August 31 2023

Bahamian IBCs Facing New Tax From January 2024

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Bahamian international business companies (IBC) operating in other jurisdictions will, from January 1 2024, be taxed by The Bahamas’ Department for Inland Revenue on their overseas earnings for the first time. The experienced commercial lawyers at ParrisWhittaker advise businesses across all sectors operating in and from The Bahamas and can explain how to prepare ahead of the new levy.

Currently, foreign entities are only required to pay for a $300 business licence in The Bahamas. They are, effectively ring-fenced from paying taxes on oversea revenue – but not for much longer.

Like several other countries, the government is removing the preferential treatment of foreign entities to meet its commitments to the European Union and Organisation for Economic Co-operation and Development.

What’s new?

The Bahamas Business Licence Bill (along with the Commercial Entities (Substance Requirements) Bill 2023) which repeals the Business Licence Act 2010) was published alongside the 2023/2024 Budget. It includes a scale of fees.

The rules enable a levy of 0.25% to be charged, by way of a business licence, on an IBC’s revenue attributable to operations outside the jurisdiction. Specifically, a $2,500 levy will be applied up to and including the first $1m, rising to 0.25% on revenues in excess of $1m – with a levy cap of $100,000.

A lower levy will be charged on revenues attributable to operations of an IBC within the jurisdiction.

Who will it apply to?

Any business operating in or from The Bahamas will be liable to pay the new levy. This includes the provision and exports of goods and services. The legislation specifically states that it will impact any “trade, profession, vocation, venture or undertaking, provision of personal services, technical and managerial skills, and the exploitation of tangible or intangible property for the purpose of obtaining income on a continuing basis from such property”.

Financial services companies will have to pay an enhanced levy of 1.25% of their turnover (up to a maximum $100,000 turnover); while banks and trust companies will be charged 1%.

Where some business activities take place within The Bahamas, and others in another jurisdiction, the IBC will have to allocate and apportion their turnover accordingly. The relevant tax will be then applied in accordance with the new scale of levy.

Is any business exempt?

Yes. Regulated investment funds and pure-equity-holding companies will be exempt.

Also, note that the charges are generally higher for financial services entities. Family offices will pay BSD10,000 or 0.25 per cent of turnover, whichever is greater, to a maximum of BSD100,000.

What should we do?

We strongly urge any IBC (and any Bahamian company unsure whether they could be caught by the tax) to take expert advice on the new rules to determine how the levy will be applied to their revenues and what they should do to prepare.

Contact the experienced corporate and commercial lawyers at award-winning ParrisWhittaker for early strategic advice. Call Jacy Whittaker on info@parriswhittaker.com or you email him at +1.242.352.6112