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INVESTOR’SRESOURCEGUIDEWealth Management and Investment in The Bahamas

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S2 INVESTOR’S RESOURCE GUIDE | The Bahamas Investor

Copyright © 2014 Information contained in thispublication under Wealth Management Tool Kitand Investment Funds is copyright by the BahamasFinancial Services Board.

Information contained in Tax Planning and Doing Business in The Bahamas is copyright Etienne Dupuch Jr Publications Ltd and theBahamas Handbook.

The contents of this guide are intended to be anaid to understanding The Bahamas’ environmentfor wealth management. The contents do not inany way constitute legal advice. Etienne Dupuch JrPublications Ltd and the Bahamas Financial ServicesBoard, its members and directors do not and willnot in any way accept responsibility or liability forany loss or damage arising from reliance on theinformation contained herein. Where a decision is to be made based on the effect of the newlegislative regime discussed herein or on any otherlegislation or common law rules, advice should besought from qualified legal professionals.

Copyright © 2014 Etienne Dupuch Jr Publications Limited.

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Contents

INVESTOR’S RESOURCE GUIDE | The Bahamas Investor S3

WEALTH MANAGEMENT TOOL KIT

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

INTERNATIONAL TAX PLANNING

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

INVESTMENT FUNDS

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

DOING BUSINESS IN THE BAHAMAS

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


Strategic planning for business cycles is an essential element for any successfulbusiness. In The Bahamas, we believe thisprinciple is equally important for individualsand families. At each stage of your financial

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

adding value to the personal financial plansof clients through dedicated service as wellas the appropriate application of financialplanning tools. For the purpose of this guide,these professional services are termedprivate wealth management.Individuals who have an effective wealth

management strategy are better positionedto manage the impact of events such aschanging market conditions, familytransitions or planning for the future.In The Bahamas, we do not believe that

private wealth management should focusmerely on the structuring of financial affairsto reduce or defer tax. While the ability to accrue profits within a tax-neutral

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

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

to remain at the forefront of the industry.

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

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

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

WEALTH MANAGEMENT TOOL KIT

Introduction to private wealth management

SOURCE: B

AHAMAS FINANCIAL SERVICES BOARD ©

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9 The Bahamas provides individuals andinstitutions the ability to establishcustomized corporate structures tailored tothe specific demands of their internationalbusiness transactions, asset management andestate planning. These range from theflexibility of the International BusinessCompany (IBC) to the sophisticatedSegregated Accounts Company (SAC).

Types of structuresThe IBC is a staple tool in creatingstructures to preserve and accumulate

wealth. Its ability to adapt to the needs of the client is enhanced by the jurisdiction’stax-neutral platform and the judiciouscorporate governance requirements.Legislation in The Bahamas also enables

the creation of Limited Duration Companies(LDCs). An LDC is restricted to anexistence of 30 years or less, to serve a clearly defined purpose. It could bestructured as a partnership for tax purposes,allowing profits and losses to be attributedproportionally to individual members ratherthan to the company itself.

Both the IBC and LDC benefit from tax exemptions for a period of years fromnormal fiscal measures in The Bahamas suchas business licence fees and stamp duty. As with all entities and individuals in The Bahamas, they are not subject to income tax, capital gains, gift, estate,inheritance or succession taxes.While companies established under the

Companies Act are used by both internationaland Bahamian investors, the IBC is the preferredvehicle. The IBC and LDC may transact businessin The Bahamas or internationally.

Corporate structures


Depending on the nature of the productand market, the corporate structure couldbe enhanced by the use of a SegregatedAccounts Company, an LDC or one Limitedby Guarantee.In an increasingly global economy, entities

that transact business in multiplejurisdictions value the importance ofproperly structured corporate affairs to takeadvantage of regional and multilateral tradeopportunities, tax incentives and mitigation,transfer pricing and double taxation treatyenhancements. Consequently, creation of a permanent establishment in a tax-neutraljurisdiction such as The Bahamas is anintegral part of strategic planning.Such planning may also extend to

companies wishing to access internationalfinancing for operations in different parts of the world. The use of internationalcorporate structures to coordinate debt and equity financing and bond issues hasproven advantageous to both companies and investors when combined with trustsettlements as part of a broader estateplanning strategy.It is vitally important to the successful

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

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

Bahamas regulatory frameworkCompanies are required to maintain aregistered office and appoint a registeredagent in The Bahamas. These serviceproviders must be licensed as financial and corporate service providers.

WEALTH MANAGEMENT TOOL KITSOURCE: B


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International Business Companies (IBCs)The International BusinessCompany (IBC) Act provides a 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 anywhere inthe world whether in its role as a holdingcompany, trading company, a private investmentvehicle, insurance company for non-domesticbusiness, or other uses, including its ability toform part of a more sophisticated structureinvolving a combination of trust, foundationor other specialized corporate elements.

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

Further, every IBC is required to maintain a registered office in The Bahamas. Thedirectors may decide where the corporaterecords of the company are to bemaintained and what they should consist ofbut copies of the Articles and Memorandumof Association, the register of directors and officers and the Share Register must bekept at 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 on the next page.

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

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

Bahamian IBCs have many practical applications

Segregated Accounts Companies (SACs)




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Company Law

Corporate Legislation Source

Types of Company

Classes of Shares

Currency for Authorized Share Capital

Minimum Share Capital

Standard Share Capital

Shares of No Par Value

Minimum Number of Shareholders

Bearer Shares

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

Redomiciliation

Liquidation/Dissolution Procedures

Exchange Control

International Business Companies Act, 2000 with amendments.

English Law

• A company limited by shares and/or guarantee. • An unlimited company. • A 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 takeplace by telephone. Directors meetings are discretionary. Directors entitled to vote on resolutions at a duly constituted meeting need not formally attend but must pass such resolutions by unanimous written consent signed by all of the directors (provided that there is no restriction thereon in the Articles). Directors may attend meetings by telephone or video conference.

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

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 isowned 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.

A Segregated Accounts Company(SAC) is a company which is registered underthe Segregated Accounts Companies Act,2004. The SAC may create separate accountswith assets and liabilities which are segregatedfrom the assets and liabilities attributable to every other account and also from thecompany’s general assets and liabilities.A segregated account is not a legal

person distinct from the SAC. It mustinform any person with whom it deals that

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

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

owners in a segregated account arecontained in a governing instrument.

Key Highlights of the IBC Act




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

counterparties dealing with the SACare evidenced in the form of contracts.

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

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

ii. is a subsidiary of a Bank or Trust Company (and not licensed by the Central Bank), oriii. is engaged in a business where the Minister responsible for companieshas prescribed a primary regulator.

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

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

Requirements• A SAC representative who monitors and reports on the activity of the SACmay be required where the primaryregulator is especially prescribed by the Minister responsible for companies.• A SAC must maintain a private registerof account owners.• A SAC must file an annual declarationstating that the company is in compliancewith the Segregated AccountsCompanies Act.• A SAC must maintain records inaccordance with generally acceptedaccounting principles. Records must be made available at least once a year to each account owner, unless waived by the account owner.• A SAC must pay prescribed fees basedon the number of accounts.

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

The Bahamas advantageBahamian law recognizes trusts and the Supreme Court has a long history of upholding the principles of equity.Many of the world’s largest and 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 no income,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 remains asone of the foremost international financialcentres and trust jurisdictions in the world.Key aspects of the Act include:Discretionary powers. The Act enables a settlor to retain certain discretionarypowers without compromising the validity of the trust. The most important includes thepower to revoke the trust or trustinstrument, or any powers granted by thetrust or trust instrument; to withdrawproperty from the trust; to add or remove

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

Bahamian trusts


Managing trustee/protector. The trustmay provide for a managing trustee, and aprotector may be appointed with widediscretionary powers, ensuring the wishes andintention of the settlor are carried out inaccordance with the trust instrument. The Actformally recognizes the role of the protector.Court advice. The Act allows a processwhereby a trustee may seek advice anddirections from a judge in chambers of thecourt without the necessity of filing anaction. This could facilitate quick resolutionof questions relating to the management oradministration of a trust property, involvingonly such interested persons as the judgemay find expedient, and saving costs.Maintenance and advancement. Thepowers of maintenance and advancement canbe applied in respect to any minor who hasan interest in the income of a trust property.Access. The Act creates certainty as towho may be able to have access to the trust documents.Income accumulation. Income may beaccumulated within the period allowed by therule against perpetuity. In The Bahamas, theperpetuity period rule adopts a “wait andsee” approach to “lives in being,” or it may be a fixed period of 150 years.Risk. The Act provides for appropriate flightclauses so that if there is any political upheaval,or any serious activity that would place thetrust at risk, the trust and its administrationwould be transferred immediately andautomatically to another country.Registration. Trust instruments andsubsequent documents do not have to be registered (except for conveyances

of Bahamian real property or personalproperty) under the Registration of Records Act.Trust legislation also provides for protection

of assets against potential creditors, avoidanceof forced heirship laws and indemnities fortrustees, as highlighted below.

