced with a singlerequirement; any person carrying onsecurities business must be registeredwith the Commission. Furthermore, anindividual may only be registered tocarry on securities activity for which thefirm is authorized to undertake anddoes not contemplate an individualbeing registered other that inassociation with a registered firm.

Distributions & ProspectusesThe 2011 Act requires an issuer tosubmit both a preliminary prospectusand a prospectus to the Commissionfor consideration in connection with thedistribution of a security, ie a trade in asecurity of an issuer not previouslyissued; a trade in a previously issuedsecurity of that issuer that has been

redeemed, purchased or donated tothat issuer; a trade in a previouslyissued security of an issuer by a controlblock holder; or a trade within aprescribed class of trades.Upon issuance of a receipt for the

preliminary prospectus, the issuer maydistribute and solicit the preliminaryprospectus, however, not until a receipthas been issued for the prospectus maya binding agreement be entered intowith prospective purchasers for thepurchase of the security.There are several exemptions in the

2011 Act which do not require thesubmission of both a preliminaryprospectus and a prospectus; theseinclude the distributions of: securitiesissued by the government of TheBahamas; securities issued by a privatecompany; securities of an investmentfund registered under the InvestmentFund Act, 2003 or exempt fromregistering under that Act; an issuer of its own securities that are distributed to holders of its securities as a dividendand offerings by approved foreign issuers.A distribution of securities issued or

to be issued by an issuer under the lawsof The Bahamas that is made outsideThe Bahamas shall be made inaccordance with the laws of the countryin which the distribution is made.

Continuing obligations of public issuersThe 2011 Act has tightened obligationsto ensure pubic issuers inform thepublic of any material changes, filingannual and interim financial statements,annual reports and on proxysolicitation. It also introduces therequirement that public issuers sendfinancial statements and annual reportsto their security holders.Furthermore, the 2011 Act has

modified the definition of public issuersto no longer include funds.

Takeover bidsA long-standing gap in the securitiesindustry’s laws has been the lack oflegislative control of takeover bids. The new regulations set out aframework of controls and guidelinesfor the industry, including a road-mapfor the conduct of takeover bids toensure all security holders are treatedin a fair and equitable manner uponchange of control.

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The Probate and Administrationof Estates Act, 2011 governs the distribution of estate assets and immovables properties.Personal properties are distributed accordingto the law of the place of a person’s domicileat date of death.

Statutory provisionsThe Bahamas is a common law jurisdiction andprobate and administration of estateslegislation is based on the laws of England andWales. The Supreme Court issues grants ofrepresentation for the estates of personsdomiciled outside The Bahamas in respect ofBahamian assets upon their demise.There are several testamentary dispositions

by which an investor may deal with Bahamianassets. However, a person can only have onedomicile at a time:i. An investor can make a Bahamian will solelyin respect of his Bahamian assets with aprovision that the will must be constructedand interpreted with Bahamian laws. TheCourt will issue a grant of probate.ii. An investor can declare in the will thatthey are domiciled in The Bahamas. TheCourt will issue a grant of probate.iii. If residing as a permanent resident in The Bahamas, the will can be administeredunder Bahamas law. The Court will issue agrant of probate.iv. An investor can settle Bahamian assets inan Inter Vivos Trust which can beincorporated as a part of a last will andtestament. The investor should appoint thetrustees named in the trust as executors andtrustees of the last will and testament.Alternatively, a Trust can be created in the will. The provisions under the TrusteesAct apply.v. Where domiciled outside The Bahamasin different circumstances, there are otherprovisions under Bahamian law.According to the Act, the Court has

jurisdiction with the eligibility of personsentitled to obtain a grant of representation onthe estate of a deceased person and requiresthat a notice of a proposed grant application bepublished in the Official Gazette on threeconsecutive occasions prior to submitting to

the Probate Court for processing.An estate executor/administrator does not

have to personally attend the Court to obtaina grant of representation; a local attorney canbe appointed by deed of power of attorney toact on behalf of the estateexecutor/administrator.Where a local trust company is executor,

the trust company can designate two officersto undertake the application.Where a testator fails to name an

executor, any beneficiary or devisee namedmay apply to the Court for a grant of letter ofadministration with the will annexed. Uponissue of the grant, the powers and dutiessimilar to an executor enables them todistribute the estate as set out 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, etcare produced to support the application.The Court also issues a grant of letters of

administration with the will annexed where adeceased 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

common law jurisdiction, the Court will issuea grant of letters of administration in respectof the estate in the first instance to thesurviving spouse or another person approvedby the Court and grant the administrator withpowers and duties similar to an executor.

