Taxes in The Bahamas – Everything You Should Know

Bahamas is a well known country not only because of its’ great beaches and weather but it is also a popular “Tax Haven” for people who want to be smart about their tax situation.

What might be news to you is that Bahamas is becoming a popular digital nomad destination. Or maybe not so much for Digital Nomads who travel constantly but rather for remote workers that choose to work from elsewhere for a while.

Since it’s also located on the North American continent, and in very close proximity to Miami it provides remote workers with easy access to the US and the rest of the world. Moreover, the time zone also benefits those that need to remain on a North American working schedule.

Now let’s dive deeper into what the Bahamas has to offer.

Is The Bahamas a Tax Haven?

The Bahamas is definitely considered a tax haven first and foremost because there is no personal income tax.

There is also no Capital Gains Tax, Inheritance or Gift Tax, nor are there any wealth taxes or taxes on share dividends and interest. This tax system makes it a very attractive place for the wealthy and the employed. It’s a contributing factor to the Nation’s healthy economy.

So, it shouldn’t be a surprise that people like Shakira have established a tax home in the Bahamas or at least she thought that’s what she had done. But other such as Nicole Kidman and Justin Timberlake also owned businesses in the Bahamas. So, if the famous and rich are doing it there must be something behind it, no?

So, does The Bahamas have no taxes at all?

That’s a common misconception that Tax Havens don’t impose any taxes at all. Most of the time we’re talking about no personal income taxes but there are so many other taxes through which governments can raise revenue and this is best shown on the example of Bahamas.

The government of the Bahamas collects most of its tax revenue from Property taxes, Import and export duties, Stamp taxes, License fees and Social Security contributions. So, let’s break them down.

Social security contributions

Residents will still have to make social security payments to the National Insurance Board of the Bahamas. Employers pay 5.9% of their wages in social security payments, while employees pay 3.9%. On the other hand, self-employed residents will have to pay 8.8% in security payments themselves.

And for everyone—employer, employee, or self-employed—the Social Security tax is capped at $3,077 BSD monthly.

Property Tax

One of the few taxes that do apply to most foreigners living in the Bahamas is the annual property tax. This tax is based on the value of the property and ranges from 0.75% to 2%, depending on whether the property is commercial or owner-occupied.

In fact iff the property is owner occupied there will be no taxes applied, but only if the value of the property is less than $250,000. From $250,001 to $500,000 the tax rate is 0.75% of the property value. For amounts above $500,000 the tax rate is 1.00%, but is capped off at $35,000.

In the event that the property is not occupied by the owner than a different tax rate will apply. Properties of up to $500,000 in value are taxed at 1.00%. Any property above that amount is taxed at 2.00%. On New Providence Island there is a tax rate of 3.00% on unimproved properties.

Also, it’s worth noting that there are no restrictions on foreign buyers acquiring real estate in The Bahamas and foreign buyers enjoy the same rights as Bahamian citizens. A permit from the government is only needed if the property to be bought is more than five acres or if the property is undeveloped land. Otherwise, the property must only be registered with the Investment Board and the Central Bank after the transaction.

Stamp Duties

Foreigners may be charged a stamp duty in a number of different circumstances. Real estate purchases are subject to stamp duty as are large international money transfers. Rates can be as low as 2.5%, but may go as high as 10% on a property sale that is valued over $100,000. The fee in this case is usually divided between the seller and the buyer. There is a 1.00% charge on a mortgage which is payable by the borrower. The charge for sending money overseas is 0.25%.

Import Duties

Bahamas does have a high import duty on many goods brought to the islands. These duty taxes vary depending upon what type of goods they are being applied to and can range anywhere between 0% and 220%.

The average rate of duty is 5% to 35%. For example, approximately 25% is applied to imported clothing, while electrical equipment is taxed at up to 65% of its value. This is an import tax, not a sales tax or VAT, but it does mean that the cost of these goods are higher for consumers.

In addition to the duty rate, VAT, environmental levies, and processing fees should also be considered to determine import costs.

The customs processing fee is 1% which converts to cash from BSD10 to BSD500. The environmental levy is based on the item and ranges from a fixed amount of BSD1 to BSD500. In some cases, it’s a percentage of the item’s landed cost.

Value-added tax (VAT) in The Bahamas is currently 10%.

So, in general expect living costs to be more expensive. For reference, The Bahamas is said to be the most expensive country in Latin America and the third most expensive country in the world.

What about this Digital Nomad Visa?

In October 2020, The Bahamas launched its own Digital Nomad Visa, called Bahamas Extended Access Travel Stay (BEATS). The BEATS program, gives you the possibility to apply for a one-year visa. This visa allows you to live in the Bahamas while working for an employer based in a different country.?

Unlike most other countries, the BEATS program not only allows workers but also students to work or study remotely from the Bahamas.

The application process is simple, and you will typically get an answer within five days. There is a $1,000 visa fee, and you will have to pay an additional $500 for each dependent who is traveling with you.?

You will have to meet a few requirements, such as showing proof of employment and purchasing health insurance. Unlike other Digital Nomad Visas out there you do not need a minimum income to qualify for this visa, however, you still need to have a monthly income from outside the Bahamas to support your life there. Students simply need to apply with a student ID to prove that they have enrolled at a university that offers online classes.?

In addition, after a one-year working vacation, you can also renew your Bahamas digital nomad visa twice and stay for a total of up to 3 years, so that you can have more time to experience and explore the Caribbean paradise.

Other ways to live in The Bahamas

There are several pathways available to obtain the right to live in The Bahamas. Foreigners who want to move to The Bahamas can apply for a work permit, homeowner’s card, annual residency, or permanent residency.

Permanent residence is issued to the applicant for a lifetime. Unless your permanent residence status is for some reason revoked, you are free to work and live in The Bahamas as long as you wish, although you do not have the right to vote.

COMMENT

The Bahamas is a great country celebrated for its’ natural beauty which makes it an attractive destination for foreigners. However, experiencing all that beauty does not come cheap as the Bahamas is regionally and globally one of the most expensive countries in the world due to its’ import tax.?

Compared to other countries, it takes more effort to bring the goods to the island.

As for buying a property,?one must be able to fully calculate the totality of the amount involved in purchasing a property.?Though stamp duties can be avoided if your property is at a certain value, you will still need to pay it for more expensive properties. Other costs include legal fees, agent fees, etc.

As for the great tax savings possibilities, it does indeed make the country a viable option for those that are seeking to lower their tax bill whether they’re high net worth individuals or remote workers alike.

Ps: This post contains affiliate links that are at no additional cost to you, but I may earn a small commission.

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