NASSAU, BAHAMAS – The Ministry of Finance has released a Green Paper presenting four corporate income tax strategies for The Bahamas.
The government aims to gather feedback from stakeholders on these proposals to enhance efficiency, equity, and alignment with global tax developments.
The strategies outlined in the Green Paper are as follows: Option 1 applies the OECD’s 15 percent minimum tax rate to multinationals earning over 750 million Euros. Option 2 adds a 10 percent rate for other firms. Option 3 includes a 12 percent rate for firms above B$0.5 million, while maintaining the business license fee (BLF) for firms below this threshold. Option 4 enforces a 15 percent corporate income tax for all firms, except those below B$0.5 million, which would be subject to a 10 percent rate.
It was noted that the government is faced with the compelling realities of having to address the Organization for Economic Cooperation and Development’s (OECD) requirements related to Pillar Two international tax reforms and the inherent bias in the existing business licence tax.
Back in July 2021, The Bahamas became one of over 138 members of the OECD’s Inclusive Framework that agreed to support implementation of the Pillar Two tax reform, under which all multinational entities with revenues of 750 million euros or higher will be subject to a minimum effective tax rate of 15 percent in each jurisdiction in which they operate. Implementation by The Bahamas will allow for a potential new revenue source which, according to initial estimates, could be at least $145 million annually.
The government is also keen to transition away from the business license tax which, because it is calculated on revenues instead of profits, may impede domestic investment and growth.
The government is soliciting the input from stakeholders to better inform the final design of the new CIT regime. Interested parties are invited to comment on the proposals in Green Paper and to provide responses to the series of questions contained therein by July 3, 2023.