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

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

The Perpetuities (Abolition) Amendment Act, 2011 This Act abolishes the rule against perpetuitiesfor all trusts made after commencement ofthe Act, ie after Dec 30, 2011. For existingtrusts, trustees may apply to the court todisapply the rule against perpetuities.

Fraudulent Dispositions Act, 1991This provides creditor protection to trustsettlors. Trust assets are generally protectedfrom all litigation in respect of existing claimsstarted more than two years after assets are placed into the trust. Trust assets areimmediately protected from any claims arisingafter such assets are placed in the trust.

In crafting this legislation, parliament wascareful to ensure that the Act exists for thebenefit of “solvent” settlors seeking tosafeguard their property from possible futureclaims. The Act does not provide assistanceto proposed settlors wilfully seeking todefeat an existing or contingent obligationowed to a creditor, of which they had notice.Settlors seeking to use the provisions 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 regard to their particular considerations andcircumstances that may exist at the time.

Purpose trustsWhile a focus on any of the various types oftrusts would be worthwhile, one of themost recent additions to The Bahamas toolkit of products within the trust sector, thePurpose Trust Act, 2004 (amended 2011) is worth highlighting.Traditionally, private trusts have 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 be considered charitable if they are for the relief of poverty, the advancement ofreligion, the advancement of education orsome other purpose beneficial to thecommunity. Like many other internationaljurisdictions, The Bahamas has recentlyintroduced legislation that recognizes trusts for non-charitable purposes.

The Purpose Trust Act, 2004(amended 2011) The law dealing with purpose trusts in TheBahamas is contained in the Purpose TrustAct, 2004 (amended 2011). Authorizedpurpose trusts 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 Act provides for authorized applicants–persons appointed as such under the trust instrument or the settlor of the trust or court-appointed person. These authorized applicants have rights



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Trusts are extremely versatile, and thisaccounts for their long-standing use inwealth management. Examples of trustsinclude asset protection, purpose trusts,pensions trusts, voting trusts andcharitable trusts. They provide thefollowing advantages:• Flexibility in the distribution of theclient’s assets following his or her death;• Wealth preservation for the nextgeneration;• Separation of income benefits from capital;• Avoidance of lengthy and complicatedprobate court procedures;

• Retention of shares for employees;• Confidentiality;• Maintenance of property for those whocannot hold it for themselves, eg, minors;• Avoidance of disputes among heirs andbeneficiaries by securing the services ofan impartial person to administer assets;and• Protection of property and assets fromlegal and political actions that may be takenagainst the settlor and beneficiaries bytransferring legal ownership to the trustee.

Uses and advantages of trusts in The Bahamas




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

purposes for which trusts and companies arepresently used: estate planning, tax planning,preserving family wealth, segregating assets,perpetuating corporate governancephilosophy, subordinating debts, separatingvoting and economic benefits, investing inprivate companies with a poor economicperformance, owning private trust companiesand establishing charities. Foundations mayalso be used where anti-forced heirship andcreditor protection are important.

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

A foundation must appoint either or botha secretary or foundation agent to conductthe necessary due diligence, provide theregistered office, undertake duties relating toanti-money laundering and counter-terrorism regulations and ensure that thefoundation complies with statutoryrequirements. The secretary or foundationagent must either be a licensed trustcompany under the Banks and TrustCompanies Regulation Act or a duly licensedfinancial and corporate service providerunder the Financial and Corporate ServicesProviders Act. If a foundation has afoundation agent and a secretary, but thelatter does not perform any of the statutoryduties, such a secretary need not be alicensed financial and corporate serviceprovider or trust company.• Where there are no officers appointed,the foundation charter shall provide forthe appointment of a foundation council,which may consist 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 members

need not be located in The Bahamas and 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 or similargoverning body and the foundation may alsohave a protector or committee of protectors.A charter may reserve powers to the

founder, including the power to amend orrevoke same. Charters may appoint otherofficers in addition to the secretary, whoseduties will be mainly administrative. It mayinclude terrorem provisions.

to make certain applications to the courtincluding administrative proceedings,proceedings for breach of trust and also rightsto information (unless excluded by the settlor).An authorized purpose trust may create

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

Uses of a purpose trustThe most interesting feature of purpose trustsis the fact that beneficial ownership is notvested in the trustee as the trust is not forhis/her benefit and there is no one else inwhom beneficial entitlement in the trust

property is vested. Accordingly, an authorizedpurpose trust has many estate planning andcommercial uses, including:• Holding shares of a private company,expressly authorized by the Act. In thisstructure, the settlor, members of the familyand advisors may be appointed directors ofthe private trust company and assume someresponsibility for the management of thetrust. This is useful when assets are of anunusual nature.• A trust that has both philanthropic andcharitable purposes. • Asset purchase or financing transactions to provide security for an entity thatfinances the purchase or to keep the assetand corresponding liability from appearingon a purchaser’s balance sheet.• Separate voting from economic control.

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

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

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

Highlights and requirementsCharter• There is no requirement that the charter be filed or registered in a public registry.• The charter must contain the name of the founder and other pertinentinformation such as the purpose of the EE and mechanisms for appointing and removing officers and/or council members.• The charter may provide for thereservation of rights to the founder andmay specify higher or lower levels ofexonerations and indemnifications thancontained in the Act.

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

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

generally supervising the administration of theEE and ensuring compliance by the EE and theofficers with the provisions of the Act.

RegistrationAn EE is established by a charter which issigned by the founder of the EE. It attainsthe status of a legal entity upon registration.To register an EE, submit the required

fee along with a statutory declaration of compliance and statement signed by the EE agent or an attorney engaged in theformation of the EE containing the following:

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 isestablished–definite or indefinitevii. 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 necessary to carry out itsexecutive functions.

Executive Entity




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The procedures for appointing beneficiariesmay be included in the charter rather than the names of the beneficiaries. A beneficiary with a vested interest in

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

beneficiaries is required, but confidentialitywith regard to foundation information mustbe maintained.Foundations are exempt from Bahamian

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

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

fixed or indefinite period. Foundations may be formally liquidated or revoked. Instruments of disposition may include

restrictions against alienation.

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

The only additional filing required is a statement containing particulars of anyamendments to the initial registration statement.Foundations must have initial assets of

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

office and secretary or foundation agent in The Bahamas.

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




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

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

Association must provide for the PTC to actas trustee only for a trust or trusts createdby a designated person named in theprescribed designating instrument pursuantto the regulations.Designated person. Is an individual namedin the designating instrument.If more that one designated person is

named, then each designated person must bea blood relative of or related by some otherfamily relationship to the other designatedperson(s). Can be deceased and his trustestablished by testamentary disposition.Designating instrument. Names thedesignated person(s) and is kept at the office ofthe registered representative.Form of acknowledgement is requiredwhereby the prescribed settloracknowledges awareness that PTCs do not require:• directors to possess expertise in trust administration• capital exceeding $5,000• a fidelity bond• an annual audit

Registered representative must: • be a separate legal entity• be either a licensee of The Central Bankof The Bahamas or a financial andcorporate service provider approved bythe Central Bank• be resident in The Bahamas• provide the services of a secretary,director, or Bahamas agent• ensure that the PTC is established forlawful purpose and that it operates as aPTC• have minimum share capital of $50,000• retain copies of certain documents inrelation to the PTC• require verification and maintenance in TheBahamas of records relating to the identitiesof 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. A person (who need notnecessarily be resident in The Bahamas) of good reputation who must possess atleast five years of experience in a disciplinerelevant to trust administration (law, finance, commerce, investment management,or accountancy).Distinguishing features of PTC. PTCsare distinguished from public, restricted andnominee trust companies as they are uniquevehicles operating under the regulatoryregime prescribed in the 2007 Banks andTrust Companies (Private Trust Companies)

Regulations. They are restricted fromcarrying out any other business other thanthat of a trusteeship to a trust or group oftrusts created by the designated person(s).The PTC must not amend its Memorandumand Articles of Association of the company,is not allowed to solicit trust business andmust comply with yearly complianceregulations and fees. If the PTC fails tocomply with directions from the CentralBank or engages in illegal conduct, the PTCor its registered representative will be liableto a fine up to $5,000 and can face an orderfrom the Supreme Court compellingcompliance or further sanctions. PTCs cantransfer or dispose of their shares provided that the registered representative maintains acurrent share register of all its shareholders.

