TerraLex Cross-Border Guide to Cross-Border Guide to Business Investment in Latin America & the Caribbean - NEW

The main types of legal entity(ies) used by foreign investors are as follows:

• International business companies (IBCs) incorporated under the International Business Companies Act, 2000.
• Companies (CACs) incorporated under the Companies Act, 1992.

IBCs are most commonly used by non-Bahamian investors. The main reasons for using IBCs are their ease of incorporation, flexible corporate structure, and fewer corporate governance requirements.

The International Business Companies Act, 2000 and the Companies Act, 1992.

IBCs

An IBC is required to have a registered agent and office in The Bahamas. The registered agent submits (i) a certificate of compliance certifying that the requirements of the International Business Companies Act, 2000 in respect of the registration of the IBC have been complied with; (ii) the Memorandum and Articles of Association for the IBC; and (iii) the names of the proposed directors of the IBC, through the online Corporate Administrative Services Registry (CARS) portal. Once the required documents are submitted on CARS, the turnaround time for incorporation of the IBC is within 48 hours.

IBCs must have a minimum of one shareholder and one director.

CACs

A CAC is required to have a registered office in The Bahamas. The registered office submits (i) a notarized statutory declaration from a counsel and attorney-at-law declaring to the best of their knowledge that no subscriber to the Memorandum and Articles of Association of the CAC have any limitations (such as being of unsound mind); (ii) the Memorandum and Articles of Association of the CAC; and (iii) a notarized witness affidavit with respect to the execution of the Memorandum and Articles of Association by the subscribers of the CAC, through the online CARS portal. Once the required documents are submitted on CARS, the turnaround time for incorporation of the CAC is within 48 hours.

CACs must have a minimum of two shareholders and two directors (three directors if a public company).

There is no minimum or maximum share capital requirement.

There is an exchange control regime under the Exchange Control Regulations Act and the Exchange Control Regulations (collectively known as the Exchange Control Regulations). Its broad objective is to conserve the foreign currency resources of The Bahamas and assist with the balance of payments.

For the purposes of the exchange control regulations, persons, firms and companies are categorised as "resident" and "nonresident". Different rules apply depending on this status. Generally, entities conducting business in The Bahamas or with Bahamian residents are considered resident. Entities conducting business exclusively offshore are considered non-resident.

The Exchange Control Regulations prohibit resident persons from receiving payments in a foreign currency without the prior approval of the Central Bank. However, this does not prohibit the recording or acknowledgement of the payment by the resident. In practice, such payments are simply converted to Bahamian dollars then received into the resident's account. Resident persons require prior approval of the Central Bank to acquire foreign currency or foreign currency assets.

There is no requirement to have local (nationals) as directors.

There is no legislation which requires specific demographics for the various legal entities or establishes a quota system.

CACs have the following filing requirements:

• An annual statement showing shareholders, directors and officers must be filed on the fourteenth day succeeding the day on which the ordinary general meeting or if there is more than one ordinary general meeting in each year, the first such ordinary general meeting is held.
• An annual return must be filed as to percentage of Bahamian ownership.
• Notice of any change in directors must be filed within fifteen days after a change is made.
• Written notice of a unanimous shareholders agreement must be filed within 15 days of execution or termination.
• Copy of annual financial statements or consolidated financial statements must be filed within two days of its annual general meeting (public companies only).

IBCs have the following filing requirements:

• A register of directors and officers must be filed and any changes thereto to be filed within one year of change.
• Written notice of a unanimous shareholders agreement must be filed within 15 days of execution or termination.
• An accounting declaration must be filed confirming that reliable accounting records are being maintained and that such accounting records shall be made available to its registered agent.

Employment in The Bahamas is governed generally by the Employment Act 2001 which sets out the minimum rights and entitlements for employees in The Bahamas. These include, but are not limited to, standards applicable to matters such as: standard hours of work and overtime; protection from discrimination on certain specified basis; vacation and vacation pay; maternity leave and maternity pay; sick leave; family leave; notice and severance pay on dismissal; and redundancy. The provisions of the Employment Act are incorporated in virtually every Bahamian contract of employment (whether written or unwritten) although employers may provide benefits to employees which exceed those set out in the Employment, they cannot provide any less.

The Industrial Relations Act 1970 (and its Regulations) relates primarily to the issue of unionization and setting out rules with the view to ensuring good working relations between an employer and its employees. More generally, the Industrial Relations Act provides for mechanisms of dispute resolution arising from employment issues and establishes the Industrial Tribunal which is an alternative forum for judicially determining employment claims.

The Health and Safety at Work Act 2002, contains provisions concerning an employer’s obligation to ensure that a safe place and system of work is provided for employees.

The National Insurance Act 1972 (and its compendium of subsidiary legislation) relates to what is essentially a social security fund that has many purposes. The National Insurance Act requires the payment of contributions by and/or on behalf of all persons employed in The Bahamas. These contributions are split between an employee contribution and an employer contribution. Employers are responsible for ensuring that both parts of the contribution are collected and paid to the National Insurance Board.

