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Tax Guide for Americans in the Bahamas

Tax Guide for Americans in the Bahamas

ADD: US Expat Taxes - Bahamas

At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Bahamas for over 8 years. Our clients hail from all parts of the country - Nassau and Freeport, West End and Coopers Town, Marsh Harbour and Freetown.

As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.

We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.

The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.

Since there is no income tax in Bahamas, FEIE is the main tool available to expats to avoid paying U.S. income tax.

As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Bahamas for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.

There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.

We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.

Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.

Below we include information on the Bahamian Tax System for the American Expatriates.

There is no income tax, capital gains tax, purchase or sales tax, VAT or capital transfer tax in Bahamas. This applies not only to individuals, but also to all resident corporations, partnerships and trusts. Employees pay national insurance contributions, there is stamp duty on property and mortgage transactions, and a tax on real property. Customs duties are quite high on most imported goods.

The Bahamas offers the offshore financial sector freedom from corporate, personal income, capital gains, withholding, inheritance, and estate taxes. However, income received in the Bahamas may be subject to the taxes in the country of origin.

There are no tax information exchange agreements between the Bahamas and any other country. These advantages are supported by a strong respect for privacy, flexible exchange controls, geographical location and continued record of political stability.

Government Tax Revenue is derived from the following sources:

  • - Import and export duties
  • - Property tax
  • - Motor vehicles
  • - Gaming tax
  • - Tourism tax
  • - Stamp tax
  • - Company fees

Regarding fees, the registration fee for a foreign company is B$50 and stamp duty is payable in the amount of B$600. All foreign companies must also pay an annual license fee of B$1,000.

Private companies are required to pay a fee of B$300 upon filing their Memorandum of Association, and an additional fee of B$30 for the filing of the Articles of Association. An annual license fee of B$1,000 is also payable.

Additionally, stamp duty is payable on the authorised capital of a company. Where the authorised capital is B$5,000 or less, the stamp duty is B$60. For every additional B$1,000 or fraction thereof, the stamp duty will be B$300.

  • - Bank and trust company fees
  • - Insurance company fees
  • - Other fees, including business licence fees

Business licence fees are levied on the gross turnover of a business, at varying rates, based on the company's size and profitability. Banks and insurance companies registered as insurers under the Insurance Act are exempt from business licence fees.

From a banking and investing point of view, the Bahamas are a well-respected jurisdiction; the banking environment is stable, the secrecy laws stringent, and the investment environment sophisticated. Banking secrecy may however be under threat from new legislation, as a result of international pressure.

Foreign exchange control: Other than specific, capped amounts that may be handled by authorised banks, any transaction subject to the foreign exchange rules (e.g. loans, dividends, capital repatriation, etc.) must be approved by the central bank. The central bank of the Bahamas generally does not withhold approval for "current transactions" (e.g. payments for imports, educational payments, medical expenses, charitable gifts, and commercial letters of credit). Exemptions from the exchange control regulations may apply, e.g. for some Bahamian banks and trusts and International Business Companies (IBCs).

Principal business entities: These are the public and private corporation, limited liability company, IBC and partnership. An IBC is an entity formed under the IBC Act 1989 and does not carry on business with Bahamian residents. The benefits of IBC status include: no fixed limit on the amount of authorised capital, it is not necessary to obtain a business license and an IBC is exempt from business license fees, an IBC can merge with a foreign company and transact foreign exchange business without exchange control restrictions.

Real property tax: Subject to several exemptions, owners (to include life tenants) of land and buildings must pay a real property tax annually. The applicable rate levied on the assessed value depends on whether the property is commercial property or owner-occupied. The first BSD 50,000 of assessed value is taxed at .5% for commercially property (exempt for owneroccupied property); the next BSD 50,000 is taxed at 1% for commercial and .75% for owner-occupied property; and the remaining assessed value is subject to tax at 1.5% for commercial and 1% for owner-occupied property.

Social security: Employers pay 5.4% of wages, while employees contribute 3.4% (capped at BSD 20,800 annually).

The self-employed are subject to a rate of 6.8% or 8.8% of average insurable income, depending on their class (with an annual cap of BSD 20,800).

Stamp duty: Stamp duty is imposed at various rates (either flat dollar or as a percentage of value) on certain instruments and filings, to include bonds, money orders, letters of credit, transfers of real or tangible property, affidavits, powers of attorney, etc.

In some instances, nonresidents may be charged stamp duty at up to twice the rate of residents. Stamp duty also may apply to imports.

Transfer tax: No

Other: While companies are not subject to direct taxes, they are subject to a host of other indirect taxes and fees, including a business license fee, registration duties and import duties. Other indirect taxes include hotel guest tax, passenger tax, casino tax and business and hotel licensing fees.

Customs duties for dutiable goods apply upon import or upon the withdrawal from bond of bonded goods. A general additional surcharge of 2.5% may apply on imports and warehoused goods are subject to a 1% additional duty.


Bahamian Tax Questions?

Navigating Bahamian taxes as a US expat? Our American Tax Service is here to help. Need a free tax consultation?

Contact us for expert advice.