Taxes imposed within The Bahamas cover a range of categories, including business licence tax, stamp duty, customs and excise duties, value-added tax (“VAT”), and real property taxes. Employed and self-employed individuals are also required to contribute to the National Insurance Board on their wages, up to the insurable wage ceiling. Notably, The Bahamas does not have income tax, inheritance tax, or wealth tax.
All persons engaging in gainful employment, employers, and self-insured persons must register with the National Insurance Board before or as soon as possible after commencing work. Contributions must be paid monthly by the 15th day of the month following the month they were due.
What are the tax obligations for property owners?
Property owners are required to declare their property to the Department of Inland Revenue (“DIR”) for assessment by 31st December each year. Any changes in property usage or ownership must be reported promptly, within 14 days for requirement for owner-occupied property changes. The DIR issues assessment notices by 15th October for the following year, with tax payments due by 31st March. Late fees are only applicable after 31st December.
What is the tax process for businesses?
Every business in The Bahamas must have a business license. The three categories are (i) occasional, (ii) temporary, and (iii) annual licenses. Applying for a license is mandatory before starting operations. Annual licenses enjoy tax exemption in the first year. Renewal for annual licenses is due by January 31st of the following year, with taxes payable by March 31st. Business owners should be aware that annual tax estimates are initially based on prior year’s turnover. Renewal filings for businesses with a turnover of $250,000 and above must include a statement of turnover from an independent practitioner licensed by The Bahamas Institute of Chartered Accountants. Businesses with annual turnovers between $250,000 and $5,000,000 are required to have a report on their turnover following International Standards on Review Engagements. For those surpassing $5,000,000 million in turnover, an audit of financial statements is mandatory. Additionally, it is crucial for businesses to maintain reliable accounting records for at least five years.
When is VAT registration applicable?
Businesses in The Bahamas must register for VAT if they provide a taxable supply of $100,000 or more. Registration is mandatory for certain sectors like electronic commerce, hotels, and foreign homeowners offering vacation home rentals, irrespective of turnover. A VAT registrant is required to file a VAT return detailing the total taxable and exempt supplies made and received during the tax period. Additionally, the registrant must settle the applicable VAT within 21 days of the end of the tax period, or within 14 days for large taxpayers. A tax period usually spans three (3) months, with payment due within the specified filing deadline. Businesses are obligated to retain accounting records for at least 5 years.
At this time, there are no substantial procedural obligations for customs duties and stamp duties. These taxes are payable shortly after an event (i.e. for customs duties, upon importation of goods, and for stamp duty, within six months of the closing of a transaction which is subject to stamp duty).
Who are the Regulators?
The key regulators in the Bahamian tax system are the DIR and the Department of Customs. The DIR oversees domestic taxes, while the Department of Customs manages border taxes and fees. Taxpayers have the right to file an objection against most tax authority decisions. This internal review process provides an avenue for resolution. If dissatisfied, taxpayers can escalate their appeal to the Tax Appeal Commission and ultimately to the Supreme Court.
It is important to remain informed and compliant with these important tax regulations in The Bahamas.
*Excerpt taken from Legal 500 Country Comparative Guide – Tax (2024)
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