Bahamas: Approval of Bill Imposing 15% Tax on Multinational Enterprises (MNEs)

With the aim of restoring tax order and aligning with the OECD/G20's Pillar Two guidelines, the Bahamas has implemented the 2024 "Domestic Supplemental Minimum Tax Bill." This legislation ensures that multinational enterprises (MNEs) with annual revenues exceeding EUR 750 million contribute to the local economy, particularly in an increasingly competitive tax environment among jurisdictions.

The new minimum 15% tax will be applied to profits earned in the Bahamas, excluding companies that (i) have no foreign presence, (ii) have annual revenues below EUR 750 million, (iii) are non-profit organizations, and (iv) other specifically exempt entities.

The goal of this new legislation is to ensure that tax contributions are collected in the Bahamas, rather than abroad, safeguarding the country’s social interests. The global 15% minimum tax has already been implemented by several G20 and OECD countries, in line with the guidelines of Pillar Two, part of the OECD’s Base Erosion and Profit Shifting (BEPS) initiative. This measure aims to discourage multinationals from shifting operations to low or no-tax financial centers, preventing purely tax-driven decisions from undermining the Bahamas' economic development.

The law is considered to have come into effect on January 1, 2024, and will be submitted for parliamentary approval on October 9, 2024. During this period, the tax is being phased in, and its impacts are being assessed. Additionally, the government plans to implement other projects and programs to increase tax incentives and strengthen the protection of social interests in the Bahamas.

Before implementing the Bill, the Bahamas consulted with the OECD, generating additional recommendations to update its tax practices in relation to the global landscape. The consultation resulted in proposals to tax companies with revenues below the OECD’s global minimum tax threshold, as well as the suggestion to exempt business license tax, which currently applies to domestic companies.

In June 2024, the Bahamas Business License Bill was published, introducing, for the first time, a tax on revenues of International Business Companies (IBCs) domiciled in the Bahamas from operations abroad. The government has also stated that a broader corporate income tax would only be proposed after proper consultation, ensuring a "considerable waiting period" for companies to adequately prepare for the changes.

It is expected that the new measures will contribute to the sustainability of the local economy, ensuring that multinational enterprises fulfill their role in tax collection and in protecting the country’s social interests, thus promoting a stable and predictable business environment.