Grants issued in a civil lawjurisdictionThe 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 of

each 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 an applicationshould be made and advise the client of theexact civil 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. It isnecessary to obtain due diligence in respect ofeach executor, trustee, devisee and beneficiary.

Administration of assetsThere is no inheritance tax in The Bahamas.Upon issue of a grant of representation thepersonal representative of the estate must:i. settle the estate’s debt including payment ofreal property taxes, if applicableii. deal with assets as settled in the trust, ifapplicable; or distribute the personal assets as set out in the will to local and/or foreign beneficiariesiii. or in the case of an intestacy, distributethe personal assets under the InheritanceAct, 2002iv. arrange transfer or settling of corporate sharesv. obtain Exchange Control approval totransfer pecuniary legacies to beneficiariesoutside The Bahamasvi. execute deeds of assent where realproperty of the deceased will be legallyvested in the devisees, apply for the requisitecertificate of registration or permit in respectof a non-Bahamian devisees’ acquisition andobtain permission from Exchange Control inrespect of the administration and completethe return for filing with the registrar asprescribed by the Act.

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In 1994, the government introduced aNational Investment Policy to support aninvestment-friendly climate and foster the economic growth and development of The Bahamas. An edited version of thepolicy follows:

Investment environmentTo support the National InvestmentPolicy the government will provide:1. A politically and economicallystable environment conducive toprivate investment.

2. An atmosphere where investmentsare safe and the expropriation ofinvestment capital is not considered.

3. A legal environment based on along tradition of parliamentarydemocracy, the rule ofconstitutional and statute laws, andwhere security of life and personalproperty are guaranteed.

4. Clear and transparent investmentincentive legislation.

5. An environment in which freedomfrom capital gains, inheritance,withholding, profit remittance,corporate, royalty, sales, personalincome, dividends, payroll andinterest taxes is ensured.

6. Essential and reliable publicservices, including moderninfrastructure services: water,electricity and communications.

7. An educational system designed tomeet the needs of foreign anddomestic investments.

With specific regard to the financialservices sector, the government is doingits part to ensure that the sector remainsinternationally competitive and adequatelyand prudently regulated. To this end thegovernment has actively pursued, amongothers, the following initiatives:1. with the assistance of the Inter-American Development Bank(IDB), create a new small andmedium-size enterprise (SME)

facilitation that will provide thebasis for effectively providingfinancial and non-financial servicesto SMEs;

2. establish the BahamasEntrepreneurial Venture CapitalFund and the government SmallBusiness Loan Guaranteeprogramme in support of smallBahamian businesses;

3. facilitated business linkagesbetween tourism and othersectors, having the BahamasAgricultural and Industrial Corp asthe major vehicle with a focus onagriculture, fisheries and lightmanufacturing;

4. development of a School ofBusiness at The College of TheBahamas; and

5. staffing of Bahamas diplomaticmissions with economic andfinancial technical experts.

Administration of policyThe National Economic Council (NEC),headed by the Prime Minister, isresponsible for executive managementof the investment policy. Operational

activities are the responsibility of theBahamas Investment Authority (BIA).

Investment incentivesInvestment incentives under thefollowing Acts include, among otherincentives, exemption from thepayment of customs duties on certainconstruction materials, relatedequipment and approved raw materials.Additionally, waiver of real propertytaxes is available for certain investmentsfor periods of up to 20 years.• Export Manufacturing Industries(Encouragement Act)• City of Nassau Revitalization Act• Industries Encouragement Act• Agricultural Manufactories Act• Bahamas Vacation Plan and (Time-Sharing Act)• Tariff Act• Hotels Encouragement Act• Spirits and Beer Manufacture Act• Hawksbill Creek Agreement Act• Family Island Development(Encouragement Act)• Free Trade Zone Act

Areas targeted for foreign investorsFollowing is a list of certain investment

Investment environment and incentivesAdapted from the 2014 edition of the Bahamas Handbook

What’s required in an investment proposal?An international investor seeking to do business in The Bahamas should submit to theBahamas Investment Authority a project proposal containing:1. Name and address, including telephone/fax.2. Executive summary of project.3. Type of business–whether share company, partnership, individual or joint venture.4. Principals–investors, major beneficial shareholders, including their dates and places ofbirth, as well as passport or social security numbers.

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 work permits*for key personnel.

10. Financial arrangements for project, including bank reference.11. Environmental impact–toxic waste, disposal procedures, toxic input.12. Total capital investment in project with a breakdown of items and start-up cost.