Part VI of the Immigration Act 1967 contains a prohibition against working in The Bahamas without a work permit and creates an offence against employing anyone to perform work in The Bahamas without a valid permit.

Pursuant to the provisions of the Immigration Act, all non-Bahamians must obtain either a long term work permit (up to 3 years per application) or short term work permits (30 days or less and which may only be used 3 times per annum for each applicant).

Pursuant to the provisions of the International Persons Landholding, Act, 1993 a non-Bahamian must apply to the Bahamas Investment Authority for either a Certificate of Registration or a Permit, depending upon the circumstances of the acquisition, such as size and/or the intended use of the property and whether the non-Bahamian owns more than one parcel of land. Additionally, obtaining a permit is a condition precedent to closing. If the circumstance calls for the non-Bahamian to obtain a permit but they fail to acquire the same, the transfer to the non-Bahamian is null and void. Certificates of Registration are obtained post-closing.

Additionally, depending on the nature of the property investment, it may also be necessary for the foreign investor to obtain approval from the Exchange Control Department of the Central Bank of the Bahamas. The Exchange Control Department of the Central Bank of The Bahamas (“ECD”) is responsible for the operations of exchange controls in The Bahamas, pursuant to the Exchange Control Act, 1952 and the Exchange Control Regulations, 1956. ECD’s primary objective is to regulate all foreign currency transactions and the inflows and outflows of foreign currency to and from The Bahamas. ECD prohibits those deemed non-resident from engaging in Bahamian currency transactions or holding Bahamian securities without prior approval. Similarly, Individuals/Companies deemed “Resident” for exchange control purposes may not maintain a foreign currency bank account nor engage in foreign currency transactions or hold foreign securities without the prior approval and must obtain prior permission before taking out foreign currency loans or purchasing or remitting foreign currency. In recent years, the regulations have been relaxed for private residential purchases.

Finally, we wish to also point out that non-Bahamians who acquire a residence valued at $1,000,000.00 and up would be eligible for economic permanent residency.

There are no bilateral or multilateral treaties that help foster business in The Bahamas.

The Government provides investment incentives, including exemption from the payment of certain customs duties on building materials, equipment and approved raw materials and real property taxes for periods up to twenty years, under the following pieces of legislation: (i) Industries Encouragement Act; (ii) Agricultural Manufacturers Act; (iii) Tariff Act; (iv) The Bahamas Free Trade Zone Act; (v) City of Nassau Revitalization Act; (vi) Hotels Encouragement Act; (vii) Family Islands Development Encouragement Act; (viii) Spirits and Beer Manufacture Act (ix) The Bahamas Vacation Plan and Time-Sharing Act.

A business licence is required to carry on business in or from within The Bahamas. Business licence taxes vary based on the type of business and turnover, and range from 0.5% to 1.25% of annual turnover (i.e. gross revenues) for most business types.

The profits of the Bahamas constituent entities of large multinational enterprise (“MNE”) groups that have global revenues of 750 million euros or more are subject to a minimum tax of 15% under the Domestic Minimum Top-Up Tax Act, 2024 (“DMTT Act”) which was enacted to implement the OECD Pillar Two Rules. Amounts paid under the DMTT Act may be applied as a credit towards business licence tax liability.

Value added tax (“VAT”) registration is required for any person who is carrying on business from within The Bahamas and has (or expects to have) annual turnover of BSD$100,000 or more. However, for some activities, registration is required regardless of whether the turnover of the business meets the registration threshold. Electronic commerce businesses that are domiciled outside The Bahamas are treated as resident to the extent that they provide services for the use, benefit or advantage of persons in The Bahamas.

The standard rate of VAT is 10%. However, some food items are subject to VAT at a reduced rate of 5%. Exports are zero rated and there are a few exemptions. VAT registrants are able to claim input tax deduction on their VAT expenses subject to the exceptions provided in the VAT Act.

Stamp duty at the rate of 5% is payable where funds of or over five hundred thousand dollars per annum are converted into foreign currency and are remitted or transferred out of The Bahamas to a related party as either dividends or profits or payments for services to be rendered by the related party. All other remittances of funds outside The Bahamas or conversions into foreign currency are subject to a 1.5% stamp duty. Stamp duty also applies to the sale of a business (other than real property) and other banking transactions such as mortgages of personalty and bank withdrawals.

There are no personal income taxes. However, The Bahamas has a social security programme that is administered by the National Insurance Board (“NIB”). NIB contributions are mandatory and are deducted from salaries at source before distribution to employees and must be remitted to the NIB by the employer. The contributions are required to be paid monthly and are due by the 15th of the following month.

The only competition authority in The Bahamas is the Utilities Regulation and Competition Authority (URCA). This was established by the Utilities Regulations and Competition Authority Act 2009. URCA regulates electronic communications sector services under the Communications Act 2009 (CAA), electricity services under the Electricity Act, 2024 (EA) and the natural gas sector under the Natural Gas Act, 2024 (NGA). The law applies to foreign businesses doing business in the electronic communications services, electricity services and natural gas sectors.

