NASSAU, BAHAMAS — The government plans to implement competitive tax incentives under the OECD/G20’s Pillar Two framework to keep its tax regime competitive with global peers and attract economic development and multinational investment, according to Attorney General Ryan Pinder.
Pinder noted that measures could include a proposed shipping exclusion that would replace the corporate tax on shipping income with a tonnage tax.
Pinder, contributing to the Senate debate on the Domestic Minimum Top-Up Tax Bill, 2024, explained that the legislation applies only to multinational corporations operating in The Bahamas earning over 750 million euros annually. The bill stems from the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS), which aims to address tax avoidance and promote transparency through a two-pillar global corporate tax framework. Pillar One remains unimplemented, while this legislation focuses on Pillar Two, ensuring in-scope entities pay a minimum effective tax rate of 15 percent on profits in each jurisdiction.
Pinder stated: “The main purpose of this Act is to implement a domestic minimum top-up tax that meets the requirements to be a Qualified Domestic Minimum Top-up Tax and in respect of which the QDMTT Safe Harbour can be applied.” He noted that the legislation takes effect on January 1, 2024, for entities headquartered in jurisdictions implementing Pillar II and on January 1, 2025, for others.
The bill outlines reporting and payment obligations for in-scope entities, as well as enforcement provisions, including penalties for noncompliance. Pinder emphasized that the legislation ensures The Bahamas retains primary taxing rights over income generated locally by these entities.
He also highlighted that the Davis administration plans to introduce additional tax incentives during the mid-term budget exercise. “These incentive packages are intended to keep our tax regime competitive and attract economic development and investment in the country from multinational organizations. It is of note that these incentive packages are not reserved solely for Pillar II qualifying entities; in order to be acceptable under the OECD regime, they must be available to all taxpayers. As such, they must be carefully crafted to balance economic incentives for businesses and the revenue needs of the country.”
Pinder noted that the proposed incentives aim to attract investment and support economic growth. These include extra-territorial turnover credits to draw headquarters to The Bahamas, capital expenditure credits to encourage further investment, employee training credits to enhance workforce development, and local content spend credits to promote the purchase of Bahamian goods and services.
The Attorney General also noted that collaboration is underway between the Ministry of Finance and the Bahamas Maritime Association to frame a proposed shipping exclusion. He added: “Implementing a shipping exclusion would set the stage for major shipping and cruise industries to consider The Bahamas as a headquarters jurisdiction for their worldwide operations. This, coupled with our strong maritime relationships and the BMA, could be a source of significant economic diversification and expansion for The Bahamas.”
The Domestic Minimum Top-Up Tax Bill, 2024, is expected to be passed and brought into force by the end of the month.
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