Why Choose The Bahamas as an Offshore Tax Haven
Those looking to go offshore in a country where English is the language of business and government need look no further than The Bahamas. English is in fact the day-to-day language in this country, which lies to the east of the state of Florida, and within the same time zone as the financial centers along the east coast of the United States.
The government of The Bahamas (The Bahamas being the official name of the country) is highly proactive in its attempts to attract offshore business, which accounts for over 30% of the country's economy with tourism accounting for approximately 60%. The tax laws and the laws and regulations regarding asset protection and transparency when establishing an offshore business are particularly attractive.
The economy is an open economy, the Bahamian dollar is maintained on a par with the U.S. Dollar, and the country enjoys strong economic and cultural ties with the United States.
Benefits of Setting up an Offshore Business in The Bahamas
- The Bahamas is one of the wealthiest Caribbean countries with an economy based on tourism (60%) and offshore banking (36%). The per capita GDP in The Bahamas was estimated at US$32,000 in 2013. The Bahamas is the third richest country on a per capita basis in the New World, following the United States and Canada.
- The exchange rate from the Bahamian dollar (BSD) to the U.S. Dollar is 1:1. The Bahamian government has maintained the value of the Bahamian dollar on a par with the US dollar for more than a decade.
- The time zone in the Bahamas is Eastern Standard Time/Eastern Daylight Time, the same time zone as Washington, DC and the financial centers along the East Coast.
- The Bahamas is member of the Caribbean Development Bank, the International Monetary Fund, and the World Bank.
- The Bahamas is home to approximately 30,000 American residents. Nearly 90% of the tourists visiting the country are Americans.
- The government of The Bahamas has been politically stable since the country achieved independence and has always had close economic and cultural relations with the United States.
- The Bahamian government has taken a proactive approach in courting foreign investors. The Bahamas has no income tax, corporate tax, value-added tax or wealth tax for those investing in offshore companies. Foreign investment in tourism and banking is especially welcome.
- The Bahamas is home to one of the world's largest open-registry shipping fleets.
- The country is an ideal destination for those wishing to enjoy quality time in an area having a marine tropical climate regulated by trade winds, and in a country of beautiful beaches and forests.
Background Information about The Bahamas
The Bahamas is an archipelago in the North Atlantic Ocean located to the north of Cuba and to the east of Florida. The majority of the islands in the Bahamas are 100 to 150 miles off the Florida coast. The the closest island, Bimini, lies 45 to the miles east of Florida.
The total ocean area encompassed by the country exceeds 180,000 square miles while the actual land area is 5,358 square miles. The majority of the islands in the archipelago are flat, coral islands with some of the larger islands featuring low, rolling hills. Of the more than 700 islands and islets that make up the country only about 30 are inhabited. The two largest towns are Freeport which is located on Grand Bahama, one of the northernmost islands, and the capital, Nassau which is located on New Providence Island.
The largest island is Andros Island, located in the Grand Bahamas Bank to the east of the Florida Keys. The climate is a mild, tropical marine climate which is moderated by the warm waters of the Gulf Stream. The country is renowned for its fine beaches and beautiful forests. The Official name of the country is The Bahamas, while the island chain itself is often referred to as the Bahamas. At times the country is officially referred to as the Commonwealth of the Bahamas.
The Bahamas, once a British Crown colony, is now an independent nation and a constitutional parliamentary democracy within the Commonwealth realm. Political parties first began to form in the years following the Second World War. In 1964 the British Parliament authorized internal self-government in the islands. Nine years later the country achieved full independence.
The Chief of State is the Queen of England who appoints a Governor General as her representative to the country. A Prime Minister serves as the head of government. The Prime Minister, while appointed by the Governor General , is usually the leader of the majority party in the Parliament or the leader of the governing coalition.
The members of the prime minister's Cabinet are appointed by the Governor General on the prime minister’s recommendation. The bicameral Parliament consists of 16 Senate seats and 38 seats in the House of Assembly. Senators are appointed, while members of the House of Assembly are elected by direct popular vote. All members of the Parliament serve 5-year terms. The highest court in The Bahamas is The Bahamas Court of Appeal which consists of a court president and five justices.
During the first half of the 20th century Bahamian politics was dominated by the white residents of the island, predominately wealthy merchants. The first two political parties were the Progressive Liberal Party (PLP) and the United Bahamian Party UBP), with the former representing the disfranchised black majority of the population and the latter representing the wealthy merchant class. A third political party, the Free National Movement (FNM), came into being in the 1970s and for a time held the majority of the seats in the Parliament. The two major political parties at present are the PLP and the FNM.
Economy and Infrastructure
The Bahamas is one of the wealthiest Caribbean countries, and it terms of per capita GNP is only behind the United States and Canada as the wealthiest in the New World. In 2013 the GDP was US$11.4 billion, while the per capita GDP was estimated at US$32,000. The Bahamian dollar is kept on a par with the United States dollar by the government and has been for several decades. The US dollar is a widely accepted currency in The Bahamas.
The economy of the country is largely based on tourism and tourist-driven housing and construction (60%) and offshore banking (36%). In the past, offshore banking was an even greater contributor to the economy but stricter financial regulations drove many businesses away, many of whom had regarded the Bahamas as a place to do offshore business for the purpose of tax evasion as opposed to tax avoidance. Today, the Bahamas is one of the premier jurisdictions for the formation of offshore corporations as its regulations, though much stricter, are nevertheless generous as the government actively seeks Bahamas offshore investors.