Minimum investment is $500,000.* Necessary work permits for key personnel will be granted. Businesses requiring permits for persons other than keypersonnel are encouraged to consult BIA in advance.



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areas especially targeted for internationalinvestors. However, the list is notexhaustive, and investors interested inareas not included should consult BIA.Joint ventures with Bahamian partners areencouraged, with the choice of partnerbeing at the discretion of the investor.1. Touristic resorts.2. Upscale condominium, timeshare andsecond home development.

3. Marinas.4. Information/data processing.5. Assembly industries.6. High-tech services.7. Ship registration, repair and other ship services.

8. Light manufacturing for export.9. Agro-industries.10. Food processing.11. Mariculture.12. Banking and other financial services.13. Captive insurance.14. Aircraft services.15. Pharmaceutical manufacture.16. Offshore medical centres.

Areas reserved for Bahamians1. Wholesale and retail operations.2. Commission agencies engaged in theimport/export trade.

3. Real estate and domestic propertymanagement agencies.

4. Domestic newspapers andmagazines.

5. Domestic advertising and publicrelations firms.

6. Nightclubs and restaurants, exceptspeciality, gourmet and ethnicrestaurants and restaurantsoperating in a hotel, resort complexor tourist attraction.

7. Security services.8. Distribution of building supplies.9. Construction companies, except forspecial structures for whichinternational expertise is required.

10. Cosmetic/beauty establishments.11. Shallow-water scale fish, crustacea,

mollusc and sponge-fishingoperations.

12. Auto and appliance serviceoperations.

13. Public transportation.2 International investors may engage in the wholesale

distribution of any product they produce locally.

Business licence feeThe Business Licence Act, 2010, made itmandatory for anyone operating abusiness aimed at obtaining a turnoverto apply for and obtain a licence.Annual licence renewal applications

and payments are due March 31 everyyear. Fees are based, for mostbusinesses, on their annual grossreceipts less the direct cost ofproducing the turnover. They rangefrom $100 for a petty business to 1.75%of turnover for businesses withturnover greater than $100 million.Authorized banks are texted at 3% ofturnover, while registered insurers aretexted 3% of gross premiums.Companies licensed under the Banks

and Trust Companies Regulation Act,2000 (which imposes separate fees), donot pay for a business licence. The Act’s definition of business

includes all types of manufacturing andcommercial undertakings and coversprofessions such as law, accounting andmedicine. Where a business consists of separate and distinct undertakings, a separate licence must be obtained for each.A non-Bahamian or a company not

100% Bahamian-owned must first obtainapproval from the BIA and then wait forthe licence application to be approved.Renewal licenses are granted once thenecessary approvals are obtained andthe payment of renewal taxes are made.The secretary for revenue has thepower to have the books of a licenseeaudited at least once a year. Books areto be maintained for at least two years.

Business investorsA business-sensitive legal frameworkand investor-friendly climate encouragesnon-Bahamian investments, supportedby the Bahamas Investment Authority(BIA), Office of the Prime Minister.Although an investor is granted a

licence by the Licensing Authority, a

work permit must still be sought to ifhe is to be resident and an employeeof/or operating the business himself.

Temporary licenceIn the Business Licence Act, 2010, anew type of licence, known as atemporary licence, was introduced for atemporary business. According to the Act,non-Bahamians who contract to carry outa business must apply for a temporarylicence and pay a tax of 1.5% of thevalue of the business contract. Temporarylicences, issued by the secretary forrevenue, are not granted unless alloutstanding licence fees under previouslicences are paid and the application isapproved by the Minister of Finance. It isan offence for non-Bahamians to carry ona business without a temporary licence.

Occasional licenceOccasional licences are granted at thediscretion of the secretary for revenueto an applicant:

a. to carry on a sales business;b. to act as a travelling salesman;c. to stage a business event at any place or premises of public dancing, singing, music or other such public entertainment;d. to stage a trade show or expo;e. 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.

Business licensingAdapted from the 2014 edition of the Bahamas Handbook

The most in-depthresource guide on The Bahamas

Get all the details onliving and working in The Bahamas from the Bahamas Handbookat www.bahamashandbook.com.