Family office The family office helps families achievetheir goals while dealing withregulations and complex issues oftaxation, distribution planning andcharitable giving. The trust is a toolused by the family office to facilitatethe smooth transition from onegeneration to the next. Other essentialservices include: evaluating lifeinsurance needs; active coordinationof legal/tax/accounting matters ofbusiness interests; financial reportingand audits coordinating the purchaseof non-financial assets; and corporategovernance reporting.

Private trust companies and family office

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

performed only in relation to entities, trustsor other arrangements that are domiciled in

or regulated by the laws of The Bahamas ora jurisdiction specified in the first scheduleto the Financial Transactions Reporting Act.The Act contains similar anti-forced

heirship provisions as are contained in theTrustee Act and Foundations Act.

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

Responsibility for the regulation ofinsurance activity in or through The Bahamasrests with the Insurance Commission of The Bahamas (ICB). It is responsible for theongoing supervision and regulation of insurers,agents, brokers, salespersons and externalinsurers and intermediaries.All local insurance operations (as distinct

from offshore, or captive, insurance) arecovered by the Insurance Act, Chapter 347.Registered insurers writing local businesspay a premium tax of 3% of gross premiumscollected each quarter.As of Dec 2013, there were 27

domestic insurers licensed to write localbusiness. In support of this activity, therewere 53 agents and brokers, 37 sub-agentsand 843 licensed insurance salespersons.Domestic insurance companies, agents

and brokers are members of the BahamasInsurance Brokers Association.The Bahamas also has a presence in the

international insurance market. There werea total of 80 licensed captive entities at theend of 2013. This included 11 stand alonecaptives, four segregated account companiesand 65 captive cells. At Dec 31, 2013 therewere eight licensed insurance managers.The ICB is a member of the International

Association of Insurance Supervisors (IAIS)and endorses supervisory and regulatoryrequirements of the IAIS InsuranceInternational Core Principles. The ICB also maintains membership of other regional and international bodies including theCaribbean Assoc of Insurance Regulators(CAIR) and the Group of InternationalInsurance Centre Supervisors.

External insurance and captivesAn external insurance company is licensedand regulated under the External InsuranceAct, Chapter 348. It is incorporated in TheBahamas and manages its business fromwithin The Bahamas but only insures riskslocated outside The Bahamas. Under the Act, captive insurance

companies are classified as “restricted external insurers” and mainly underwrite

the risks of related entities. Captives are aform of self insurance and are typically usedas a risk transfer tool in a company’s orgroup’s overall risk management programme.The Bahamas offers a convenient and

professionally administered location for captiveinsurance companies. There is a flexible andcapable regulator in the ICB and a professionalinfrastructure to support such business.All external insurers licensed in The

Bahamas are required to appoint a residentrepresentative, who is often one of thelicensed insurance managers and maintainbooks and records in The Bahamas. Beforean international company may be licensed,the ICB must be satisfied:1. the company is managed, owned andcontrolled by persons who are fit andproper;

2. its business plan is acceptable to the ICB;

3. adequate books and records will bemaintained in The Bahamas;

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

5. there will be adequate capital tosupport the business.

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

a licence is $100,000 for general businessand $200,000 for long-term business.However, the ICB will require companies to maintain a level of capital commensuratewith the size and risks of the operations.Other provisions of the Act include a confidentiality clause to protect the policy holder and tax exemptions fora period of 25 years from the date offirst registration.Interested parties are encouraged to

arrange a meeting with the ICB prior toapplying. Insurance managers can provideassistance with the licensing applications,ongoing management services and regulatoryrequirements. A list of licensed managerscan be found on the ICB website atwww.icb.gov.bs.

Annual fees payable under the ExternalInsurance Act Chapter 348:Unrestricted external insurer ......$3,500 Restricted external insurer ..........$2,500External insurance broker ............$1,000Underwriting manager....................$1,000Contact the Insurance Commission of

The Bahamas, Charlotte House, Charlotteand Shirley Sts, PO Box N-4844, Nassau, tel (242) 397-4183, fax (242) 397-1070, e-mail [email protected] or visit www.icb.gov.bs.

Insurance productsAdapted from the 2015 edition of the Bahamas Handbook


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

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

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

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

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

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

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

the Canada or Quebec Pension Plans are subject to withholding tax.

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

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

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

relate to the deductibility of interest paid on money borrowed from abroad byCanadian resident corporations and trusts.Interest payments made to non-residents

who hold a substantial interest (ie 25% ofthe voting or equity shares) in a Canadiancompany or which do not deal at arm’slength with such a shareholder, are notalways entirely deductible in computingincome in Canada. They will be disallowed if the ratio of the company’s equity capital to the debt due to such non-residentshareholders or non-arm’s-length persons is less than 1.5:1.

Bahamas benefitsDespite the restrictive and wide-rangingnature of the Canadian fiscal law, TheBahamas continues to play an importantpart in Canadian tax planning. In particular,the use of testamentary trusts and certaininter vivos trusts can yield rewards. There are not many tax havens that

offer benefits comparable to The Bahamas in terms of flexibility of corporate structure, top-quality accounting and legalservices, readily available first-class financialand banking services, proximity to majorworld markets and good docking andharbour facilities.The modernization and liberalization

of the Bahamian company and trust law and the introduction of foundation law now provide a flexibility previouslyunavailable in The Bahamas. The Bahamas can offer a variety of

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

Tax planning for CanadiansBy Charles C Gagnon Reprinted from the 2015 edition of the Bahamas Handbook

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

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

triggered by the death of an individual whohappens to own shares of a non-residentcorporation with Canadian assets. All non-residents must report

dispositions of taxable Canadian property tothe Canadian fisc, indicate the name of theperson to whom the property is sold andpay an amount on account of Canadian taxor furnish acceptable security (this specialrequirement is not applicable to thedisposition of listed shares in a Canadianpublic corporation).Upon payment of a tax instalment, a

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

Becoming a non-resident of CanadaIn order to become a non-resident ofCanada, an individual must generally give uphis home and most attachments withinCanada such as employment, provincialmedicare coverage, clubs, bank accounts,credit cards and the like and acquire aresidence in another jurisdiction bypurchasing a home or renting an apartmentin which he lives as his central familyheadquarters.Nevertheless, once a former Canadian

resident has become a non-resident, he mayreturn to Canada each year for temporaryvisits without being taxed.Thus, because The Bahamas imposes no

income tax of any kind, a non-residentCanadian citizen may reside there with theadvantage of paying to Canada only 25% oncertain kinds of investment income derivedfrom Canadian sources and no withholdingtax on certain kinds of interest. Royalties

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

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

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

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

no such property, then he would not sufferany Canadian tax at the time of his death.

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

being legally resident in Canada and thereby paying tax, management and controlmust be exercised, bona fide and in fact,outside Canada.

A non-resident company may performuseful functions of an extraterritorial naturesuch as world advertising, worldwide selling,the financing and organizing of sales abroad,the management and servicing of the facilitiesneeded to maintain the products sold abroadand the operation of ships or certain groupinsurance activities. In each case, it isimportant to determine whether the incomeof the Bahamian subsidiary is foreign accrualproperty income (commonly referred to asFAPI). The FAPI of a “controlled foreignaffiliate” of a Canadian resident is attributedto and taxed in the hands of its Canadianresident shareholders on an annual basis.There have also been cases before the

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

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

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

and as a result active business incomeearned by the Bahamian affiliates ofCanadian companies benefit from exemptsurplus treatment.




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Passive income is treated quite differentlyfrom active business income. The concept ofFAPI is meant to tax the passive earnings offoreign affiliates controlled by Canadiantaxpayers. In many ways it is not unlike itsAmerican counterpart, “Subpart F” of theInternal Revenue Code. FAPI is essentiallyincome from property or from a businessother than an active business. Each year anappropriate share of the FAPI of acontrolled foreign affiliate (and certaintrusts), if it exceeds $5,000, is included inthe income of Canadian taxpayerscontrolling the foreign affiliate in thetaxation year in which the foreign affiliate’staxation year has terminated.FAPI does not include interaffiliate

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

Non-resident trustsA non-resident of Canada who has notresided in Canada during the 60-monthperiod preceding the end of a taxation yearcan establish, by will or gift, a Bahamianresident discretionary trust (NRT) for thebenefit of Canadian resident familymembers, which will escape the applicationof the income attribution rules governing

offshore discretionary trusts. Distributionsof capital (which can include accumulatedincome) received by Canadian residentbeneficiaries from an NRT funded solely by a non-resident should not be taxable.Bahamian trusts are particularly well-suitedfor this purpose.Of course it is important that a trust

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

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

In this whole field, the area of manoeuvre is narrowing, so a conservative and realisticapproach should be taken.




