|The Bahamas Investor Magazine
July 1, 2006
July 1, 2006
John K F Delaney
The Bahamas has long been attuned to positioning itself as a competitive player in its major industries. Attractive commercial, geographic, social and political conditions designed in the country’s economic infancy and nurtured over the past 50 years have given birth to a thriving tourism industry and innovative financial services jurisdiction. The result is a paradise for investment, equipped with a sound infrastructure, a time-honoured legal framework and incentives to attract diverse opportunities for lucrative international investment.
As the bedrock of The Bahamas’ fertile business environment, the tourism industry bears the original example: Blessed by nature with a temperate year-round climate, world-class beaches and hospitable residents, more than 50 years ago, The Bahamas enacted incentive legislation in the form of the Hotels Encouragement Act, 1954, granting customs duty and other concessions for the development of hotels in the archipelago. That important piece of legislation is, in a sense, the forebear of modern Bahamas tourism, and it is its evolution that has propelled the industry, attracting world-class tourist facilities in The Bahamas–Kerzner International’s Atlantis Paradise Island, Sandals Royal Bahamian and Breezes of Cable Beach–and driving the success of tandem economic sectors.
In January 2006, another major incentive for Bahamas tourism came into effect. Again, the incentive involved a tax inducement, except this time it is a tax inducement available to American businesses, which would encourage them to travel to The Bahamas and to offset the related expenses against their US tax liabilities. This convention tax exemption arises out of an agreement made in January 2002 between The Bahamas and the US. The Tax Agreement provides for the provision of tax information by The Bahamas to the US on request and subject to certain criteria in criminal and civil matters.
The Tax Agreement was one of several measures adopted by The Bahamas at the time that enhanced the regulatory regime governing its financial services sector and increased transparency. Under the Tax Agreement, The Bahamas was also certified as a Qualified Jurisdiction for purposes of US Tax Withholding procedures. That important certification allows Bahamian financial institutions certain privileges under US law, namely, allowing those that invested in US securities to do so while maintaining the confidentiality of non-US investors.
The convention tax exemption is also believed to be an important factor currently stimulating the development of hotel properties in The Bahamas and tourism in general. Amongst other projects, Atlantis has embarked upon its Phase III project and a multi-billion-dollar tourist resort is planned for Baha Mar at Cable Beach, New Providence. Indeed, the Bahamas Ministry of Tourism has attributed an estimated annual growth, beginning in 2006, of 15 to 20 per cent in the volume of business group travellers coming to our shores to hold meetings and conferences as a direct result of the convention tax exemption.
In this increasingly globalized world, The Bahamas will likely find itself considering other international trade arrangements. Already, it is exploring entry into the World Trade Organization. The history of The Bahamas to date would suggest that it is up to the task of negotiating arrangements that suit the business interests of its residents and investors.
Close to the American mainland, endowed with natural beauty, skilled and hospitable people, and with significant incentives in place, it is worth your while to consider exploring or creating new opportunities to invest in The Bahamas.
John K F Delaney
John K F Delaney is a partner at Higgs & Johnson, Counsel & Attorneys-at-Law, one of the oldest and leading commercial law firms in The Bahamas. His practice specializes in banking and financial services compliance law. He also advises clients in corporate and commercial law, civil and commercial litigation, law of insolvency and company liquidation and employment law.