The government’s immigrationpolicy is aimed at ensuring thereasonable security, well-being andeconomic progress of The Bahamas andits people.The government gives consideration

to citizenship, permanent residency andwork permits for non-Bahamiansprovided there is compliance with theimmigration laws of The Bahamas andpolicies of the government. Acceleratedconsideration is given to applications forannual or permanent residence bymajor international investors and to “fitand proper” owners of residences mayapply with purchase of a home valued at$500,000, but accelerated considerationis given to buyers of homes valued inexcess of $1.5 million.As The Bahamas is a major tourist

destination, every effort is made tokeep visitors’ immigration formalities toa minimum. Non-Commonwealthcitizens should inquire at the Ministry ofTourism and Foreign Affairs for entryrequirements, as they vary fromcountry to country.Visitors must have a return ticket to

their homeland or to some othercountry where they would be accepted.Visits can be for up to eight months, ifthey can show means of financialsupport; they are not allowed to engagein any form of gainful occupation whilein The Bahamas.

Obtaining an annual residence permit*Persons who wish to reside in The Bahamas on an annual basis mayqualify under one of four categories:1. Spouse or dependent of acitizen of The Bahamas. If anapplicant is married to a Bahamiancitizen, a resident spouse permit maybe issued, provided the marriage issubsisting. The resident spousepermit is issued up to a max periodof five years. The fee is $250. An

application can be made forpermanent residence or citizenshipafter five years or more of marriageprovided the marriage is subsisting.

2. Spouse or dependent of a permit holder. A copy of thesponsor’s work permit, permit toreside or certificate of permanentresidence must be included.

3. Independent economicresident. A financial referencefrom a reputable bank verifyingeconomic worth, and two writtencharacter references are required.For an annual residence permit, ahead-of-household pays $1,000 andeach dependent, $25.

4. Resident homeowner, orseasonal resident homeowner.Non-Bahamians who own secondhomes in The Bahamas may applyfor an annual homeowner’sresidence card. Renewable annuallyit entitles the owner, spouse andany minor dependents endorsedon the card when travelling withthe owner, to enter and remain inThe Bahamas for the validity of thecard (up to one year). The fee is$250 and facilitates entry withminimal formalities by obviatingneed for return tickets or proofmaintenance ability.*Applicants in any of thesecategories are not permitted toengage in employment.

Procedures for obtaining a work permitAn inflexible principle of The Bahamasgovernment is that no expatriate maybe offered a position that a suitablyqualified Bahamian is available to fill.Employers with vacant posts are

required to advertise locally and consultthe Bahamas Employment Exchange. Ifunsuccessful in fulfilling theirrequirements they may recruit fromoutside The Bahamas. Normally a work

permit application will not be processedif the prospective employee is already inthe country, having entered as a visitor.Work permit fees range from $500

to $12,500 per year. Immigration Policy,which is critical to the granting of workpermits, provides that:1. A Bahamian who is qualified to fill aposition should be given the positionin preference to anyone else.

2. The Bahamian must be given that jobon the same terms and conditions asany expatriate counterpart.

3. Where the company has a careerstructure, here or abroad, theBahamian employee must be giventhe same opportunities as affordedto other employees.

4. The Bahamian must be assisted tobroaden skills in the individual’schosen field of endeavour byfurther training at home or abroad.

Where work permits have beengranted, employers will be required to identify a Bahamian to understudy theexpatriate so that the trainee will fill the expatriate’s position in areasonable time.Employers may obtain permits for

longer than the standard one-year periodin respect to key personnel on contract.Such contracts should indicate theirrenewal would be subject to obtainingthe necessary immigration permission,and they may be endorsed to the effectthat the employee is expected to train orbe replaced by a suitable Bahamianwithin a stipulated period.Each permit issued by the Immigration

Board relates to a specific post. Permitsare not altered by the director ofimmigration to reflect change ofemployment or residence. However, aperson holding a work permit may makeapplication for a new one (his newemployer having been unsuccessful inrecruiting a qualified Bahamian to fill thepost) without having to leave the islands.The renewal of a permit on expiration

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Residency and employmentAdapted from the 2014 edition of the Bahamas Handbook

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In New Providence, real estateagents charge a 10% commission on thesale of undeveloped property; 6% ondeveloped property, whether residentialor commercial; and 10% for FamilyIsland property, whether land, home or commercial.Stamp duty on property conveyances

or realty transfers is as follows:Up to & including Stamp duty$0-$20,000 ..............................................4%$20,000.01-$50,000 ..............................6%$50,000.01-$100,000 ............................8%Over $100,000 ......................................10%

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 netsales figure, in which case the agent addsthose 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 Assoc follows a

minimum scale fee for conveyances andmortgage transactions at 2.5% of thesale price plus out-of-pocket expenses.