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

private businesses, structuring of inboundand outbound investments, tax issuesrelating to immigration and emigration,international tax planning, and wills andtrusts. In addition to being a guest speakerat tax conferences and author of severalreports and publications, Gagnon is amember of the Canadian Tax Foundation,the International Fiscal Association and theSociety of Trust and Estate Practitioners(STEP). He was educated at McGillUniversity (BCL, LLB 1993), CanadianSecurities Institute (CIFC 1991), CollegeJean-de-Brebeuf (IB 1989) and CanadianSecurities Institute (CSC 1988). He wasadmitted to the Barreau du Quebec in1995 and the Law Society of BritishColumbia in 1994. He is listed in the latestedition of the Best Lawyers in Canada.

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Companies formed in the United Statesand individuals who are either citizens orresidents of the US for US federal income taxpurposes are subject to US federal income taxon their worldwide income. US taxpayers anddomestic companies can, in some instances,start international operations with relativelysmall amounts of capital and then expand with tax-free or low-taxed accumulations ofearnings instead of net-tax dollars earned in the US. Expansion abroad can be more rapidlyaccomplished with 100-cent tax-free dollars,instead of 65-cent dollars (which is net after the35% US federal corporate tax). For individuals,the top marginal rate of US federal income taxrate is currently 39.6% and 20% for long-termcapital gains and qualified dividends (plus anadditional 3.8% surtax on certain types of “netinvestment income.”) With careful tax planning,US investors can achieve the tax advantages of income tax deferral in The Bahamas. The US federal income tax advantages

are available by reason of certain exceptionsto the anti-deferral provisions of the InternalRevenue Code (IRC), which set forthconditions under which the US will not tax certain items of foreign-source income on a current basis so that US federal income tax on such foreign-source income is deferred until distributions are made. To be eligible for the US income tax

advantages, Bahamian business venturesmust be operated by a Bahamian company. If a Bahamian or other foreign company(except a passive foreign investmentcompany or PFIC) is not engaged in a US“trade or business,” and at least 50% of the voting power and value is owned by non-US persons (insurance companies are an exception), US shareholders of suchcompany may not be subject to US federalincome tax on such company’s foreignsource income 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 or value) owned (directly or indirectly) by US shareholders it is known under US

tax laws as a “controlled foreign corporation”(CFC). A US shareholder is a US person whoowns directly or indirectly (or constructively)10% or more of the total combined votingpower of a CFC. A US shareholder is subjectto US federal income tax each year on theirproportionate share of certain kinds of incomeof the CFC regardless of whether there is adistribution 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 produced passiveincome, capital gains from the sale of stocks and securities, gains oncommodities and foreign currencytransactions, royalties, etc.

3. Sales income where the goods are either purchased from,or sold to, a related person.

4. Income from services if rendered to a related person.

5. Increases in investments in US property.6. Income attributable to internationalboycotts.

7. Income attributable to the bribery of foreign government officials.

8. Income that is foreign oil or gas-related.Even so, there are many exceptions

and exclusions to the above. In other words, even if the Bahamian company is US-controlled, its US shareholders may notbe required to include foreign-sourceincome of the CFC in their annual taxableincome if an exception applies.

Seven vehicles for investing in The BahamasThe types of CFCs particularly suitable foroperations in The Bahamas are those whichearn income which qualifies for deferral in thehands of a US shareholder including, amongothers, the following:1. Manufacturing production. Incomefrom the sale of products or goodsmanufactured or produced in TheBahamas generally is not subject to US

taxation even though purchases and salesinvolve the parent corporation or other related persons.The same applies to rental income

where such products or goods areleased to an unrelated party instead of 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 US taxationprovided that the products or goods are used in The Bahamas. Likewise,income from certain incidental servicesrendered before a sale or in connectionwith an effort to sell such products or goods is not currently taxable.

2. Sales of products and goods.If the parent corporation or otherrelated person is not involved in thepurchase or sale of products or goods,then income from such sales is notsubject to current US taxation, no matterwhere, or by whom, the products orgoods were manufactured, where thesales are made or where such productsor goods are used or consumed.Even if a related person is involved,

the sales income is free of current tax if the products or goods aremanufactured, produced, grown orextracted in The Bahamas, or if they are for use, consumption ordisposition in The Bahamas.

3. Insurance. A Bahamian insurancecompany is considered a CFC if morethan 25% of the voting power or value of its stock is owned by US 10%shareholders. Income earned by aBahamian insurance or reinsurancecompany, which is a CFC, is taxable only 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 (even if suchshareholders own less than 10%) mustinclude in income their pro rata share ofthe company’s “related person insuranceincome” (premium or investment income

Tax planning for AmericansBy Steven L Cantor and Sarah B Sindledecker Reprinted from the 2015 edition of the Bahamas Handbook




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on insurance policies where the personinsured, directly or indirectly, is a USshareholder or related person). Relatedperson insurance income also includesincome from reinsurance if the cedingcompany or its insured is a USshareholder in the Bahamian insurer.A Bahamian insurance company that is

a CFC can elect to be treated as a UScorporation for all US tax purposes. Ifthis election is made, US shareholderswill not be taxed on the company’sincome until distributed as dividends. The charge for electing is 0.75% of capitaland surplus as of Dec 31, 1987, up to amax charge of US $1.5 million.The Bahamas government provides

advantages and incentives for insurancecompanies insuring and reinsuring non-Bahamian risks.

4. Banks and finance companies.Passive income of a Bahamian bank orfinance company that is a CFC that is“predominantly engaged in the activeconduct of a banking, financing or similarbusiness” (as defined in the IRC) andconducts substantial activity with respectto such business is not subject to currentUS taxation. Interest earned by aBahamian bank that is a CFC inconnection with export financing forrelated US persons, with certainexceptions, is not subject to US tax.

5. Service companies. This is a broad category and includes anyBahamian corporation rendering servicesthat 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 include engineering,sales promotion, sales engineering,merchandising, consulting, etc. Withreference to such companies, incomefrom such services, rendered outside theUS and performed for persons who arenot related without substantial assistanceof related US persons, is exempt fromcurrent US taxation.Income from services rendered within

The Bahamas is also exempt even thoughsuch services are rendered for, or onbehalf of, a related person. Income fromservices rendered by a foreign companyin The Bahamas before a sale or inconnection with an effort to sell products

or goods manufactured, produced,grown or extracted by it are alsoexempt from current US tax eventhough such income is received from arelated person.

6. Leasing and royalties. Rents derivedin the active conduct of a trade orbusiness in The Bahamas and receivedfrom persons not related are notsubject to current US taxation. Rentsare also so exempt even when receivedfrom a related person if such rents arefor use of property located in The Bahamas.Royalties–eg payments in connection

with patents, copyrights, inventions,models, designs, secret formulas orprocesses–are currently exempt fromUS taxation when derived in the activeconduct of a trade or business in TheBahamas and received from personswho are not related. Royalties are alsoexempt, even when received from arelated person, if such royalties are forthe use of property or property rightswithin The Bahamas.

7. Certain investment income.Dividend and interest income receivedfrom a related foreign corporationgenerally is exempt from current tax ifboth payer and payee are incorporated in The Bahamas and the payer has asubstantial part of its assets used in the business in The Bahamas.

Passive foreign investmentcompany (PFICs)A Bahamian company is a PFIC if 75% ormore of its gross income is “passive” income(dividends, interest, etc), or 50% or more ofits assets are held to produce passiveincome. Thus, a mutual fund, and even amanufacturing company with significant cashon hand or securities, could be a PFIC.US shareholders in a Bahamian PFIC may be

subject to additional taxes (plus interest) oncertain PFIC distributions or on a dispositionof PFIC stock. A US shareholder of a PFIC mayavoid this result by making one of the followingtwo elections. First, a PFIC shareholder canelect to be taxed currently on his pro ratashare of PFIC ordinary income and capitalgains, which then can be distributed tax free. If a US shareholder of a PFIC makes thiselection, he also can elect to defer the currenttax but must pay interest on the deferredtaxes. Second, a US shareholder of a PFIC mayS

OURCE: T


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Sarah BSindledeckeris an associate atCantor & WebbPA, specializing in tax and estateplanning for high- net-worthindividuals, foreigntrusts administration,

advising international trust companies on US matters, and cross-border real estatetransactions for international families.Born and raised in Boca Raton, FL,

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

Steven L Cantor is the managingpartner ofMiami-basedCantor & WebbPA. Herepresents high-net-worth familiesmostly from

Latin America, the Caribbean andEurope in international tax and estateplanning, foreign trusts with assets and/orbeneficiaries in the US, pre-residencyplanning and structuring of foreigninvestment in US real property. Cantor is a member of the London-based Society ofTrust and Estate Practitioners (STEP) andfounded the STEP Miami branch. He helpedestablish the STEP Caribbean Conferenceand is the recipient of the STEP Founder’sAward for Outstanding Achievement.Cantor is an author and has lectured

on behalf of the Bahamas FinancialServices Board, the Private Client Forumand over 20 STEP branches in Europe,the Caribbean, Latin America andCanada. He has been recognized as oneof the world’s leading internationalprivate client attorneys by ChambersGlobal and Chambers USA and as oneof the top 50 foreign lawyers for LatinAmerica by the Latin Business Chronicle.


elect to mark-to-market his stock on an annualbasis if such stock is marketable (regularlytraded on a national securities exchangeregistered with the SEC). The mark-to-marketelection is less favourable because all inclusionsare taxed as ordinary income.Coordination rules also prevent US

shareholders of a CFC from being taxedtwice on the same item of income withrespect to such CFC stock in cases wherethe CFC also qualifies as a PFIC.

