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Bahamas - Real Property taxes

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Land is currently assessed for the payment of real property tax at the rates set forth below per annum:

OWNER-OCCUPIED PROPERTY		COMMERICAL PROPERTY		VACANT LAND		CROWN LEASED CAY
First $250,0000	Exempt	First $500,000	1%	First $7,000	$100.00	Market value of improvements under $10 Million	0.5%
Homes belonging to first time homeowners with market value above $250,000 but under $500,000	Exempt for 5 years from date of occupancy or conveyance1	Balance	2%	Balance	1.5%	Market value of improvements above $10 Million	0.25%
Homes with market value above $250,000 but under $500,000	0.75%2
Homes with market value above $500,000 but under $5,000,000	1%3
Homes with market value above $5,000,000	0.25% upon that part of the market value which exceeds $5,000,0004

¹ Section 3(d) of Real Property Tax (Amendment) Act, 2009
² Section 5 of Real Property Tax (Amendment) Act, 2008
³ Section 3(2) of Real Property Tax (Amendment) Act, 2002
⁴ Section 3(a)(iii) of Real Property Tax (Amendment) Act, 2009

Owner-Occupied Property

The Real Property Tax (Amendment) Act, 2008, was implemented on 1st July 2008. It introduced an exemption for first time homeowners for a period of 5 years for owner-occupied property with a market value above $250,000 but under $500,000.

Previously, an owner had to occupy his home for an aggregate of 9 months per annum to qualify for the owner-occupied exemption. However, this requirement was removed by the Real Property Tax (Amendment) Act, 2009, which was implemented on 13th July 2009. Owner-occupied property is now defined as property occupied by the owner in fee simple or the mortgagor in possession who occupies and resides in the property exclusively on a permanent or seasonal basis. There is no longer a restriction on the amount of time that the owner must occupy the home on an annual basis but the property should not be leased or rented to a third party for more than 9 months during the calendar year.⁵

For owner-occupied property exceeding $5,000,000 in value, the 2009 amendment also reduced the tax from ¾% to ¼% per annum upon that part of the market value of the property which exceeds $5,000,000.

Vacant (Undeveloped) Land

The 2009 amendment introduced an entirely new rate of assessment for vacant land. Upon that part of the market value which does not exceed $7,000, the tax is $100.00 and, upon that part which exceeds $7,000, the tax is 1½%.

Undeveloped land owned by Bahamians is exempt. Property in the Family Islands owned by Bahamians is also exempt.

The remedy of the power of sale is now available to the Treasurer in relation to unimproved property in arrears where such arrears are unpaid for more than 6 months after the expiration of 30 days from becoming due.

Crown Leased Cay

As a result of the 2009 amendment, this is an entirely new category of property now being assessed. The tax is ½% per annum of the market value of the improvements under $10 million and ¼% per annum of the market value of the improvements above $10 million.

Surcharges on Arrears

The 2009 amendment introduced a new rate of surcharge on arrears of 5% per annum until payment.

This post is for your information only and is not intended to constitute a legal opinion.  If you require specific advice you should contact a Bahamian real estate attorney.  You can contact a Bahamian Real Estate attorney by clicking here.

Offshore Corporate and Private Wealth Management Strategies

     The perfect offshore corporate and trust structuring strategy, should one exist, would constitute the 'holy grail' of commerce and wealth management. 

It would free its employer from the chains of taxation (both domestically and internationally), render assets immune from adverse adjudication and cloak finances with an impenetrable veil of privacy insurmountable by even the most determined and capable of inquirers. 

     Firms of expensive lawyers and accountants earn fortunes each year from companies and individuals with deep pockets looking for strategies to maximise and preserve their wealth. As a consequence, to this end, individuals and companies (particularly those with international interests) are deploying increasingly sophisticated arrangements of offshore agreements, trusts, corporations, foundations, powers of attorney, bank accounts and other mechanisms.

     This series of articles will consider some of the common components of offshore corporate and private wealth management strategies typically employed by high net worth individuals and corporations around the world.

What is an 'Offshore' Jurisdiction

     The term 'offshore' generally refers to any territory outside of one's home jurisdiction. In the context of finance management however, the term refers to a jurisdiction which offers attractive financial and legal incentives to non-residents who assume a legal presence or hold assets there.

