Calls For Rethink Of Corporate Tax For Big Multinationals

We reported recently on the forthcoming corporate income tax that the government in the Bahamas is well on the way to introducing – but there have been strong calls for a rethink. The award-winning corporate team at ParrisWhittaker advises international corporations and domestic companies on business and tax matters.   

The Bahamas has long been internationally known for its favourable tax environment given the absence of corporate tax, capital gains tax, income tax or wealth taxes. This will soon change, assuming the impending corporate tax will come into effect: the country will be brought into line with the Organization for Economic Cooperation and Development’s (OECD) expectations for international tax systems.

Reassuringly for most business, only the biggest international companies will be hit by the new 15% minimum tax (specifically, those generating more than €750 million a year).

Calls to rethink

However, a letter sent jointly by the Bahamas Financial Services Board (BFSB) and the Association of International Banks and Trust Companies (AIBT) calls for a rethink. It’s been reported (in The Tribune) that the letter has been sent to a UN committee responsible for writing a new UN convention on international tax.

It expresses concern that the tax violates the sovereign right of nations to set their own tax systems and rates; and it was irrelevant whether the tax rate was zero or 15% – so long as companies were doing real business and abiding by key rules.

The BFSB and AIBT, who called for a ‘holding period’, said: “Revisit the minimum global corporate tax requirement, as it infringes on sovereign nations’ autonomy to establish and manage their own tax systems. Alternatively, international tax rules should focus on substance presence rules and standardised transfer pricing rules to prevent tax evasion through profit shifting. If entities operate in substance and form within a country, that country’s tax rules should apply, whether 0 percent or 15 percent.”

If government presses ahead regardless, draft legislation for the ‘qualified domestic minimum top-up tax’ (QDMTT) is expected within weeks (it says, by the end of May 2024). This is to be followed by a public consultation process this summer.  

While the majority of companies will be unaffected, the largest multinational enterprises should be preparing now for the potential financial and legal impact. We will continue to report on developments as they happen.

For specialist advice on whether your operations could be affected by the QDMTT, contact the specialist corporate and commercial lawyers at award-winning firm ParrisWhittaker on  +1.242.352.6112 or email us at  info@parriswhittaker.com