12/12/23

BAHAMAS: More changes to Bahamas economic substance and beneficial ownership regimes

As published on: step.org, Tuesday 12 December, 2023.

The Bahamas is revising its economic substance reporting regime for the second time in 2023, following an OECD review in October 2023. The review requested three changes to legislation that was enacted during the year.

Corporate entities have been required to report details of their economic presence in the Bahamas since the enactment of the Commercial Entities (Substance Requirements) Bill 2023 at the end of 2018. However, both the OECD Forum on Harmful Tax Practices and the EU Code of Conduct Group (Business Taxation) noted deficiences in the original legislation, in particular regarding the reporting and sharing of information with other jurisdictions. In October 2022, the Council of the European Union (the EU Council) added the Bahamas to its list of non-cooperative jurisdictions for tax purposes.

This led the government to draft further legislation in the shape of the Commercial Entities (Substance Requirements) (Amendment) Bill 2023 in February this year. It gave non-compliant entities 28 days to comply with the Act's substance requirements or be ordered to commission an audit at the risk of a heavy fine.

However, the OECD has now requested three further amendments. The most important of these is that the jurisdiction brings its procedures for exchange of economic substance information with other countries up to the required standard for all entities. It particularly focuses on those entities that claim to be out of scope, pure equity holding companies and foreign tax residence claims.

The government has now tabled a further amendment to the Commercial Entities (Substance Requirements) Act to allow the finance ministry to obtain information directly from the Bahamas' beneficial ownership register for all relevant entities, without being in breach of the Act's confidentiality provisions. This also requires changes to the Register of Beneficial Ownership Act.

Companies in scope of the economic substance reporting legislation must disclose gross income earned, the total amount of expenditure incurred on activities captured by substance reporting and the amount spent in the Bahamas. They must also report their total number of employees and address in the jurisdiction. Board meeting details are also required. Important changes concern the reporting of information by parent entities, the requesting of additional information from entities, the spontaneous exchange of information and removing the list of reportable jurisdictions from the text of the Act to the regulations, to allow for faster changes when the need arises.

The EU will reconsider the Bahamas listing in February 2024. The government has undertaken to put the necessary laws in place by the end of 2023 and will also request a new assessment from the OECD in April 2024.

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Bahamas Economic Substance Beneficial Ownership