The Ministry of Finance today announced the release of the Green Paper on “Corporate Income Tax Strategies for The Bahamas”, which aims to solicit feedback from stakeholders on the government’s proposals to achieve greater efficiency and equity in the business tax regime and achieve alignment with global tax developments. The Minister of Finance notes that, “Our goal is to ensure that we explore all the right options and properly align our choices to support growth, investment and development”.

Overview

The government is faced with the compelling realities of having to address the Organization for Economic Cooperation and Development’s (“the OECD”) requirements related to Pillar Two international tax reforms and the inherent bias in the existing business licence tax (“the BLT”).

In July 2021, The Bahamas became one of over 138 members of the OECD’s Inclusive Framework that agreed to support implementation of the Pillar Two tax reform, under which all multinational entities with revenues of 750 million euros or higher will be subject to a minimum effective tax rate of 15% in each jurisdiction in which they operate. Implementation by The Bahamas will allow for a potential new revenue source which, according to initial estimates, could be at least $145 million annually. On the domestic front, the government is also keen to transition away from the BLT which, because it is calculated on revenues instead of profits, may impede domestic investment and growth.

The Minister of Finance states, ”Confronting these two challenges is as much about ensuring greater fairness, efficiency and effectiveness in our tax policy regime as it is about supporting fiscal resilience, economic growth and development”.

The CIT strategies identified by the government in the Green Paper include four (4) options: Option 1 represents the OECD 15% compliant Pillar Two regime; Option 2 adds to Option 1 a 10% rate for other firms; Option 3 adds to Option 1 a 12% rate for firms above B$0.5 million and maintains the BLF for firms below this threshold and Option 4 applies a 15% CIT across all firms, except for those below the B$0.5 million which would attract a 10% rate.

The Green Paper contains a series of questions, intended to help with refining these options and other design features of the proposed CIT regime in the next phase of the exercise.

Period of Consultation

In keeping with its commitment to a transparent, responsive and accountable governance, the government is soliciting the widest possible input from stakeholders to better inform the final design of the new CIT regime.

Interested parties are invited to comment on the proposals in Green Paper and to provide responses to the series of questions contained therein by July 3, 2023.

Submissions should include your name, organization, if relevant, and contact details.

Feedback channels

Comments should be submitted using the Response Template provided and returning by:

1. Email to : GPCIT@bahamas.gov.bs
2. Mail/Hand delivered to:

             The Financial Secretary
             Ministry of Finance
             Cecil Wallace-Whitfield Centre
             West Bay Street
             P.O. Box N-3017
             Nassau, Bahamas

Where possible, we strongly encourage electronic submissions, as they will reach us faster and speed up the process of consideration.

Documents to download

For your convenience, the relevant documents related to this public consultation exercise can be downloaded for further reference.

An electronic version of the Green Paper can be accessed here.
An electronic version of the Response Template can be accessed here.

What happens next

All submissions to the consultation paper will be treated as confidential. They will be reviewed and a summary of the responses will be published on the Ministry of Finance website (www.bahamas.gov.bs/finance).

Based on the considerations set out in the consultation paper, along with the responses received, the government will make a decision on the future CIT policy and proceed to the next phase which will involve, inter alia, designing the rules of the proposed CIT regime. This will be closely followed by another public consultation exercise and, thereafter, drafting of the requisite legislative framework towards enactment of the selected policy approach. Please refer to indicative timeline in the Green Paper.

Enquires

All enquires should be emailed to: GPCIT@bahamas.gov.bs