    These incentives tend to include tax concessions or exemptions together with banking facilities and confidentiality rules which purport to enable non-residents to maximize the value of, protect and conceal their wealth. Examples of the tax concessions available offshore include the complete exemptions for all international business of non-residents offered by Belize, St Lucia and the Seychelles. Other examples include the exemptions from income and capital gains taxation for companies incorporated in the British Virgin Islands and the tax concessions on investment income available in the Bahamas and the Cayman Islands. There are currently in excess of fifty jurisdictions offering such incentives to offshore businesses.

The IBC

     An individual or company wishing to establish a presence in an offshore jurisdiction in order to take advantage of the incentives available there usually does so by way of an International Business Company ('IBC') incorporated under the laws of the offshore jurisdiction.

     In the more popular offshore jurisdictions, an IBC may be incorporated quickly and relatively cheaply. Where privacy is of particular concern to the beneficial owner, the IBC is often incorporated with nominee corporate directors and shareholders thereby obscuring the beneficial owner's interest in the company. Other mechanisms are available to further enhance the privacy afforded by the offshore arrangements if so required.

     It is a common misconception that simply contracting through an offshore IBC circumvents the tax liability that would otherwise have arisen. The tax rules of most 'normal' and 'higher' tax jurisdictions include anti-tax-avoidance provisions carefully crafted to prevent the use of offshore entities in the avoidance of taxation of domestically sourced income. 

   However, notwithstanding such domestic legislation, a properly executed offshore strategy may, in appropriate circumstances, reduce, defer or completely eliminate liabilities that would otherwise arise. Some of the more common uses of IBCs are outlined below. The legality and effectiveness of such arrangements will depend on a range of very important factors including the laws of the home and offshore jurisdictions as well as those of the jurisdiction in which the business is conducted. The existence and terms of any applicable double-taxation treaties are also critically important, particularly as it relates to the operation of withholding taxes and other anti-avoidance mechanisms.

Common IBC Strategies

     IBCs are frequently included in a trading corporate group as a distribution, import/export, procurement or sales intermediary. For example, where goods are being sourced from a producer in one country for sale to a consumer in another, an offshore IBC may be used to purchase the goods from the manufacturer for shipment directly to the end consumer. Similarly, IBCs are often used by importers for procurement of goods sourced abroad, and by producers for foreign distribution. The ultimate objective of these arrangements is to accumulate the trading profits in the tax-free offshore jurisdiction. IBCs are also used by professional consultants, athletes and entertainers as service companies through which fee income is accumulated offshore. Contracting through an IBC also reduces the individual service provider's personal exposure to liability for breach of contract.

    Many private investment funds are administered through offshore investment companies. Although the fund's investments would in many cases be subject to withholding tax or capital gains tax at source, there are a number of investment instruments where no such taxation applies.

IBCs are also used to hold and exploit intellectual property rights. Such offshore IP holding strategies have become less prevalent as a result of the withholding taxes applied on royalty payments at source by most of the higher tax jurisdictions. Depending on the territories involved, a double taxation avoidance treaty may operate to reduce the withholding taxes.

    One area in which there appears to be very good scope for offshore structuring is the provision of international electronic services. This is because transnational e-commerce challenges the concept of legal jurisdiction which is traditionally based on clearly defined geographical boundaries - boundaries which are not so easily delineated in 'cyberspace.' IBCs are increasingly being used to hold domain names and operate service providing websites from their tax friendly offshore territories.

    Perhaps the most popular use of an IBC is to hold shares of subsidiaries and real estate based in other jurisdictions with less friendly tax regimes. However, the utility of IBCs in this regard has declined as a result of the various withholding taxes and rules applicable to 'immovable property' imposed by many of the higher tax jurisdictions. Despite these rules, IBCs are still frequently used to acquire and hold property with a view to simplifying the subsequent disposal process. The transfer of shares or real estate held by an IBC may be accomplished by transferring ownership of the IBC itself circumventing domestic red tape. Depending on the jurisdictions involved, this may also save on some legal fees, transfer taxes and duties levied by the state. Where an individual owns a number of assets in different countries, by consolidating ownership through an IBC, estate transfer upon death may become less complicated, expensive and time consuming.

    The above examples have been simplified and are provided for illustrative purposes only. Offshore trust and corporate structuring is highly risky and extremely complex. A misconceived or improperly executed strategy may result in severe criminal and/or civil liability. Most jurisdictions have entered into numerous Tax Information Exchange Treaties, which have significantly limited the tax planning capabilities of IBCs. Individuals or companies seeking to explore offshore options should ensure that they are properly advised by suitably qualified and experienced legal and accounting professionals.

