Bahamas: Country and Foreign Investment
The Bahamas Are An Independent Nation State
The Bahamas became independent from the UK in 1973, although the Queen remains Head of State. Beginning 50 miles off Florida, in the Caribbean, the Bahamas has 700 islands and a population of just over 350,000. The official language is English. The capital is Nassau, there are a number of international airports with good connections, and there are excellent port facilities. The climate is sub-tropical. The Westminster-style government is business-friendly. In May 2012, voters ousted Prime Minister Hubert Ingraham's Free National Movement Party, with 29 of the 38 House of Assembly seats going to the Progressive Liberal Party led by Perry Christie. Mr. Christie was sworn in as Prime Minister on May 8, 2012.
Economy Based on Financial Services and Tourism
The Bahamas was a trust and tourist jurisdiction very early in the 20th century, but was relatively late in developing as a financial centre. The economy is heavily dependent on tourism (4m visitors a year), but financial services are growing in importance. GDP was USD11.24bn in 2012 (est) at purchasing power parity, and GDP per head was about USD31,900 in 2012 (est) at PPP. This is above average for the region, but well behind the most successful (and smaller) jurisdictions such as the Cayman Islands and the British Virgin Islands.The global financial crisis left its mark on the country's economy with GDP contracting and the budget deficit increasing. However increased tourism, particularly from the US and new investments, have reversed the decline. Investment in the tourism sector and increased visitor numbers are vital for further growth.
The Bahamas' Stock Exchange
In May 2000, the Bahamas' new stock exchange (BISX) went live, originally with 2 established brokers; by the end of 2005 there were 19 companies listed on the exchange with a capitalisation of around USD2.6 billion. The BISX has an upgraded infrastructure from which remote trading across a secure private WAN and the launch of an international segment can take place. However, the exchange has struggled to develop a secure financial base in the absence of promised privatisations.
The Bahamas' Lowtax Specialisations
Leading sectors are banking (268 banks at the end of 2012) and mutual funds (713 at the end of 2011). Trust management is also prominent. The insurance sector has assets of USD1.3bn. Professional services are excellent. The shipping registry has been very successful for larger vessels.
No Income Tax in the Bahamas!
There is no income tax, capital gains tax, VAT, sales or use tax or wealth tax. Annual government fees are imposed on businesses and there are national insurance, stamp duties and property taxes. Local businesses are controlled by licensing and somewhat protected, although there are good investment incentives in some sectors. Offshore operations take place through International Business Companies or other tax-exempt forms.
After the Bahamas was placed on both the FATF and OECD 'blacklists' in 2000, the government extensively revised its legislative structure to bring the country into conformity with tougher international standards, and the Bahamas was removed from both lists as a result.
A Tax Information Exchange Agreement was signed with the US in 2002, and the new Bahamian government in 2002 emphasized its determination to maintain the Bahamas as a fully compliant international financial centre. The Bahamas has since signed a further 29 Tax Information Exchange Agreements. Some dissatisfaction with the new legislation on the part of the financial sector is being dealt with through adjustment of the regulatory regime.
Immigration Controlled by Residence and Work Permits
With an unemployment problem, the Government controls access to Bahamian jobs with a system of work permits. Access to housing has been recently relaxed for foreigners, who are now encouraged to buy or build 'second homes'. Also, the finance industry is working with the government to develop a more flexible work permit framework, to allow the Bahamas to attract the best industry talent.