The Bahamas is a true veteran in the offshore financial services sector.
It’s a well-known tax haven and is no longer associated with turning a blind eye to money laundering that in the past has hurt its reputation.
English settlement began with settlers from Bermuda in 1648.
In the early 1700s, the French and Spanish teamed up to oust the English from the Bahamas. This was not entirely successful, although it did create a power vacuum, which pirates used to set up a quasi-state. The Republic of Pirates was an unrecognized state in the Bahamas that lasted from 1706 to 1718. The English then retook the Bahamas and established a stable government.
In 1908, Royal Bank of Canada (RBC) became the first bank to set up shop in the Bahamas. Over the coming decades, more Canadian banks joined. Swiss banks, which today hold a firm grip on the Bahamian international financial services sector, arrived in the ‘60s, spearheaded by UBS.
The Bahamas grew as a tax haven in the 1930s and 1940s, drawing the attention of wealthy foreigners (largely Canadians) with its lack of taxation on wealth, income, and inheritance. This had not been an intentional move, but rather a consequence of its history, with an economy successfully reliant on customs duties.
In 1973, Bahamas was granted full independence from the United Kingdom.
Offshore Company Formation in the Bahamas
While the Bahamas offers a rather wide range of business entities, it is the International Business Company (IBC) that is used for the vast majority of incorporations by international clients.
The Bahamas IBC has all the bells and whistles you would expect:
- Complete exemption from taxation.
- No reporting requirements.
- Bookkeeping is required but need not be submitted.
- No paid-up share capital required.
- Shareholders are not in public records, but directors are on public records (which is unusual for an IBC).
- One director and one shareholder are required, and they can be the same person.
- Cannot trade within Bahamas.
- Re-domiciliation or continuance in other jurisdiction.
The costs of forming a Bahamas IBC ranges from around US$1,500 to $2,500, and $1,000 to $1,500 for the annual renewal. This is higher than most other IBC jurisdictions and is one of the ways the Bahamas tries to keep out less reputable clients.
Trusts and Foundations in the Bahamas
Bahamas is a significant jurisdiction for international trusts. Its laws are attractive for everything from asset protection to tax planning, from inheritance planning to charitable trusts.
Foundations are a relatively new addition to the Bahamian financial services arsenal. The Foundations Act of 2004 saw the Bahamas try to get in on the increased interest in foundations—then largely specialties of Panama and Liechtenstein.
Bahamas foundations are commonly used for tax planning or family wealth (including heritage) planning. Forced heirship is prohibited by law.
Foundations must have assets valued at no less than US$10,000.
Foundations and trusts are exempt from tax in the Bahamas.
Offshore Banking in the Bahamas
Today, the Bahamian banking sector has positioned itself as a light version of Switzerland. This is in part because of the magnitude of the operations of Swiss banks such as UBS, Credit Suisse, Pictet, and Julius Baer, which have shaped the island nation into a significant wealth-management jurisdiction.
There used to be a time when the Bahamas would actively market itself for its tight banking secrecy. For better or worse, those days are now gone.
Economic Residency Program in the Bahamas
Instead of offering economic citizenship, which offers instant access to a second passport, Bahamas has an economic residency program.
In exchange for a US$500,000 investment in local real estate, foreign investors can be granted a residence permit.
Short of coughing up $500,000 in real estate or getting a highly qualified job in, for example, financial services or medicine, it’s very difficult to obtain residency in the Bahamas.
The Bahamas compares to Cayman Islands and Bermuda in terms of quality of life and standards of living, although costs are generally lower.
However, many expats grow weary of the island feeling overly touristy. It’s very difficult to fully assimilate into society as a foreigner; a problem the other two mentioned jurisdictions do not suffer from.
Taxation in the Bahamas
With no tax on income, wealth, capital gains, or inheritance, and with significant exemptions available to real estate tax, Bahamas is extremely attractive.
Customs duties are high, as they serve as one of the government’s main sources of income (after tourism income and financial services license fees).
Conclusion
The Bahamas offers a compromise between reputability, transparency, privacy, cost, and ease of engagement.
Bahamas’ efforts have helped to improve its reputation, and today the jurisdiction is considered far more favorably than the likes of Seychelles and Belize.
Editor’s Note: In addition to the Bahamas, there are other attractive jurisdictions that are cause for optimism. International Man is all about making the most of your personal freedom and financial opportunity around the world. Our free guides and resources are a great place to start.
The information in this article is based on Streber’s personal experiences and has not been independently verified. As always, do your own due diligence.
Streber works as a consultant and director for a wide range of companies and has broad experience in offshore banking, offshore incorporation (formation and maintenance of offshore companies), taxation, privacy, ecommerce, merchant accounts, online payments, and all other things the privacy-minded entrepreneur might find interesting. You can read Streber’s blog here.