Criminal penalties can be imposed for breaches of the CAA, EA and NGA and not complying with any URCA order. A fine or other penalty can be imposed as determined by the URCA, up to 10% of the offender's Bahamian turnover.

Restrictive Agreements and Practices

Under the CAA, the following agreements (whether formal or informal) between undertakings or concerted practices relating to communication matters are prohibited:

• Agreements that may affect trade in The Bahamas.
• Agreements that have as their object or effect the prevention, restriction, or distortion of competition in markets in The Bahamas.

Under the EA, no person shall without the grant of an approval by URCA enter into a contract or arrangement or arrive at an understanding which:

• contains a provision that has the purpose, or has or is likely to have the effect, of substantially lessening competition in an electricity market; or
• creates new monopoly situations in the generation, transmission, distribution or supply of electricity in The Bahamas.

Under the NGA, no person shall without the grant of an approval by URCA enter into a contract or arrangement or arrive at an understanding which:

• contains a provision that has the purpose, or has or is likely to have the effect, of substantially lessening competition in the gas market; or
• creates new monopoly situations in the generation, transmission or supply of natural gas in The Bahamas.

Certain exemptions apply which are issued on a case-by-case basis.

Unilateral Conduct

Conduct by URCA licensees that amounts to an abuse of a dominant position in the provision of an electronic communications service, electricity service and natural gas service in The Bahamas is prohibited.

The Bahamas recognizes local and international arbitral awards.

Under the Arbitration Act, 2009, an arbitral award made pursuant to an arbitration agreement may, by leave of the Supreme Court of The Bahamas, be enforced in the same manner as a judgment or order of the Supreme Court to the same effect.

Subject to compliance with the procedural requirements of the Arbitration (Foreign Arbitral Awards) Act 2009, an arbitral award made pursuant to an arbitration agreement in a foreign state that is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards is, with leave of the Supreme Court of The Bahamas, enforceable in the same manner as a judgment or order of the Supreme Court to the same effect.

Enforcement of a foreign arbitral award may be refused if the person against whom it is invoked proves:

• that a party to the arbitration agreement is under some incapacity under the law applicable to that party;
• that the arbitration agreement was not valid under its stated governing law or, failing any indication thereon, under the law of the state where the award was made;
• that he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;
• that the award (or relevant portion thereof) deals with a dispute or decides on matters not contemplated by or not falling within the terms of the submission to arbitration;
• that the composition of the arbitral tribunal or the arbitral procedure, was not in accordance with the agreement of the parties or failing such agreement, with the law of the state where the arbitration took place;
• that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority in the state in which or under the law of which, the award was made; or
• that the award is in respect of a matter that is not capable of settlement by arbitration or is contrary public policy.

There are no laws aimed at protecting investors who wish to invest in The Bahamas.

The Bahamas has a politically stable and investment safe environment conducive to private investment.

Under the National Investment Policy for The Bahamas there is a non-exhaustive list of certain areas especially targeted for overseas investors, as follows:

(i) Touristic Resorts (ii) Upscale Condominium, Time-share and Second Home Development; (iii) International Business Centre; (iv) Marinas; (v) Information and Data Processing Services; (vi) Assembly Industries; (vii) High-Tech Services; (viii) Ship Registration, Repair and other services; (ix) Light Manufacturing for export; (x) Agro-Industries; (xi) Food Processing; (xii) Mari-culture; (xiii) Banking and other Financial Services; (xiv) Captive Insurance; (xv) E-Commerce; (xvi) Aircraft Services; (xvii) Pharmaceutical manufacture; (xviii) Off-shore Medical Centres.

For completeness, the following areas are reserved for Bahamians:

(i) Wholesale and Retail Operations; (ii) Commission agencies engaged in the import/export/trade; (iii) Real estate and domestic property management agencies; (ix) Domestic newspaper and magazine publication; (v) Domestic advertising and public relations firms; (vi) Nightclubs and restaurants, except specialty, gourmet and ethnic restaurants; restaurants operating in a hotel, resort complex or tourist attraction; (vii) Security services; (viii) Domestic distribution of building supplies; (ix) Construction companies, except for special structures for which international expertise is required; (x) Personal cosmetic/beauty establishment; (xi) Commercial fishing; (xii) Auto and appliance service operations; and (xiii) Public transportation.

Although the above areas are reserved for Bahamians, under certain circumstances, such as joint venture arrangements with Bahamians, a foreign investor could invest and participate in these areas reserved for Bahamians.

The Bahamas’ infrastructure is undergoing modernization. There are ongoing upgrades to the roads and airports on islands other than New Providence and to the digital infrastructure across The Bahamas. The Government has also encouraged renewable energy projects and the use of public private partnerships for climate resilient infrastructure.

There are compliance hurdles and multiple regulatory delays and which cause extended approval for larger projects and business operations.