Employment of US citizens abroadTax benefits are available to US citizensemployed abroad who establish a tax homein a foreign country (the foreign country isthe taxpayer’s principal place of business)and who meet certain other tests prescribedby the IRC (either a physical presence orresidency test with respect to the foreigncountry). Although a US citizen generally issubject to US income tax on his worldwideincome, a US citizen employed abroad whosatisfies the IRC tests described above mayexclude from gross income for any taxableyear foreign-source earned income (wages

or salary for services performed outside the US) an amount equal to the product of$80,000 and the inflation factor determinedunder section 1(f) (3) of the IRC; US$97,600for the 2013 tax year. For any taxable yearthat a US citizen is employed abroad they may also:1. Exclude from gross income a portionof the housing expenses paid for by his employer, or

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



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

Judicial gatewaysEvidence (Proceedings in OtherJurisdictions Act, 2000 (EPOJA). Underthe EPOJA, an application from a foreigncourt may be facilitated by the SupremeCourt of The Bahamas to obtain evidence inThe Bahamas for purposes of foreign civilproceedings which either have beeninstituted or is contemplated to be instituted(and for which investigations have alreadycommenced) before the requesting foreigncourt. The EPOJA contains provisions toprevent wide-ranging discovery.Criminal Justice (International Co-operation) Act, 2000 (CJICA).Under the CJICA, an application from aforeign court may be facilitated by theSupreme Court of The Bahamas to obtainevidence in The Bahamas for purposes offoreign criminal proceedings andinvestigations. In each case, the AttorneyGeneral of The Bahamas shall makeapplications on behalf of the requesting

foreign court. Where the Supreme Court issatisfied that the request is an appropriateone, it may make an order for the relevantevidence to be produced to or taken indeposition by the Supreme Court. Theevidence obtained by the court wouldthereafter be provided to the AttorneyGeneral of The Bahamas for transmission to the requesting court.Mutual Legal Assistance in CriminalMatters Act, 1988 (MLA). Pursuant tothe MLA, The Bahamas has treatyarrangements with the United States ofAmerica, Canada and the United Kingdomof Great Britain, “the requesting countries,”respectively, by which The Bahamas willfacilitate requests of the requestingcountries to obtain and to provide evidencein/from The Bahamas for use in criminalproceedings. Fiscal offenses are outside ofthe scope of the MLA.

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

The CBA and the BTCRA enable TheCentral Bank of The Bahamas and respectingBahamian banks and trust companies withinformation gathering powers and authorizes

the Central Bank to disclose information inspecified circumstances.Per the CBA, the Central Bank may

require the production of specifiedinformation or documents from entities itregulates and their officers, employees andagents for its own regulatory purposes or tofacilitate a request of an overseas regulatoryauthority. An overseas regulatory authoritymeans an authority in a foreign country thatexercises powers in that foreign countrycorresponding to that exercised by theCentral Bank within The Bahamas. As a pre-requisite to disclosing information to anoverseas regulatory authority, the CentralBank must: be satisfied as to theconfidentiality and restrictions on furtherdisclosure by the overseas regulatoryauthority; have received an undertakingagainst further disclosure without the CentralBank’s consent; be satisfied that disclosure isrequired for a regulatory function (includingcivil or administrative investigations orproceedings) to enforce laws administered bythe overseas regulatory authority; and besatisfied that the information will not be usedfor criminal proceedings against the personproviding the information.The BTCRA also facilitates cross-border

supervision by foreign banking regulators ofbranches or subsidiaries in The Bahamas ofentities that are regulated by that foreignS

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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 individual customers.The BTCRA permits disclosure, “exceptionsto a duty of confidentiality,” of bankinginformation in 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 IndustrySecurities Industry Act, 2011 (SIA): Per the SIA, the Securities Commission of The Bahamas has authority (similar to thatgranted under the CBA to the Central Bank)to disclose information in the course offacilitating a request of an overseasregulatory authority. Under the SIA, anoverseas regulatory authority means an authority in a foreign country thatexercises powers in that foreign countrycorresponding to that exercised in The Bahamas by the Securities Commission of The Bahamas.Investment Funds Act, 2003 (IFA): In

relation to investment funds, the IFAprovides exceptions to a duty ofconfidentiality comparable to that providedunder the BTCRA relative to banks andtrust companies.

Financial IntelligenceFinancial Intelligence Unit Act, 2000 (FIUA):The FIUA established a Bahamian financialintelligence unit (FIU). The FIU is a centralagency to receive, analyse and disseminateto competent authorities disclosures offinancial information concerning theproceeds of crime respecting offenses underthe Proceeds of Crime Act, 2000.In addition to receiving financial intelligenceoriginating from suspicious transaction reportsmade to the FIU by financial institutions andother persons, the FIU is empowered toissue, administratively, an order for theproduction of information by persons.

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

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

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

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

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

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

• Finland• France• Germany• Great Britain andNorthern Ireland• Greenland• Guernsey• Iceland

• India• Japan• Korea• Malta• Mexico• Monaco• New Zealand• Norway

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

Tax Information Exchange AgreementsTIEAs have been signed with the following jurisdictions as of Dec 2014:

Bahamas FinancialServices Board websiteThe website of the Bahamas FinancialServices Board provides a database of information for tax, estate and financial planningpractitioners, including a directory ofservice providers and legislationreferenced in this guide at www.bfsb-bahamas.com.


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The Investment Funds Act, 2003(amended 2011) positions The Bahamas at thecutting edge of modern investment fundadministration. The Act updates the generallegislative and supervisory environment andintroduces an additional style of collectiveinvestment vehicle–The Bahamas SMARTFund– officially known as the Specific MandateAlternative Regulatory Test fund.Providing financial services to a

sophisticated international clientele requiresa sophisticated legislative approach. Indrafting the new Act, the SecuritiesCommission of The Bahamas was mindful ofthe need for flexibility to adequately cater tothe evolving needs of the global marketplace.

The Act recognizes four classes of fund: 1. The Standard Fund. Anticipates anoffering to the general public, and is ahighly regulated, modern investmentvehicle designed to operate as atraditional collective investmentscheme.

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

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

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

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

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

Funds industry overview

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

Equity interest• Equity interest held only by investor• No minimum investment by the investor.• A share, trust unit or partnership interestthat carries an entitlement to participate inthe profits or gains of the issuer and isredeemable or subject to be repurchased at the option of the investor.• Does not include closed-end issuers.• Close-end issuers may elect to be licensedas an investment fund.

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

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

Requirements• Bahamian administrator–delegation toforeign sub-administrator is acceptable.• Accounts prepared in accordance withinternational accepted accounting standards(or other recognized GAAP).• Prescribed disclosure requirements in 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 tax on income, capital gains, dividendsearned by the fund or the investor.• No stamp duty on transactions.• No public disclosure of investors or the accounts.• No exchange controls.



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



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

Equity interest• Equity interest held only by eligible investor• No minimum investment by the eligible investor• A share, trust unit or partnership interestthat carries an entitlement to participate inthe profits or gains of the issuer and isredeemable or subject to be purchased atthe option of the investor.• Does not include closed-end issuers• Closed-end issuers may elect to be licensedas an investment fund.

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

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

Eligible investors• A bank or trust company licensed in TheBahamas or licensed pursuant to the laws oranother jurisdiction• A securities firm registered in The Bahamasor registered pursuant to the laws ofanother jurisdiction• A Bahamian investment fund or investmentfund regulated pursuant to the laws ofanother jurisdiction• An insurance company licensed in TheBahamas or pursuant to the laws of anotherjurisdiction• Natural person (jointly w/ spouse) with anet worth of $1,000,000• Natural person who had minimum incomeof $200,000 for the last 2 years ($300,000w/ spouse) and has reasonable expectationof same for current year• A trust with minimum $5,000,000 in assets• An entity owned by any one of the above• An entity with net assets in excess of $5,000,000

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

Requirements• Bahamian administrator - delegation toforeign sub-administrator is acceptable.• Accounts prepared in accordance with international accepted accountingstandards (or other recognized GAAP).• Prescribed disclosure requirements in the offering memorandum. These are in line with best industry practices.

