Tax & Accounting Compliance

The Bahamas is one of the globally recognized offshore zones. It has a favorable tax regime for international businesses. The absence of filing income tax and financial statements; and audit requirements makes it advantageous for international businesses to do business in the Bahamas.Enterslice provides end-to-end..

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An Overview of Accounting, Auditing, and Tax Compliance in the Bahamas

The Bahamas changed its legislation regarding International Business Companies (IBCs) and adopted the Commercial Entities (Substance Requirement) Act in 2018. This Act provides the economic substance requirement for companies to conduct relevant activities. There is no requirement for public disclosure of financial statements. However, the IBCs are required to maintain financial statements and records of related necessary papers to reflect the company’s financial position. The financial statements and records should be kept for a period of 5 years. The accounting records should be accessible to the company’s registered agent. A declaration regarding the maintenance of accounting records and accessibility of the accounting records to the company’s agent should be made. The accounting records adopted by the Bahamas are the International Financial Reporting Standards (IFRS).

For people who wish to be smart about their taxes, the Bahamas is the right place as it is a popular “tax haven”. However, it does not mean that the Bahamas does not have any taxes. It has no personal tax however there are a number of other taxes through which the government raises revenue. Let’s discuss in detail the accounting, auditing, and tax compliance in the Bahamas.

Accounting and Auditing Requirements in the Bahamas

Preparation and Filing of Financial Statements

There is no requirement for IBCs to file financial statements. However, the companies are required to file a declaration of accessibility of accounts with the Registrar. The declaration should be filed by the 30th of September every year. If you’re a new company, then the agent at the Registrar’s office has to confirm the declaration within 90 days from the company’s date of incorporation. If there is a change in the agent, a copy of the declaration must be filed with the Registrar by the new agent within 30 days from the date of appointment of the new agent. After the adoption of the Commercial Entities (Substance Requirements) Act, the companies have to file accounts to confirm the company’s economic substance in the Bahamas. An annual report on economic substance in the Bahamas must be filed within 90 days from the end of the financial year. The accounts are to be filed electronically. The forms under which they are to be filed depend upon the result of activity qualification. Below are the forms and the activities for which they are to be filed:

Type of Form

Activity for which the Form is filed

Form A

Outsourcing service providers

Form B

For included companies

Form C

For Holding Companies

Form D

For Non-included companies

The Financial Statements consist of the balance sheet, statement of profit and loss, statement of changes in financial position, and explanatory notes. A company’s financial statement is prepared on a date more than 12 months from the date of its incorporation. No standard reporting format, valuation bases or methods are prescribed. There is a requirement that banks, trust companies, insurance companies, unions, and credit unions must prepare a detailed accounting record as they are required to file annual financial statements with appropriate government authorities. Many companies’ articles of association prescribe that adequate books must be prepared.

Filing of Consolidated Financial Statements

The IFRS is used for the preparation of consolidated accounts for resident companies. As per the Multinational Entities Financial Reporting Act of 2018, a parent resident in the Bahamas must file a country-by-country report. The Country-by-country reporting should be within 12 months from the end of the reporting period. The consolidated accounts of a group of companies should be the source of information for country-by-country reporting.

Liability for failure to file a country-by-country report

On failure to file a country-by-country report, a penalty of USD 4000 may be levied on the parent company. For filing a country-by-country report with false information, a penalty amounting to USD 5000 is levied.

Audit of Accounts

There is no requirement to audit the financial statements of an IBC. However, companies incorporated as per the International Standards on Auditing (ISA) must audit their accounts. An auditor’s opinion is required to be prepared only by a specialist who holds a special license and is a member of the Bahamas Institute of Chartered Accountants (BICA). BICA is a premier accounting body in the Bahamas. It is a member of the International Federation of Accountants and it requires its members to comply with the auditing guidelines of the organization.

