The World of Business

As the Bahamas have historically been focused on the financial sector both because of its well-developed regulatory structure and it’s policy of promoting itself as an international finance center, the business environment focuses a great deal of attention and other resources on this sector. Moreover, the Bahamas are both well developed with respect to their business and communications infrastructures. Although the economy is strongly dependent on the offshore financial sector, the government has worked hard to prevent the island from being used as a money-laundering center.

The Bahamas is host to a wide range of professional services including particularly insurance, trust management, and mutual funds sectors. In addition, the Government is interest in developing its e-commerce sector in response to their belief that this sector is the future of international business. The Government hopes to makes the Bahamas a center of e-commerce development.

The Government tends not to involve itself in business, especially offshore business. However, onshore business activity can only be undertaken with a license and firms are required to register their business names at a cost of $50 USD. It is possible to obtain a detailed list of business activities that the Government will usually sanction. It is important to note that the rules regulating foreign investment, especially relating to incentives, are complex and it is best to seek expert guidance when entering this market. Areas such as small-scale wholesaling and retailing, small-scale construction, newspaper and magazine publication, operation of small hotels, entertainment, real estate agencies, and fishing are generally reserved for Bahamian locals. It is not uncommon for the Government to sanction larger-scaled activities such as local manufacturing, transportation, and farming only on the basis of shared equity.

With regards to the import of foreign capital, the Government’s currency exchange controls only affect the Bahamian dollar and resident companies and individuals. Non-residents and various forms of offshore entities, which are allowed to import and export funds in all currencies, are not subject to capital or exchange controls. Moreover, these transfers are not subject to any taxes, neither is there a withholding tax on interest, dividend, or royalty payments. Nevertheless, one must gain approval from the Exchange control Department before investing in the Bahamas. Once an initial “approval of investment” status has been granted subsequent remittances from the jurisdiction will be uncomplicated.

As of February 2006, the Central Bank has relaxed foreign exchange controls relating to foreign currency transfers, real estate investments, debt and equity instruments, and mortgages. Before these changes, residents that wished to purchase securities or make real estate investments overseas could only do so via the Investment Currency Market (ICM) at a premium bid and offer rate of 25% and 20% respectively. Immediately following the changes in 2006, these rates were cut in half to 12.5% and 10% respectively.

Moreover, it is possible to cross-list equities of Bahamian listed on the BISX on principal CARICOM exchanges such as ECU< Trinidad & Tobago, and Jamaica. Of course, there are certain limitations relating to this. Foreign companies listed on principal CARICOM exchanges may also list outstanding and issued equity securities on BISX.

The combination of legislation that is designed to protect Bahamian interest and employment as well as exchange controls and the great variety of support and incentives offered to foreign investors has resulted in a complex foreign investment regime. Therefore, the following should be considered only a brief summation of the most important point of the government’s foreign investment regime.

The following is a list of statutes that incorporate significant incentive structures:

• The Industries Encouragement Act

• The Tariff Act

• The Hotels Encouragement Act

• The Agricultural Manufactories Act

• The Export Manufacturing Industries Encouraging Act

• The Bahamas Free Trade Zone Act

• The Hawksbill Creek Agreement

The city of Freeport on Grand Bahama is a free trade zone, meaning it is a tax and duty free zone, that covers a 200 square mile area and incorporates Freeport Harbor, which was recently built as a container transport port that is able to accommodate even the largest vessels. New Providence Island is home to a second, smaller free port.

The National Economic Council was given responsibility for the National Investment Policy. This council is run by the Bahamas Investment Authority, who should also be considered the first stop of any inward investor intending to enter the market.

The Bahamas offers incentives such as exemption from property taxes, exemptions from customs duties, support for training and retraining, subsidized land and buildings, and freedom from licensing and permit rules. Also, the Bahamas belongs to several international preferential trade groups that may provide assistance in reducing tariffs on exports form the Bahamas to other markets. These groupings include the Lome Convention, the Generalized System of Preferences, Caribcan, and the Caribbean Basin Initiative.