Originally inhabited by the Lucayan tribe and made up of more than 700 islands, islets, and cays, The Bahamas is said to be the site where Christopher Columbus first set foot in the new world. It became a prominent British colony during the 17th and 18th centuries as it was valued for its strategic location for shipping routes. The country gained its independence from the United Kingdom in 1973 and is today part of the commonwealth of nations.
One of the most popular and prosperous tourist destinations in the region, The Bahamas also boasts a highly developed services sector – international banking and investment management accounts for 17% of the country’s GDP.
To be successful in The Bahamas, investors and companies must understand the country’s laws, rules, and regulations. In this article, we review the advantages of doing business in The Bahamas, the risks and considerations, and address common FAQs.
Advantages of doing business in The Bahamas
Ease of doing business
The biggest draw of The Bahamas to companies and investors is its business-friendly environment. The enactment of the International Business Companies Act of 1990 easing the process and cost of incorporation and governance, helped established the country as a popular destination for foreign investment. It also introduced other business-friendly initiatives such as 0% corporate income tax and no annual filing or auditing requirements.
In fact, the government actively encourages investment from foreign sources. Its political stability also adds to the country’s attractiveness in the banking and financial sectors.
Risks and considerations
The jurisdiction has strict privacy protection laws; however, The Bahamas has begun implementing anti-money laundering (AML) laws in accordance with the Organization for Economic Co-operation and Development (OECD) to deter wrongdoing and protect its stable and safe business environment.
Although AML laws protect companies from being implicated in criminal activities, they are laborious to comply with, introducing additional risk. Companies can be held liable from a civil and criminal perspective if they fail to complete periodic AML assessments to keep pace with changes in customer and partner business structures and additions to sanction lists. A failure to do so can also result in reputational damage and be detrimental to growth.
While the Bahamian government does not impose an income tax, other forms of tax are levied on companies doing business in the country. Some of these taxes include value-added tax (VAT), stamp tax, real property tax, and import duties (although some items are exempt).
Dependency on tourism
Like its Caribbean neighbors, tourism is the bedrock of The Bahamas’ economy. It contributes 60% of the country’s GDP and employs about 50% of the labor force. As such, the nation and its tourism infrastructure are vulnerable to periods of global economic downturn.
A big challenge to investment in The Bahamas includes the government’s protection of certain areas of the economy, prohibiting investment from foreign companies. These areas include:
- Wholesale and retail operations
- Commission agencies engaged in import or export
- Real estate and domestic property management
- Domestic newspapers and magazine publication
- Domestic advertising and public relations firms
- Nightclubs and restaurants except for specialty, gourmet, and ethnic restaurants and those operating in a hotel, resort, or tourist attraction
- Security services
- Domestic distribution of building supplies
- Construction companies except for special structures
- Personal cosmetic/beauty establishments
- Commercial fishing including deep water fishing, shallow water scale fish, crustacean, mollusk, and sponge-fishing
- Auto and appliance service operations
- Public ground transportation
- The domestic gaming industry