Tax Compliance in the Bahamas

Types of Taxes in the Bahamas

  1. Property Tax: Property Tax is charged on the value of the property at rates depending on the type and value of the property. A stamp duty is levied on the Bahama’s immovable property rentals on the amount of the annual rent. Fees are levied on other immovable property transactions as well as in relation to certain other transactions. However, property tax does not apply to foreigners living in the Bahamas. The tax is charged on the value of the property and the rate at which it is charged ranges from 0.75% to 2% based on whether the property is commercial or owner-occupied.

If the property is occupied by the owner and the value of the property is less than $250,000, then no taxes apply. If the value of the property ranges from $250,000 to $500,000, then the rate applicable is 0.75% of the value of the property. Finally, if the value of the property is above $500,000, then the tax rate is charged at the rate of 1% but is capped off at $35,000. However, if the property is not occupied by the owner of the property, then a different tax rate applies. If the value of the property is up to $500,000, then it is taxed at the rate of 1%. Any property valued above $500,00 will be taxed at the rate of 2%. On New Providence Island, the tax rate applicable is 3% on unimproved properties.

There is no restriction on foreigners buying real estate in the Bahamas. Foreign buyers enjoy the same rights as Bahamian citizens. A government permit is needed only if the property to be bought is valued at an amount more than 5 crores or if the property is an underdeveloped land. In other situations, the property must only be registered with the Investment Board and the Central Bank after the transaction.

  1. Social Security Contributions: Social Security Contributions are paid by the employer as well as the employee on employment remuneration. The general rate is 9.8% out of which 3.9% is payable by employees and 5.9% is paid by the employer. Social Security Contributions are made by residents to the National Insurance Board of Bahamas. Self-employed residents make social security contributions at the rate of 8.8%. Further, there is a cap on the Social Security Tax for everyone at $3,077 BSD monthly.
  1. Stamp Duties: Foreigners are charged stamp duty on a number of transactions. Stamp Duty is levied on real estate purchases as on large international money transfers. Rates at which stamp duties are levied range from 2.5% to 10% on the sale of property valued above $100,000. The fee is usually divided between the buyer and the seller. A 1% charge on a mortgage is payable by the borrower. A 0.25% charge is levied for sending money overseas.
  2. Import Duties: Import duty is not levied at a high rate. These duties vary on the type of goods the duty is applied to and can range anywhere between 0% and 220%. The average rate of stamp duty ranges from 5% to 35%.
  1. Value-Added Tax: VAT is a consumption-based tax applied to goods and services imported, bought, or sold for use in the Bahamas. Two rates of VAT are applied: one is the standard rate @ 10% and the other is the zero rate @ 0%. Those goods which are exported to customers abroad are exempt from VAT or zero-rated.

Tax Compliance Certificate

When doing business in the Bahamas, a tax compliance certificate (TCC) is necessary. The TCC is issued by the Government of Bahamas. The TCC came into effect on 1st July 2015. The certificate is valid for 6 months. A TCC is issued only to those taxpayers that are compliant with the tax obligations of the government. A TCC is required for individuals who:

  1. Intend to do business with the government or a public body;
  2. Intend to collect monies for services rendered to the government or a public body;
  3. Intend to register ownership or change ownership of taxable goods;
  4. Receive allowance under the provisions of the legislation.

Frequently Asked Questions

No financial statement is required to be filed by the IBCs in the Bahamas. However, a declaration regarding the accessibility of accounting records has to be filed by the 30th of September with the Registrar.

There is no audit requirement for IBCs in Bahamas. However, companies incorporated as per the Companies Act of 1992 must get its financial statements audited as per the International Standards on Audit.

Yes, the Bahamas is a Tax Haven. The reason being it has no personal income tax, no capital gains tax, no inheritance, gift tax, wealth tax, or taxes on shares dividends, and interests. This makes it an attractive destination for the wealthy and employed. The country’s tax regime is a contributing factor to the Nation’s healthy economy.

No, the government of the Bahamas collects its tax revenue from Property tax, Import and export duties, stamp duties, social security contributions, and License fees.

TCC stands for Tax Compliance Certificate. This certificate is necessary for doing business with the Government of the Bahamas.

 

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