W. A. Brenford Christie

Lord Ellor & Co.
Nassau, Bahamas
CONTACT US!

Bahamas - Private Trust Companies and Family Office

Families need dynamic and professional advisors to help them manage their wealth. PTC and the Family Office structures can be used as vehicles to help families achieve their goals, while dealing with complex tax, legal and regulatory issues.

Published: Date: Updated:

Investor Resources October 15, 2010 January 25, 2012

Source: Bahamas Financial Services Board © 2010

Snapshot: The Private Trust Company (PTC) was established to provide trusteeship to a defined class of trusts. In The Bahamas, this class of trust is defined by reference to the designated person(s). The designated person(s) is identified at the establishment of the PTC and with whom all other settlors of trusts, for whom the PTC acts as trustee, must be related. With this requirement, the PTC can act as trustee for an unlimited number of trusts and can benefit anyone (subject to due diligence requirements) from the assets of the trusts. PTCs in The Bahamas were enhanced by legislation in the form of the Banks and Trust Companies Regulation (Amendment) Act, 2006, followed by the Banks and Trust Companies (Private Trust Companies) Regulations, 2007.

Features:

Incorporation:

• can be incorporated under Companies Act, 1992, or International Business Companies Act, 2000

• minimum share capital $5,000

Designated person:
• individual named in designating instrument

• if more than one designated person named, then each designated person must be a blood relative or related by some other family relationship to the other designated person(s)

• can be deceased and trust established by testamentary disposition

Designating instrument:
• names designated person(s)

• kept at office of registered representative

Form of acknowledgement:
• settlor acknowledges awareness that PTCs do not require:

• directors to possess expertise in trust administration

• a fidelity bond

• capital exceeding $5,000

• an annual audit

Special director:
• except where an officer of a licensee serves as registered representative, there must be at least one special director

• special director must possess at least five years experience in discipline relevant to trust administration (law, finance, commerce, investment management, or accountancy) and be of good repute

• need not be resident in The Bahamas

Registered representative:
• must be separate legal entity

• shall be either a licensee of The Central Bank of The Bahamas (the Central Bank) or a Financial and Corporate 

Services Provider approved by the Central Bank

• must be resident in The Bahamas

• provides the services of a secretary, director, or Bahamas agent

• ensures PTC is established for lawful purpose and that it operates as a PTC

• must have minimum share capital of $50,000

• must retain copies of certain documents in relation to the PTC

• required to verify and maintain in The Bahamas records of such verification relating to the identities of:

• settlor and any person providing funds or assets subject to trust(s) administered by the PTC

• designated person(s)

• protector of trust(s) of which the PTC is trustee

• any person with a vested interest under trust(s) of which the PTC is trustee

• shall report suspicious transactions to Financial Intelligence Unit

Penalties:
• if a PTC fails to comply with directions from the governor of the Central Bank or engages in illegal conduct, then the PTC or its registered representative is subject to sanctions including a fine of no more that $5,000; a Supreme Court Order compelling compliance; amending or varying conditions of the license; requiring substitution of any director or officer; appointing a person to advise a receiver to assume control of the PTC or registered representative’s affairs; or such other action as the governor deems necessary.

• governor of the Central Bank has discretion to petition court to transfer trusteeship to a new trustee

Sidebar:
 
Family office evolves, with The Bahamas at the forefront
Families need dynamic partnerships and advisors who will help them manage their wealth. The family office helps families achieve their goals while dealing with increased regulations, and complex issues of taxation, distribution planning and charitable giving. An important tool used by the family office is the trust. Assets will often be transferred to trusts (with underlying corporations to facilitate separation of various assets) as a means of facilitating the smooth transition from one generation to the next. Other essential services of the family office include: evaluating life insurance needs; active coordination of legal/tax/accounting matters of business interests; financial reporting and audits; coordinating the purchase of non-financial assets; and corporate governance reporting. The Bahamas is an ideal location for the establishment of family offices, scoring high marks on all the following requisites:

• Infrastructure (airports, communications, high-end services);

• Nature of assets and issues of control, such as where main tangible assets are held, whether business interests are involved and whether they are mobile or fixed;

• Tax neutrality and tax treaties;

• Regulatory and compliance obligations;

• Exchange of information and access to information, and confidentiality; and

• Financial environment.

