The Bahamas as an Offshore Tax Haven - Bahamian taxes as low as ZERO%

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The Bahamas as an Offshore Tax Haven The Bahamas offer many legitimate benefits as an Offshore Low Tax area. The main one, of course, is to minimize or avoid high tax rates in the investor's home country The Bahamas is a stable, developing nation with an economy heavily dependent on tourism and offshore banking. Tourism together with tourism-driven construction and manufacturing accounts for approximately 60% of GDP and directly or indirectly employs half of the archipelago's labor force. Steady growth in tourism receipts and a boom in construction of new hotels, resorts, and residences had led to solid GDP growth in recent years, but the slowdown in the US economy and the attacks of 11 September 2001 held back growth in these sectors in 2001-03. The current government has presided over a period of economic recovery and an upturn in large-scale private sector investments in tourism. Financial services constitute the second-most important sector of the Bahamian economy, accounting for about 15% of GDP. However, since December 2000, when the government enacted new regulations on the financial sector, many international businesses have left The Bahamas. Manufacturing and agriculture together contribute approximately a tenth of GDP and show little growth, despite government incentives aimed at those sectors. Overall growth prospects in the short run rest heavily on the fortunes of the tourism sector, which depends on growth in the US, the source of more than 80% of the visitors. A Bahamas IBC can be used for: Asset Management and Holding Trading Activities Personal Service Company Consultancy Services Yacht Registration Investment Holding (passive) Such a company: Is easy to setup Has low maintenance cost Is confidential Has no filing requirements Is exempted from any taxation

The term 'offshore' is not used in Bahamian legislation or in describing company forms. Abstaining from local trading activity is the key factor which allows use of the various 'offshore' corporate forms, and ensures long term exemption from taxation and some or all of stamp duty, exchange controls and business licensing requirements. Since there are no general corporate taxes other than stamp duty, there is no separate 'offshore' sector as such in taxation terms. Forms of Offshore Operation Offshore (external) operations take place mostly within the following forms: Domestic Limited Company International Business Company Limited Duration Company Exempted Limited Partnership Foreign Company Trust Foundation Tax Treatment of Offshore Operations In the Bahamas there is no income or corporation tax, no capital gains tax, no VAT or sales tax, and no withholding tax. Companies and partnerships pay annual fees to the Government depending on their nature and capitalisation. There is stamp duty and there are some property taxes. Exempted Limited Partnerships are exempt from both, as are Trusts provided that their beneficiaries are non-resident. In The Bahamas, Banks and Trust Companies (ie administrators of trusts) are also exempt provided that they have non-resident licenses (this is a matter of practice - a license is issued as resident or non-resident depending on circumstances). All of the offshore entities, and non-resident domestic companies, are exempt from exchange controls. Mutual Funds are exempt from taxes and exchange controls if they have an appropriate corporate form; in practice therefore they are exempt. Exchange Control The Bahamas have exchange controls, under the Exchange Control Act and Regulations 1956, applying to resident individuals and companies, who need consent from the Central Bank to conduct operations in foreign currencies. Likewise, non-resident or offshore companies, who are free to deal in foreign currencies, require Central Bank consent to deal in Bahamian dollars. Residents comprise: Bahamian nationals, companies beneficially owned in the Bahamas, and companies whether Bahamanian or foreign-owned operating within the Bahamas. Foreign nationals with work permits who live in the Bahamas are also normally considered to be resident. Non-residents comprise: foreign nationals living abroad, or, if living in the Bahamas, without the right to work there; and foreign companies and foreign-owned Bahamian companies trading exclusively outside the Bahamas. Residents who want to make external investments in foreign currencies will usually be allowed to do so, but have to buy the foreign currency at a premium; non-residents who want to invest into the Bahamas may do so, but the opportunities for portfolio investment are very limited. Exchange controls are gradually being dismantled, initially in respect of CARICOM, and it is the intention of the Central Bank to remove them entirely in due course The International Business Company and its cousin, the Limited Duration Company, are not allowed to do business with Bahamian residents, but are allowed the following activities in the Bahamas: To maintain bank accounts; To make and maintain contact with professional firms; To maintain books and records; To hold meetings of directors or members; To lease real estate for use as an office. It is possible to obtain a license from the Minister of Finance to carry out other types of business activity on the island, if he considers it is in the interests of Bermuda. Other offshore and non-resident entities operate under broadly similar regimes to the International Business Company COMPANY MANAGERS Chancery Corporate Services Limited P.O. Box F-42643 Freeport, Bahamas Tel: (809) 351-4025, Fax: (809)351-4050 IMS International Management Services Ltd Tel: 809-949-4244 Fax: 809-949-8635 Contacts: Clive Harris A.C.A.; Paul Harris F.C.A.; Michael Howard F.I.D.; lan Goodall A.C.A. Services: Specialists in arranging company incorporation and management in most jurisdictions since 1974, providing services for private investment companies and individuals, trading companies, insurance companies and captives, ship and yacht registration and management, mutual funds and property companies. Custom service for lawyers and professional advisors. Correspondents throughout the world Email: ims@candw.ky Mossack Fonseca and Co. (Bahamas) Ltd Bitco Bldg., 3rd Floor P.O. Box N-8188 Nassau, Bahamas Contact: Ms. Antoinette Stubbs Tel: (809) 322 7601, Fax: (809) 322 5807 / 325 3583 Company formation and management. Offices in Panama, the British Virgin Islands, Jersey (CI), Hong Kong, Luxembourg, Geneva, Vancouver, London, Singapore, Budapest and Niue (South Pacific)

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