The primary import partners of the country are the United States, India, Singapore and South Korea. The main import commodities are machinery and transportation equipment, chemicals, mineral fuels and food. Its principal export partners are South Korea, the United States, the Dominican Republic and Ecuador with the principal export commodities being mineral products, animal products, food, live animals and rum.
The infrastructure in the country is modern and up-to-date. Over two-thirds of the population use cell phones and half the population are Internet users. The main islands are linked by a submarine cable designed to support broadband. The Bahamas is a landing point for the Americas Region Caribbean Ring System (ARCOS-1) and has submarine cable links to Central and South America and to the United States. Two satellite earth stations are located in The Bahamas.
There are 61 airports in the country including 4 international airports plus a heliport. The Bahamas' merchant marine is the 10th largest in the world with over 1,000 vessels, most of which are foreign owned and include 57 container ships and 238 bulk carriers. The primary owners of these vessels are the United States, Canada, Denmark, Greece, Japan and Norway. The major container port is Freeport while Nassau serves as the principal cruise port.
Population, Language and Culture
Natives of the Caribbean region had settled the Bahamas long before Columbus made a landfall there. There was little effort on the part of Europeans to settle the islands although most of the inhabitants were taken by the Spanish to be sold into slavery and were relocated to the island of Hispaniola.
Much of the remaining population was decimated by smallpox. The first European settlements were established in the mid-17th century. The British eventually gained control of the Bahamas and made it a Crown colony in 1718. The islands were long known as a haven for pirates including the infamous Blackbeard.
The estimated population of the Bahamas was 316,000 in 2012. The population is predominantly urban with a majority of the residents living in the Nassau. The official language and the language almost universally used in the islands is English. Some Creole is spoken, mainly by immigrants from other parts of the Caribbean.
The Bahamian literacy rate is above 95%. Approximately 90% of the population is black, just under 5% are white, and the remainder are mixed or other. Residents of the country are referred to as Bahamians. The religion practiced is almost exclusively Christian and predominantly Protestant.
There is no one type of food that one would consider to be uniquely Bahamian. A visitor to the country is likely to be served chicken or boiled fish, chowders, grits, rice, crab or banana bread. One dish somewhat unique to the islands is boiled or stewed conch.
A musical style unique to the islands is called Goombay music, a style having West African roots and often played on the 6-string guitar. Calypso music is also popular, with the father of Calypso having been Bahamian. Today, much of what you will hear in the islands, except when the more traditional music is being performed at the various festivals is nightclub music and rock.
One of the primary events in the islands is Regatta. Regatta got its start in the 1950's when an effort was made to put new life into an aging sailing fleet whose vessels were primarily working vessels. Regatta is now an annual 3-day event.
One of the featured festivals, Junkanoo, is held twice a year, once during the interval between Christmas and New Years and once in July when Independence Day is celebrated. Junkanoo is a riot of sights, sounds, and colors, and is the Bahamian equivalent of Mardi Gras and Carnival. Two other annual events of great importance to the residents is the Andros Crab Fest and the Fox Hill Festival, the latter commemorating the abolishing of slavery on the island.
There are no exchange controls in effect for offshore companies classified as International Business Companies and doing business from the Bahamas. Residents are subject to exchange controls however. Exchange control rules and regulations, where they do apply, are administered by the Central Bank.
International Business Companies conducting business with resident Bahamians could in some instances become subject to exchange controls but typically IBCs do not conduct business with Bahamian citizens or a Bahamas company.
Type of Law
The law in the Bahamas is a common law system based on the English model. When the Constitution was enacted following independence certain features of the United States Constitution were incorporated. Bahamian citizens by and large enjoy the same rights and privileges accorded to American citizens under the United States Constitution.
Insofar as laws pertaining to the Bahamas company formation are concerned, Bahamian corporate law stipulate what a company can or cannot be named, requirements for the number of stockholders and directors, and the process which must be followed to apply for permission to incorporate. These rules and regulations are straightforward and the overall process is transparent.
In The Bahamas, IBC companies are either incorporated under the Companies Act, 1992 as domestic companies or under the International Business Companies Act as offshore companies.
A person does not have to appear in person to incorporate but is in any event required to do so through a registered agent. Registered agents can incorporate an International Business Corporation (IBC) at the Companies Section of the Registrar General's Department. These agents are required to have a Financial and Corporate Service Providers License. Once the incorporation fee is paid, the turnaround time is typically 1 to 7 business days.
Principal Corporate Legislation
The principal pieces of corporate legislation pertaining to establishing a Bahamas offshore company are the International Business Companies Act, 2000 and the Business Companies Act, 2004 with amendments to the Act being made in 2008 and 2010. The Act states that two or more persons may, by subscribing to a Memorandum, incorporate an IBC. No person other than one who is licensed under the Banks and Trust Companies Regulation Act may incorporate an IBC unless licensed and approved under the Financial and Corporate Services Act.
The International Business Companies Act identifies the legal regulations to be followed in great detail to incorporate and operate an offshore company. It states among other things that the minimum number of directors is one, the minimum number of shareholders is one, and that having a company secretary is not required. It is required that accounts be prepared, but they are not publicly accessible and there are no audit requirements, nor is there a requirement to file an annual return. Changes in domicile are permitted for a company that has been formed as an IBC.
The Bahamas has no corporate income tax, value added tax, or wealth tax. There is a minimum annual tax to be paid by offshore corporations. This tax is actually a fee, and will be from US$350 to US$1,000. The tax liability of an offshore Bahamas corporation, which includes the amount of this annual tax is often described as "nil." In addition, there are is no sales tax in The Bahamas nor is there an estate tax, a capital gains tax, or gift or inheritance taxes.