BAHAMAS | DATA PROTECTION AND PRIVACY OF PERSONAL INFORMATION

Data protection laws exist to strike a balance between the rights of individuals to privacy and the ability of organisations to use data for the purposes of their business. The Data Protection Act 2003 introduced basic rules of registration for users of data and rights of access to that data for the individuals to which it related. These rules and rights were revised and superseded by the Data Protection Act 2003 which came into force on 2^nd April 2007. This Guide explains what you should know about data protection under the Data Protection Act 2003 ('the Act').

When does data protection law apply?

Data protection law applies whenever a data controller processes personal data. These words are given special meanings by the Act.

Data controllers

A data controller is the person who determines the purposes for which, and the manner in which, any personal data is, or is likely to be, processed. In other words, you will be a data controller if the processing of personal data is undertaken for your benefit and you decide what personal data should be processed and why. A typical example of a data controller is an employer. 

Personal data

Personal data means data which relates to a living individual who can be identified from that data or from that data and other information which is in the possession of, or is likely to come into the possession of, the data controller. For example, most organisations will process personal data relating to employees, customers, suppliers and business contacts. These individuals are referred to in the Act as 'data subjects'.

Processing

The Act applies when personal data is processed or is to be processed and “processing” under the Act means obtaining, recording or holding the information or data or carrying out any operation or set of operations on the information or data, including:

(a)     organisation, adaptation or alteration of the information or data;

(b)     retrieval, consultation or use of the information or data;

(c)     transmission of data;

(d)    dissemination or otherwise making available; or

(e)     alignment, combination, blocking, erasure or destruction of the information or data;

The term 'processing' therefore covers virtually any use which can be made of personal data, from collecting the data, storing it and using it to destroying it.

What are the obligations?

The data protection principles

In order to comply with the Act, a data controller must comply with the following principles:

1. The data should be processed fairly and lawfully and may not be processed unless the data controller can satisfy one of the conditions for processing set out in the Act.
2. Data or the information constituting the data should be collected by means which are both lawful and fair in the circumstances of the case.
3. Data should be adequate, relevant and not excessive.
4. Data should be accurate and, where necessary, kept up to date.
5. Data should not be kept longer than is necessary for the purposes for which it is processed except in the case of personal data kept for historical, statistical or research purposes.
6. Data should not be used or disclosed in any manner incompatible with that purpose or those purposes
7. Data should be processed in accordance with the rights of the data subject under the Act.
8. Appropriate security measures shall be taken against unauthorised access to, or alteration, disclosure or destruction of, the data and against their accidental loss or destruction.
9. Data should not be transferred to a country or territory outside the Commonwealth of The Bahamas  unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data.

Other requirements for data controllers

Under the first data protection principle, a data controller must justify its processing of personal data under one of the following conditions:

• the data subject has given his consent to the processing;
• the processing is necessary for the performance of a contract or the entering into of a contract to which the data subject is a party;
• the processing is necessary for compliance with any legal obligation to which the data controller is subject;
• the processing is necessary in order to protect the vital interests of the data subject;
• the processing is necessary for the administration of justice;
• the processing is necessary for the purposes of legitimate interests pursued by the data controller provided such processing does not harm the rights and freedoms or legitimate interests of data subjects; or
• the particular circumstances fall under one of the exceptions in the Act.

The data controller must also register with the Data Protection Commissioner ('the Commissioner').

Sensitive personal data

Where the data controller intends to process sensitive personal data, there are further conditions. Sensitive personal data consists of information relating to the racial or ethnic origin of a data subject, his political opinions, religious beliefs, trade union membership, sexual life, physical or mental health or condition, or criminal offences or record. Of these further conditions, the most useful to most businesses will be:

• where the data subject has given his explicit consent;
• where the processing is required for the purposes of complying with employment law;
• where it is necessary to establish, exercise or defend legal rights.

If none of the conditions can be met, processing cannot legally continue.

Purposes of processing

Data subjects must be given information about the purposes of the processing. This information is generally provided in the form of a data protection notice, which can be given in application forms, terms and conditions, by telephone or on a website. The information to be set out in a data protection notice must include a description of:

• details of the data controller;
• the purposes for the processing, including any non-obvious purposes (e.g. cross-mailing, host mailing);
• details of any recipients of the personal data (e.g. other companies within the group) and their purposes;
• an opt-out / opt-in to marketing, as appropriate;
• a description of the methods to be used for contacting individuals for marketing purposes (e.g. telephone, fax, SMS, email and/or mail); and
• any other information that is necessary to make the processing fair (e.g. whether it is obligatory to provide all the information requested or whether provision of some of that information is optional).