International Persons Landholding Act, 1993Amended in 2007, The InternationalPersons Landholding Act made it easierfor non-Bahamians and companies undertheir control to own property.1. A non-Bahamian or permanentresident who purchases oracquires an interest in acondominium or property to beused by him as an owner-occupiedproperty, or for construction ofpremises to be used as an owner-occupied property, must apply tothe secretary to the InvestmentsBoard (IB) to register thepurchase. Application forCertificate of Registration Form Imust be filed with the Bahamas

Investment Authority (BIA), Officeof the Prime Minister. Contact BIAfor a complete list of the requireddocumentation that mustaccompany the application alongwith the original receipt from thePublic Treasury showing paymentof 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 isrequired if the property isundeveloped land and the purchaserwould become the owner of two ormore contiguous acres. A permit isalso required if the non-Bahamianintends to acquire land or an interesttherein by way of freehold orleasehold, when the acquisition is notin accordance with item 1.

4. Non-Bahamians who own homesin The Bahamas may apply for anannual homeowner’s residencecard. This card entitles the owner,spouse and dependent children toenter and remain in The Bahamasfor the duration of the validity ofthe card (one year). This facilitatesentry–it does not confer residentstatus in The Bahamas.

All applications for permits, Form 3,are to be submitted to BIA forconsideration by the IB. If approved, aletter is issued and payment of therequisite fee of $500 is paid at the PublicTreasury and the original receiptreturned to BIA. The permit is thenissued by the Secretary to the Board.Certificate of registration or permit (withacquisition documents) must be recordedin the Registrar General’s Dept. Fee schedule

Certification of Registration ............$250Permit ....................................................$500Annual homeowner’s residence card ................................$250

Property transactionsReprinted from the 2014 edition of the Bahamas Handbook

is not automatic. Generally, noexpatriate may be continually employedin the country in any capacity for morethan five years. However, there are likelyto be cases where hardship will becaused by rigid implementation of thispolicy; according to government, thisfactor will be kept in mind in applying the regulations.

BondingA bond is required for each persongranted a work permit, if necessary, torepatriate the employee and hisdependents and to pay any publiccharges, including medical expenses,incurred by the employee.

Sales representative permitTravelling Travelling sales representatives planningto do business in The Bahamas mustobtain work permits from the Dept ofImmigration as well as from theLicensing Authority.

Permanent residenceApplicants for this status of residencymust be of good character andprepared to show evidence of financialsupport. Such an applicant must alsostate that he intends to residepermanently in The Bahamas.Persons may apply for permanent

residence in any of the followingcategories provided they satisfystatutory requirements of The Bahamas:1. As the spouse of a citizen of TheBahamas, and in the case of a male,he must have been married for notless than five years. Womenmarried to Bahamians may apply atany time after marriage.

2. As an economic applicant; that is,one who seeks to permanentlyreside in The Bahamas because of:• investment/business or home, or• established roots through family ties.

People who held valid certificates ofpermanent residence prior to theImmigration Act, 1975, continue to holdsuch status automatically.

ABOUT THE 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. Augmented by professional advisors from legal,accounting, realty, information and communication technology firms, The Bahamas is a complete international centre.The Bahamas Financial Services Board (BFSB) represents an innovative commitment by the financial services industryand the government of The Bahamas to promote a greater awareness of The Bahamas’ strengths as an internationalfinancial 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 and business environment issuitable for both clients and the international stature of The Bahamas as a member of the community of nations.

For further information contact:Bahamas Financial Services BoardPhone: [email protected]

ABOUT THE BAHAMAS HANDBOOK AND THE BAHAMAS INVESTOR

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 tomore than 600 pages, earning a reputation as the most comprehensive source of informationon living and doing business in The Bahamas. See highlights of the latest edition at:www.bahamashandbook.com

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 onwealth management strategies, opportunities for direct investment and the lifestyle advantagesof doing business in The Bahamas–a practical resource designed for financial planners and otheradvisors to share with their own clients. Order your own subscription online atwww.thebahamasinvestor.com

Etienne Dupuch Jr Publications Ltd is the leading publisher of business and tourism information in The Bahamas. For 50 years the company has created a wide range of high-quality, informative and respected publications, reliablydelivered to their targeted audiences. Books, magazines, maps and travel guides produced by Dupuch reach amajority of vacation and business travellers visiting The Bahamas.

Contact:Etienne Dupuch Jr Publications LtdPO Box N-7513 Nassau, The BahamasPhone: [email protected] www.thebahamasinvestor.com

Bahamas Investor Guide - 2014

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