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

Visit us onlinefor an essential overview of setting up trusts, international business companies and other wealth management structures in The Bahamas, plus information on working and living here.

The Bahamas Investor, Dupuch Publications and the ‘D’ device are registered trademarks of Etienne Dupuch Jr Publications Limited.


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SMART fundsA recognized legal fund structure inThe Bahamas that issues equity interests thepurpose or effect of which is the pooling ofinvestor capital with the aim of spreadingvarious risks and achieving profits or gainsfrom the acquisition, holding, managementor disposal of investments. Similar to other licensed fund structures,

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

defined in the Investment Funds Act, to belicensed as a SMART Fund, it must satisfythe parameters and requirements of aspecific set of rules that are approved andpublished by the Securities Commission.Equity interest and investmentEquity interests in this context are held by fund investors and represent a share,trust unit or partnership interest thatcarries an entitlement to participate in theprofits or losses of the issuing fund. Suchequity interests are redeemable or subjectto be repurchased by the fund at the option of the investor.

SMART Fund Models (SFMs)• SFM001: An investment fund where thepromoter is a financial institution and theinvestors in the investment fund are alsocustomers of the financial institution andparty to a Discretionary ManagementAgreement with the financial institution.• SFM002: An investment fund that has nomore than ten investors who hold equityinterests in the investment fund who meetthe criteria of an Eligible Investor in aProfessional Fund and the majority ofwhom have the power to appoint andremove the operators of the investmentfund. The fund may be licensed andlaunched 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 holding equityinterest in the investment fund, themajority of whom have the power toappoint or remove the operators of the investment fund.• SFM004: An investment fund with a maximum of five investors operating as a private investment company. May be used as a credible, licensed holding vehicle.• SFM005: An investment fund with amaximum of five investors holding equity interests and operating as a privateinvestment structure for individuals/families. Each investor must be a personto whom a Professional Fund may beoffered, permitting same day launch by an unrestricted fund administrator or 72-hour response through the Commission.• SFM006: A special purpose vehicledesigned to hold the illiquid or hard-to-value assets of another Bahamasinvestment fund which offers a significantlylighter administrative and cost-effectiveenvironment for the assets whilst respectingthe ownership rights of the investors andcreditors (if any) of the original fund.• SFM007: An investment fund that may beoffered, on a private placement basis, to upto 50 super-qualified investors who musteach make a minimum initial subscription of US$500,000. SFM007 has been designed for use mainly by institutionalinvestors, such as pension funds, funds of funds and master-feeder structures;however natural persons and privateentities are also eligible investors. Due to the very significant minimuminvestment amount per investor, this SFMhas a reduced structural risk profile andcounterparties may benefit from maximumflexibility with respect to appointment anddomicile of service providers.

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

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

StructuresCompany (incl Segregated Accounts Company),Limited Partnership, Unit Trust.

Requirements• Bahamian administrator required in most cases–delegation to foreign sub-administrator is acceptable.• Foreign Administrator–may be appointedfor SFM005 or SFM007.• A SFM005 SMART Fund must appoint anadministrator that is a financial institution.• SFM004, SFM006, and SFM007 do notrequire an administrator. The operatorsmay administer the fund but this will notbe treated as a self administered fund.• SFM001 and SFM006 are not required tohave financial statements audited but theannual unaudited statements and the semiannual performance report must be filedwith Securities Commission.• SFM002, SFM003, SFM004, SFM005 andSFM007 SMART Funds shall be auditedannually unless unanimously waived by theinvestors, and where there is such waivera performance report shall be filed withthe Commission within six months of thewaiver and every six months thereafter as long as the waiver exists.

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




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A recognized legal structure in TheBahamas that issues or has equity intereststhe purpose or effect of which is the poolingof investor funds with the aim of spreadinginvestment risks and achieving profits orgains from the acquisition, holding,management or disposal of investments.Where: a. the equity interests are listed on asecurities exchange (including an over-the-counter market) prescribed by

the Commission by notice in The Gazetteand the fund is not licensed in The Bahamas;b. it is licensed or registered in a jurisdictionprescribed by the SCB by notice in TheGazette and not suspended from operation;orc. it is incorporated or established and is in good standing in a jurisdictionprescribed by the Commission by notice in The Gazette.

Licensor• No licensing requirements.• The investment fund is to beregistered in The Bahamas with the Commission upon filing therequired application with theprescribed documents.

StructuresCompany (incl Segregated Accounts Company),Limited Partnership, Unit Trust.

Recognized foreign funds

An investment condominiumis established under the InvestmentCondominium Act, 2014. It is a contractualrelationship between one or moreparticipants who have pooled assets for thepurposes of operating as an investmentfund, and an investment condominium mustbe licensed as an investment fund under theInvestment Funds Act. It may be formed tooperate as an open-ended fund (in whichparticipants can call for redemption of theirinterests) or a closed ended fund (in whichthey may not).It is an entity without legal personality

but, when represented by its administrator,is able to hold assets in its own name, enterinto agreements and sue or be sued in itsown name.

What are the governing regulations?The governing regulations set out the terms under which the investmentcondominium will operate. There arespecific contents prescribed by law, whichinclude the following:• Its name;• The name and address of its administrator;• Its duration (which may be limited or unlimited);• The number of participation interests it can issue and the currency in which the interests will be issued;

• Whether it will issue classes or series ofparticipation interests, who is authorized to determine the number of classes/seriesand what the powers, rights and preferences of such interests are:• How the administrator will handle itsadministration and whether it will have a governing administrator and a generaladministrator;• Audit provisions (which are subject to the Investment Funds Act);• How the governing regulations may be ended;• The liability of the participants in theinvestment condominium, including how it is limited (if at all);• Provisions for valuation of theinvestment condominium's assets;• Provisions for termination of theinvestment condominium; and• Any other provisions required under the Investment Funds Act.The governing regulations are not required

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

How does the ICON act?An investment condominium, as an entitywithout legal personality, is represented byits administrator. The administrator, actingon its behalf, executes all letters, contracts,agreements, deeds and documents for theinvestment condominium. The administrator

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

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

be the investment condominium’s operatorfor purposes of the Investment Funds Act,and has all the powers and duties of anoperator for this purpose. A governingadministrator must be either: 1. an administrator licensed by theSecurities Commission (restrictedor unrestricted);

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

3. a licensee under the Securities Industry Act;

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

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

Investment Condominium

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

obligations in conducting the investmentcondominium's business, they are obligationsor debts of the investment condominiumand not the administrator personally.

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

not, carry voting rights, and such rights are as specified in the governing regulations.Participation interests are personal property,and enforceable by the participants as a chose in action.Books and records must be kept by the

administrator, and include a register ofparticipation interests as well as reliableaccounting records retained for a minimumfive-year period.Annual meetings of the participants must

be called by the investment condominium’sadministrator, and such meetings may beheld in The Bahamas or elsewhere.Publicly available information on an

investment condominium is generally limitedto the information contained in its

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

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

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

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

jurisdictions are able convert into aninvestment condominium and be licensed as a investment fund. Therefore, it is possible:• to convert a Bahamian trust, exemptedlimited partnership or company to aninvestment condominium;• to accommodate the redomiciliation of an investment fund established elsewhereto The Bahamas and to permit itsconversion to a condominium oncesuccessfully redomiciled; and• to allow for unbroken continuity of thefund, while changing the character of thelegal structure that underpins it.Note that equivalent entities established

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

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

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The Securities Industry Act, 2011repealed the Securities Industry Act, 1999. The 2011 Act modernizes and updates the lawgoverning the regulation of securities in TheBahamas, enhances the powers of theSecurities Commission (the Commission) andpromotes confidence and efficiency in thecapital markets, making them a more attractiveprospect to domestic and foreign investors.

HighlightsDefinitionsThe first schedule of the 2011 Act definessecurities and the activities giving rise to theobligation to register. Part 2 of the firstschedule sets out four types of activitieswhich would constitute securities businessand 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 and Part 4 lists exempt persons, eg receivers,executors or lawyers where such activitiesare incidental to their profession.

