NASSAU, BAHAMAS — Attorney General Ryan Pinder yesterday accused the former administration of causing “considerable anxiety” within the country’s financial services industry due to a lack of proper consultation and unannounced changes.
Attorney General Ryan Pinder who was delivered a contribution in the Senate on the compendium of financial services bills underscored the the importance of consultation and engagement with the financial services industry when it comes to tax matters.
“The industry is rather sensitive to abrupt and unannounced changes, especially when there is no consultation,” he said.
“Unfortunately this is exactly what we saw in the prior administration, tax changes without consultation, announcement or warning that was contrary to the longstanding operation of the financial services industry, and has caused considerable anxiety within the industry. We have engaged with the Financial Services industry through the BFSB and have been working with them to try to remedy the poor legislative governance of the prior administration.
Pinder noted that under Section 2c of the VAT (Amendment) Act, 2020, “disposition of a business” includes the sale, exchange or other transfer or disposition, in whole or in part of the goodwill or other property comprised in a business either directly or indirectly to another person and includes the transfer of shares in a company that owns the property of that business.
“The consequence of this amendment was that IBCs that have no nexus with The Bahamas, no business interest, no real estate and no other connection with The Bahamas other than incorporation could be subject to a six percent VAT on the sale of shares,” he continued.
“This has never been the case in The Bahamas and should not be the case. VAT is a tax that is a domestic consumption tax and should not be extended to activities wholly out of The Bahamas. This has threatened the IBC incorporation business on The Bahamas and must be remedied consistent with current law.
“What the industry is proposing, that I would agree with, is that if the company holds a business license, or a subsidiary of the holding company has a business license, the transfer of shares is subject to VAT. If not then it is not subject to VAT. A simple fix that is consistent with the philosophy of VAT and consistent with domestic law.”
Pinder said: “Similarly we have a situation with the pledge of shares of an IBC and the Stamp Tax that is payable because there was never any clarification after the former administration passed the Removal of Preferential Exemptions Act. This has likewise caused much anxiety in the industry and has caused us to lose IBC business.
“There are instances where the shares of an IBC are pledged as security for a loan. The IBC is deemed non-resident for exchange control purposes, all of its activities are conducted exclusively outside The Bahamas, and it owns no real estate or any interest in real estate or a business in The Bahamas. Under the law the pledge of these shares are subject to Stamp tax, when they never before were.”
According to Pinder, tax reform and amendments are by their nature disruptive if there is not proper consultation, and especially in industries where capital is mobile and there is significant competition among jurisdictions.
“The prior administration modified tax laws without consultation, discussion and in some cases without logic. This cannot be the proper approach and will not during this administration,” he added.
