NASSAU, BAHAMAS: Economic Affairs Minister Senator Jerome Fitzgerald has announced that the government intends to remove VAT from trust services and certain transfers of property into trusts by the end of the year, as part of a broader push to strengthen The Bahamas’ position as an international wealth management and succession-planning jurisdiction.
Fitzgerald, addressing the Association of International Banks and Trust Companies (AIBT) Conference at Baha Mar on Wednesday, said the government does not believe families should be taxed for making arrangements to pass assets from one generation to the next.
“So today, I am happy to announce two important pending changes in policy and in law. Firstly, we will remove VAT from trust services at the end of this year,” Fitzgerald said.
“Secondly, we will also remove VAT from the transfer of property to trusts for certain classes of beneficiaries, including transfers to family members.”
Fitzgerald said the Department of Inland Revenue is reviewing guidance notes and draft legislative amendments, which the government intends to issue, table and debate in Parliament before the end of the year.
The minister said the proposed changes seek to address what he sees as an inconsistency between property passed to a family member through a will and property placed into a trust.
“One of the things that never made sense to me is the fact that a person can pass property to a family member through a will without paying VAT, while that same person is charged VAT to place that property in a trust when the beneficial owner is the same,” Fitzgerald said.
“The aim in both cases is the same, which is to provide for people you love, and VAT should not penalize anyone who chooses to plan ahead.”
Fitzgerald said removing the tax would lower the cost of establishing and maintaining wealth structures and make The Bahamas more attractive to families looking to manage their wealth and succession planning.
“We are making these changes because we do not believe a family should be taxed for succession planning,” he said. “It is through continued dialogue and industry feedback that these changes and others will be made throughout this term.”
The announcement formed part of a broader government strategy outlined by Fitzgerald to attract international family offices and mobile private wealth to The Bahamas, with the minister saying a primary policy focus of the government and Ministry of Economic Affairs will be creating an environment capable of attracting family offices.
“The Bahamas has an opportunity to establish itself as a leading jurisdiction for international family offices by treating the reallocation and relocation or establishment of a substantial family office as a form of strategic foreign direct investment,” Fitzgerald said.
He said substantial family offices could bring high-value professional employment, internationally mobile family capital and investment decision-making, demand for Bahamian banking and professional services, substantial local operating expenditure, high-value real estate investment, philanthropy and direct investment into Bahamian businesses and projects.
As part of that push, Fitzgerald announced that the government will establish a family office programme administered through Bahamas Invest Concierge.
“The government will establish a family office programme administered through Bahamas Invest Concierge. A qualifying family will enter into an agreement with the government. The agreement will be similar in concept to a large developer’s Heads of Agreement and will bring certainty, predictability and transparency to the relationship,” Fitzgerald said.
The proposed framework is intended to provide greater coordination across immigration, senior and specialist work permits, business licence treatment, exchange control, regulatory determinations, investment and land-holding approvals and economic substance requirements.
Fitzgerald also provided an update on the government’s planned Bahamas Tax Residency Certificate, saying legislation is now in its final drafting stage.
“With the new certificate, 90 non-consecutive days in our jurisdiction is what will be required. This clarity around residency gives advisors and clients something they can plan around with confidence,” Fitzgerald said.
Meanwhile, renovations for the Bahamas Invest Concierge Unit are underway and are expected to be completed by the end of the year.
Fitzgerald said the unit will guide qualifying investors through the government process from their initial inquiry to final approval, bringing together agencies involved in investment, residency, wealth management and related approvals.
“It will be a one-stop shop for everything from economic permanent residency, tax residency, Family Island projects and nine-figure resort developments,” Fitzgerald said.
The initiatives come as Fitzgerald warned that the international financial services landscape is rapidly changing, with The Bahamas confronting the global minimum corporate tax, increasing transparency and beneficial ownership requirements, correspondent banking de-risking and competition for skilled professionals.
“The map is changing as we speak, and that raises an important question for us here in The Bahamas: Where do we intend to sit on that map in the next 10 years and beyond as this realignment takes place?” Fitzgerald said.
He said the government’s goal is to position the jurisdiction to compete more aggressively for international financial services business.
“Our goal is to be the most responsive, sophisticated and trusted international financial services center in this hemisphere,” Fitzgerald said.