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

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

Investigations & inspectionsThe 2011 Act substantially expanded thepowers of the Commission to investigatea regulated person or firm to determine if the person or firm has, is, or is about tocontravene any provision of Bahamiansecurities laws. An investigation may also beinitiated for the administration of Bahamiansecurities laws or to assist in the administrationof securities laws of another jurisdiction.The Commission is not required to give

notice of these inspections nor does theCommission have to suspect a breach of the2011 Act, however, the regulated person orfirm bears the expense of inspection.

Registration of persons carrying on asecurities businessThe 2011 Act and the Securities IndustryRegulations, 2011, entities formed under theInternational Business Companies Act, 2000(IBC Act) who conduct securities businessare now eligible for registration as broker-dealers (registered firms). The old Act onlypermitted entities formed under theCompanies Act, 1992 to register.Furthermore, registered firms will no

longer be required to be licensed toundertake specific types of securitiesbusiness as provided for in the previous Act.Registered firms may now carry on one ormore categories described in Part 2 of thefirst schedule of the Act. Registered firmswith licenses so classified will now beafforded expanded powers of dealing, ieClass I registered firms may now carry onall categories of securities business. Class IImay now carry on all categories ofsecurities business except those set out inSection 1b of Part 2 of the first schedule ofthe 2011 Act, which include buying, selling,subscribing for or underwriting securities asprincipals. Former securities investmentadvisors will be also authorized to engage inthe managing and advising of securities.Previously registered firms will not be

required to re-register.The categories of registration for

individuals have changed as well; the currentcategories of broker-dealer, trader, broker,stock-broker and securities investmentadvisor with overlapping permitted activities

have been replaced with a requirement; any person carrying on securities businessmust be registered with the Commission.Furthermore, an individual may only beregistered to carry on securities activity for which the firm is authorized toundertake and does not contemplate anindividual being registered other that inassociation with a registered firm.

Distributions & prospectusesThe 2011 Act requires an issuer to submitboth a preliminary prospectus and aprospectus to the Commission forconsideration in connection with thedistribution of a security, ie a trade in asecurity of an issuer not previously issued; a trade in a previously issued security ofthat issuer that has been redeemed,purchased or donated to that issuer; a tradein a previously issued security of an issuerby a control block holder; or a trade within a prescribed 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 may a binding agreement be entered into withprospective purchasers for the purchase of the security.

Securities Industry Act

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

Statutory provisionsThe Bahamas is a common law jurisdictionand probate and administration of estateslegislation is based on the laws of Englandand Wales. The Supreme Court issues grantsof representation for the estates of personsdomiciled outside The Bahamas in respect of Bahamian 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:• 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. The Court will issue a grant of probate.• An investor can declare in the will that they are domiciled in The Bahamas. The Court will issue a grant of probate.• If residing as a permanent resident in The Bahamas, the will can be administeredunder Bahamas law. The Court will issue a grant of probate.• An investor can settle Bahamian assets in an Inter Vivos Trust which can beincorporated as a part of a last will and

testament. The investor should appoint the trustees named in the trust asexecutors and trustees of the last will andtestament. Alternatively, a Trust can becreated in the will. The provisions underthe Trustees Act apply.

• Where domiciled outside The Bahamas indifferent 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 on the estate of a deceased person andrequires that a notice of a proposed grantapplication be published in the Official Gazette on three consecutive occasions prior to submitting to the Probate Court for processing.An estate executor/administrator

does not have to personally attend the Courtto obtain a grant of representation; a localattorney can be appointed by deed of powerof attorney to act 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 of administration with the will annexed. Upon issue of the grant, the powers andduties similar to an executor enables them to distribute 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, etc are produced to support the application.The Court also issues a grant of letters

of administration with the will annexed wherea deceased testator owns Bahamian assets butis not necessary to apply for a grant in respectof the will in the place of domicile.Where a person dies intestate in a common

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

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

a civil law jurisdiction, the Court issues a grantof letters of administration.

Estate planning: probate & administration


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There are several exemptions in the2011 Act which do not require thesubmission of both a preliminary prospectusand a prospectus; these include thedistributions of: securities issued by thegovernment of The Bahamas; securitiesissued by a private company; securities of aninvestment fund registered under theInvestment Fund Act, 2003 or exempt fromregistering under that Act; an issuer of itsown securities that are distributed toholders of its securities as a dividend andofferings by approved foreign issuers.A distribution of securities issued or to be

issued by an issuer under the laws of The

Bahamas that is made outside The Bahamasshall be made in accordance with the laws ofthe country in which the distribution is made.

Continuing obligations of public issuersThe 2011 Act has tightened obligations toensure public issuers inform the public ofany material changes, filing annual andinterim financial statements, annual reportsand on proxy solicitation. It also introducesthe requirement that public issuers sendfinancial statements and annual reports totheir security holders.

Furthermore, the 2011 Act has modifiedthe definition of public issuers to no longerinclude 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 a framework of controls and guidelines for the industry,including a road map for the conduct oftakeover bids to ensure all security holdersare treated in a fair and equitable mannerupon change of control.


DOING BUSINESS IN THE BAHAMAS

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

Investment environmentTo support the National Investment Policythe government will provide:

1. A politically and economically stableenvironment conducive to privateinvestment.

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

3. A legal environment based on a longtradition of parliamentary democracy,the rule of constitutional and statutelaws, and where security of life and

personal property are guaranteed.4. Clear and transparent investmentincentive legislation.

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

6. Essential and reliable public services,including modern infrastructureservices: water, electricity andcommunications.

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

With specific regard to the financial services sector, the government is doing its 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 and medium-sizeenterprise (SME) facilitation that willprovide the basis for effectivelyproviding financial and non-financialservices to SMEs;

Investment environment and incentivesAdapted from the 2015 edition of the Bahamas Handbook

1. Name and address, includingtelephone/fax.

2. Executive summary of project.3. Type of business–whether sharecompany, partnership, individual orjoint venture.

4. Principals–investors, major beneficialshareholders, including their datesand places of birth, as well as passportor social security numbers.

5. Proposed location.6. Land requirements.7. Start-up date.

8. Employment projections–number ofBahamian and non-Bahamian employees.

9. Management/personnel requirement–years of experience, training and workpermits* for key personnel.

10. Financial arrangements for project,including bank reference.

11. Environmental impact–toxic waste,disposal procedures, toxic input.

12. Total capital investment in projectwith a breakdown of items and start-up cost. Minimum investment is$500,000.

What’s required in an investment proposal?

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

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

An application for a grant in respect ofeach of the above must be accompanied bythe civil law testamentary disposition andsupporting documents must be translatedinto English by a certified, notarized andauthenticated translator.The local attorney will advise the client as to

the appropriate grant for which 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 personal

representative 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 of real property taxes, if applicableii. deal with assets as settled in the trust, if applicable; or distribute the personal assets as set out in the will to local and/or foreign beneficiariesiii. or in the case of an intestacy, distribute the personal assets under the InheritanceAct, 2002

iv. 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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2. establish the Bahamas EntrepreneurialVenture Capital Fund and thegovernment Small Business LoanGuarantee programme in support ofsmall Bahamian businesses;

3. facilitated business linkages betweentourism and other sectors, having theBahamas Agricultural and IndustrialCorp as the major vehicle with a focuson agriculture, fisheries and lightmanufacturing;

4. development of a School of Business atThe College of The Bahamas; and

5. staffing of Bahamas diplomatic missionswith economic and financial technicalexperts.

Administration of policyThe National Economic Council (NEC),headed by the Prime Minister, is responsiblefor executive management of the investmentpolicy. Operational activities are theresponsibility of the Bahamas InvestmentAuthority (BIA).

Investment incentivesInvestment incentives under the followingActs include, among other incentives,exemption from the payment of customsduties on certain construction materials,related equipment and approved rawmaterials. Additionally, waiver of real

property taxes is available for certaininvestments for 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 areasespecially targeted for international investors.The list is not exhaustive, and investorsinterested in areas not included should consultBIA. Joint ventures with Bahamian partners areencouraged, with the choice of partner being atthe 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 and magazines.5. Domestic advertising and publicrelations firms.

6. Security services.7. Domestic distribution of building supplies.

8. Construction companies, except forspecial structures for which internationalexpertise is required.

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

mollusc and sponge-fishing operations.11. Auto and appliance service operations.12. Public transportation.

* International investors may engage in the wholesaledistribution of any product they produce locally.

Business licence feeThe Business Licence Act, 2010, made itmandatory for anyone operating a businessaimed at obtaining a turnover to apply forand obtain a licence.Annual licence renewal applications are due

Jan 31 and payments are due March 31 everyyear. For most businesses, taxes are based ontheir annual gross turnover. They range from$100 for a petty business to 1.75% forbusinesses with turnover greater than $100million. Authorized banks are taxed at 3% ofturnover, while registered insurers are taxed3% of gross premiums.Companies designated non-resident under

the exchange Control Regulations Act pay anannual fee of $300.

