14/02/23

BAHAMAS: Government tables amendments to bring economic substance regime in line with international standard.

As published on step.org/industry-news, Monday 13 February, 2023.

The Bahamas government has tabled legislation in the House of Assembly to update the jurisdiction's economic substance regime.

Corporate entities are already required to have a genuine economic presence in the Bahamas under the Commercial Entities (Substance Requirements) Act 2018 and some amendments made to it in 2019. However, in July 2022 the OECD made recommendations to the Bahamas as one of four jurisdictions whose enforcement of the substantial activities standard needed 'substantial improvement'. This was followed in October 2022 by the EU's addition of the Bahamas to its list of non-cooperative jurisdictions for tax purposes, because of deficiencies in enforcing its economic substance reporting regime combined with its zero- or nominal-only rate of corporate income tax.

The new amendment to the Act aims to update the jurisdiction’s regulatory framework so that it is in line with latest international standard for corporate entities to have economic presence in a jurisdiction.

It will expedite the reporting and sharing of information with other jurisdictions. It will also set out remedial measures for non-compliant entities, which will be given 28 days to remedy the defects or face an audit inspection. If the audit uncovers further non-compliance, the regulator will issue the company with a notice requiring compliance within 14 days. Failure to do so could result in the imposition of administrative fines of up to BSD300,000 and, ultimately, removal from the Companies Register.

The government is also working on other avenues towards increased compliance, principally an overhaul of the electronic portal that is intended to allow Bahamas-domiciled entities to file their economic substance reports through the Department of Inland Revenue.