Bahamas IBCs to pay tax on overseas earnings for the first time

Bahamas-domiciled International Business Companies (IBCs) will have to pay tax on their overseas earnings for the first time from 1 January 2024. The move is designed to eliminate preferential ‘ring-fencing’ and meet commitments made to the European Union and OECD’s base and profit shifting (BEPS) initiative by the Bahamas government.

The Bill repeals and replaces the Business Licence Act 2010, establishing new rules for the Business Licence Tax, including a new rate schedule and an expanded scope of taxable turnover, notably covering the turnover of IBCs earned outside the Bahamas.

The Bill was due to enter into force on 1 July 2023 but the year of assessment for the Business Licence Tax is the 12-month period commencing on the 1 day of January in each year. This means that the new Business Licence rules will generally apply from 1 January 2024.

Under the new Business Licence Bill, IBCs will have to pay a BSD2,500 fee on the first BSD1 million of “revenue attributable to operations outside The Bahamas”, with a 0.25% levy applied to turnover exceeding BSD1 million. This levy is capped at BSD100,000.

Revenue of an IBC derived from the following is deemed to be from operations within the Bahamas:

  • The sale or exploitation of tangible or intangible property that is located or registered in the Bahamas.
  • The export of goods.
  • The sale or other provision of goods or services to persons deemed resident for exchange control purposes, or who are within the Bahamas at the time that the goods or services are sold or otherwise provided.
  • Professional services, including legal services, architectural services, consultancy services, engineering services, accountancy services, and advisory services.

Where the turnover of a business consists partly or wholly of revenues derived from proprietary trading the business will pay tax as follows:

  • Tax equal to the greater of BSD15,000 or 0.25% of revenues derived from proprietary trading, up to a maximum of BSD100,000.
  • On all revenues derived from activities other than proprietary trading, tax is levied at the applicable rates specified above based on the nature of the business and the amount of the revenue.

A family office will pay tax equal to the greater of BSD10,000 and 0.25% of turnover, up to a maximum of BSD100,000.

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