Companies licensed under the Banks andTrust Companies Regulation Act, 2000(which imposes separate fees), do not payfor a business licence. The Act’s definition of business includes

all types of manufacturing and commercialundertakings and covers professions such aslaw, accounting and medicine. Where a

business consists of separate and distinctundertakings, a separate licence must beobtained for each.A non-Bahamian or a company not 100%

Bahamian-owned must first obtain approvalfrom the Bahamas Investment Authority(BIA), before the application can beprocessed. Renewal licenses are granted

Business licensingAdapted from the 2015 edition of the Bahamas Handbook


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

citizenship, permanent residency and workpermits for non-Bahamians provided there iscompliance with the immigration laws ofThe Bahamas and policies of thegovernment. Accelerated consideration isgiven to applications for annual orpermanent residence by major internationalinvestors and to “fit and proper” owners ofresidences valued in $500,000, butaccelerated consideration is given to buyersof homes valued in excess of $1.5 million.As The Bahamas is a major tourist

destination, every effort is made to keepvisitors’ immigration formalities to aminimum. Non-Commonwealth citizensshould inquire at the Ministry of ForeignAffairs for entry requirements, as they varyfrom country to country.Visitors must have a return ticket to their

homeland or to some other country wherethey would be accepted. Visits can be for upto three months, if they can show evidencethat they are able to sustain themselveswhile in the Bahamas; they are not allowed

to engage in any form of gainful occupationwhile in The Bahamas.

Obtaining an annual residence permit*Persons who wish to reside in The Bahamas on an annual basis may qualifyunder one of four categories:1. Spouse or dependent of a citizen ofThe Bahamas. If an applicant is marriedto a Bahamian citizen, a resident spousepermit may be issued, provided themarriage is subsisting. The residentspouse permit is issued up to a maxperiod of five years. The fee is $250. Anapplication can be made for permanentresidence or citizenship after five years ormore of marriage provided the marriageis 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 economic resident.A financial reference from a reputablebank verifying economic worth, and two written character references arerequired. For an annual residence permit,




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Residency and employmentAdapted from the 2015 edition of the Bahamas Handbook

once the necessary approvals are obtainedand the payment of renewal taxes are made.The secretary for revenue has the power tomake an assessment of a company’s taxesand to have the books of a licensee audited. Businesses whose annual turnover

exceeds $50,000 are required to maintainaccounting records for at least five years.Businesses whose annual turnover amountto $1 million or more must include certifiedfinancial results along with their application.

Business investorsA business-sensitive legal framework andinvestor-friendly climate encourages non-Bahamian investments, supported by 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 if he is to be residentand an employee of/or operating thebusiness himself.

Temporary licenceNon-Bahamians who contract to carry out a business must apply for a temporary licenceand pay a tax of 1.5% of the value of thebusiness contract. Temporary licences are notgranted unless all outstanding licence fees underprevious licences are paid and the application is approved by the Minister of Finance. It is an offence for non-Bahamians to carry on a business without a temporary licence.

Occasional licenceOccasional licences are granted at thediscretion of the secretary for revenue to 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 exceeding sevendays up to four times a year.

BAHAMAS HANDBOOKTel (242) 323-5665• Fax (242) 323-5728

a head-of-household pays $1,000 andeach dependent, $25.

4. Resident homeowner, or seasonalresident homeowner. Non-Bahamians who own second homes inThe Bahamas may apply for an annualhomeowner’s residence card.Renewable annually it entitles theowner, spouse and any minordependents endorsed on the card whentravelling with the owner, to enter andremain in The Bahamas for the validityof the card (up to one year). The fee is$250 and facilitates entry with minimalformalities by obviating need for returntickets or proof maintenance ability.*Applicants in any of these categories are not permitted to engage in employment.

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

to advertise locally and consult the BahamasEmployment Exchange. If unsuccessful infulfilling their requirements they may recruitfrom outside The Bahamas. A work permitapplication will not be processed if theprospective employee is already in thecountry, having entered as a visitor.Work permit fees range from $500 to

$12,500 per year. Immigration Policy, whichis critical to the granting of work permits,provides that:1. A Bahamian who is qualified to fill aposition should be given the position inpreference to anyone else.

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

3. Where the company has a careerstructure, here or abroad, theBahamian employee must be given thesame opportunities as afforded toother employees.

4. The Bahamian must be assisted tobroaden skills in the individual’s chosenfield of endeavour by further training at home or abroad.

Where work permits have been granted,employers will be required to identify aBahamian to understudy the expatriate so that the trainee will fill the expatriate’sposition in a reasonable time.

Employers may obtain permits for longerthan the standard one-year period in respectto key personnel on contract. Such contractsshould indicate their renewal would besubject to obtaining the necessaryimmigration permission, and they may beendorsed to the effect that the employee isexpected to train or be replaced by a suitableBahamian within a stipulated period.Each permit issued by the Immigration

Board relates to a specific post. Permits arenot altered by the director of immigration toreflect change of employment or residence.However, a person holding a work permitmay make application for a new one (his newemployer having been unsuccessful inrecruiting a qualified Bahamian to fill the post)without having to leave the islands.The renewal of a permit on expiration is

not automatic. Generally, no expatriate may becontinually employed in the country in anycapacity for more than five years. However,there are likely to be cases where hardship willbe caused by rigid implementation of thispolicy; according to government, this factorwill be kept in mind in applying the regulations.

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

Sales representative permitTravelling Travelling sales representatives planning todo business in The Bahamas must obtainwork permits from the Dept of Immigrationas well as from the Licensing Authority.

Permanent residenceApplicants for this status of residency mustbe of good character and prepared to showevidence of financial support. Such anapplicant must also state that he intends toreside permanently in The Bahamas.Persons may apply for permanent

residence in any of the following categoriesprovided they satisfy statutory requirementsof The Bahamas:1. As the spouse of a citizen of TheBahamas, and in the case of a male, hemust have been married for not lessthan five years. Women married toBahamians may apply at any time aftermarriage.

2. As an economic applicant; that is, onewho seeks to permanently reside inThe 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.




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In New Providence, real estate agentscharge a 10% commission on the sale ofundeveloped property; 6% on developedproperty, whether residential orcommercial; and 10% for Family Islandproperty, 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 and purchaser

each pay half the stamp duty unless otherwiseagreed. Sellers generally pay commission,stamp duty and legal fees. Sometimesproperty owners list a net sales figure, inwhich case the agent adds those charges to the price quoted to prospective 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 the saleprice plus out-of-pocket expenses.

International Persons Landholding Act, 1993Amended in 2007, The International Persons Landholding Act made it easier for non-Bahamians and companies undertheir control to own property.1. A non-Bahamian or permanentresident who purchases or acquires aninterest in a condominium or propertyto be used by him as an owner-occupied property, or for constructionof premises to be used as an owner-occupied property, must apply to thesecretary to the Investments Board(IB) to register the purchase.Application for Certificate ofRegistration Form I must be filed withthe Bahamas Investment Authority(BIA), Office of the Prime Minister.Contact BIA for a complete list of therequired documentation that mustaccompany the application along withthe original receipt from the Public

Treasury showing payment of therequisite fee of $250.

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

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

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

All applications for permits, Form 3, are to be submitted to BIA for considerationby the IB. If approved, a letter is issued andpayment of the requisite fee of $500 is paid at the Public Treasury and the originalreceipt returned to BIA. The permit is thenissued by the Secretary to the Board.Certificate of registration or permit (withacquisition documents) must be recorded in the Registrar General’s Dept. Fee schedule is as follows:

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

Property transactionsReprinted from the 2015 edition of the Bahamas Handbook

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for an essential overview of setting up trusts, internationalbusiness companies and otherwealth management structuresin The Bahamas, plus informationon working and living here.

Bahamas Financial Services Board websiteThe website of the Bahamas FinancialServices Board provides a database ofinformation for tax, estate and financialplanning practitioners, including adirectory of service providers andlegislation referenced in this guide at www.bfsb-bahamas.com.

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

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

For further information contact:

Bahamas Financial Services BoardPhone: [email protected]

Since 1960, the Bahamas Handbook has documented the development of a nation byrecording and analysing significant events and providing a snapshot of culture, art, business,history and politics in The Bahamas. This richly illustrated annual publication has grown to more than 600 pages, earning a reputation as the most comprehensive source ofinformation on 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 on wealth management strategies, opportunities for direct investment and the lifestyleadvantages of doing business in The Bahamas–a practical resource designed for financialplanners and other advisors to share with their own clients. Order your own subscriptiononline at www.thebahamasinvestor.com

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

For further information contact:

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

Bahamas Handbook & The Bahamas Investor

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