News Americas, NEW YORK, NY, Sat. May 15, 2021: It is believed the Bahamas is where Christopher Columbus first set foot in the Americas. Since then, this nation has had its exotic location and strategic position to its advantage. It was a British Colony for most of the 17th and 18th centuries. Pirates favored the hiding places around the islands for the treasure stolen from the ships traversing the shipping corridors in the region. The civil war and prohibition benefited the Bahamas, but these 700 islands were devastated economically when these ended, that is until they opened their doors to tourism.
Today, the Bahamas are not just a popular Caribbean tourist destination but have a highly developed services sector. Despite some restrictions, the Bahamas generally have business-friendly regulations making it easy to start an LLC. It is also an attractive investment location. Compared to President Biden’s proposed 28% corporate tax in the US, the 0 % corporate tax of the Bahamas is highly attractive to businesses.
What Are the Advantages of Doing Business in The Bahamas vs the US?
A business-friendly approach to both companies and investors was encouraged by the International Business Companies Act passed in 1990. This made the Bahamas more than a popular tourist destination and opened doors to foreign investors.
Approval of Foreign Investments
All investors in every sector of the Bahamian economy must seek approval from the Bahamas Investment Authority (BIA). Their proposed activities must satisfy the BIA that they will benefit the nation. Some sectors are reserved for nationals of the island. These include property management, wholesale and retail, the domestic gaming industry, security services, are a few.
Some key areas like financial competence, capital investment, the business plan, employment opportunities for the islanders, the source of business funds, and all basic information about the proposed shareholders are all taken into consideration by the BIA.
All proposals approved by the BIA are presented to the National Economic Council, which is headed by the Prime Minister, for further review before a decision is made.
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Wages of employees on sick leave, maternity leave, other job-related issues, and pensions are covered by the program run by the National Insurance Board (NIB). Everyone working on the islands must make NIB contributions. All companies, businesses, and the self-employed must register.
Contribution rates are 9.8% of the actual wages with an insurable ceiling of just over BSD 3,000 per month. Employers pay 5.9% of the contributions and the rest are paid by the employee.
Every business applies for a business license as soon as it gets BIA approval. The process is quick, requiring the completion of a Business License Application form and a BSD 100 fee. The license is an annual requirement. Some cases of non-resident businesses qualify to pay an annual fee of BSD 300.
Regardless of turnover, all permanent businesses must file annual business tax returns. These are due by January 31 and taxes are payable by March 31. Businesses with turnovers of BSD 100,000 or more also submit financial results and a certified statement issued by an independent professional accountant.
Business License taxes are based on turnover and business type and range from 0.5% and 3% of the gross annual revenue.
The most frequently used business type by foreigners is the International Business Company (IBC). However, other commonly used business types are Limited Liability Company (LLC), and Segregated Accounts Company (SAC).
Value Added Tax (VAT)
The standard rate for VAT is 12% and it applies to nearly all goods and services within the Bahamas. Businesses expecting to have an annual turnover of BSD 100,000 must register for VAT.
People who conduct business activities in the Bahamas are exempt from paying personal or corporate income tax on their profits. However, a Stamp Tax of 5% is imposed on all types of money exchanges and transfers remitted out of the Bahamas for amounts of $500,000 and up transferred out of the country. Stamp Tax applies to the sale of a business at 6%, and mortgages at 1%.
There is also a Real Property Tax of between 0.75% and 2% on the market value of properties with a few exceptions.
Approximately 50% of the Bahamas government revenues are from customs and excise duties with an average import duty of 45%. Some items like electronics, watches, jewelry, and perfumes are duty-free, whereas cigars have 220% import duties.
Investment is encouraged in the Bahamas, and the government has ensured a stable and safe environment for doing business. Perhaps getting started may be slightly more complicated than in the US, but the process is reasonably straightforward. Low taxes make the Caribbean extremely attractive to businesses from the US.