By using an appropriately worded data protection notice, an online business can ensure that there is consent from visitors to its web site to allow the business to build a valuable contacts database and market its services to the visitors.

Security requirements

Data controllers must put in place adequate technical and organisational measures to safeguard personal data which they are processing from destruction, adequate loss, unauthorised access or disclosure. This would include, for example, using a secure server when payments are made online.

Furthermore, all data controllers must put in place processing contracts with their 'data processors'. A data processor is a third party appointed by the data controller to process personal data on its behalf, although it will still be the data controller who ultimately decides what happens to the data. These processing contracts must be in writing and must set out what the data processor may or may not do with the personal data, including what security measures should be taken to safeguard the data. Data controllers should reserve for themselves the right to audit data processors to ensure compliance with the contract.

To give a practical example, if a website collects e-mail addresses, this could constitute personal data – so the data controller not only has to register with the Commissioner but ensure that security be put in place to guard against hacking. If the website is actually hosted by a third party on behalf of the data controller, then the data controller will have to contractually oblige that third party to put the relevant security in place.  Of course, the data controller will also have to comply with other principles.

Transfer of data overseas

If personal data is disclosed or made available to a person overseas, that is considered a transfer for the purposes of the eighth data protection principle above. In the context of the internet, if the information is placed on a website without specific consent from the individual, this may be in breach of the Act since the data can be accessed in countries with less stringent data protection laws.

Rights of individuals

Data controllers must give the following rights to data subjects:

• the right of access to his or her personal data;
• the right to object to certain processing causing substantial damage or distress;
• the right to object to automated decision taking; and
• the right to object to direct marketing.

The most important of these rights is the right to access personal data. An individual may request access to all personal data of which he or she is the subject and which is being processed by the data controller. The Minister Responsible for Data Protection may prescribe a fee for data controllers to charge data subjects, for making the request in writing and for the data controller complying with the request. There are exemptions from these access rules in certain limited circumstances.

Another right which will be of importance to any organisation which markets to individuals, is the right given to data subjects to object to direct marketing. There are no exemptions to this right.

What are the consequences of non-compliance?

Compliance with the Act should not be taken lightly, as the Commissioner has been given extensive powers of enforcement. Data controllers could, for example, find these powers used against them by disgruntled employees or customers, who contact the Commissioner to complain that there has been a breach of the rules.

The Commissioner can now serve a data controller with an 'information notice' requiring the data controller to provide certain information within set time limits. Failure to comply with such notice, or providing deliberately false information, is a criminal offence. If the Commissioner concludes that there has been a breach of the Act, he may then serve a data controller with an 'enforcement notice'. This could force a data controller to cease processing personal data, or cease processing data in a particular way. Failure to comply with an enforcement notice is a criminal offence.

Criminal liability does not lie just with the data controller. It is possible for officers of a company, such as its directors, officers or managers, to be personally criminally liable if the offence has been committed with their consent, connivance or neglect. Employees may also incur criminal liability in certain limited circumstances if they disclose or obtain personal data without authority of the data controller.

Although the commission of a criminal offence under the Act will not result in a prison sentence, it will result in fines which, depending on the circumstances, may be up to $100,000.  It is also increasingly the case that industry regulators are looking at matters of data security which are similar to those addressed by the Act.

However, the fines are unlikely to be the reason why most data controllers will want to comply. Few data controllers will be able to continue with business as usual if they are prevented from processing personal data as a result of an enforcement notice and no data controller will want the bad publicity which is attached to the unfair processing of personal data. 

Conclusion

The increasing use of information technology and the internet ensures that data protection has become one of the most important and relevant laws that online businesses are required to comply with.  The internet is all about the transfer of information.  Not only is the internet used to disseminate information, but also to collect it.  Organisations must look now at how they collect, store and use personal data and ask themselves whether they comply with the Act. This may involve amending employment and marketing practices in addition to internal training.

This post is for your information only and is not intended to constitute a legal opinion.  If you require detailed legal advice you should contact a Bahamian e-commerce attorney.  You can contact a Bahamian e-commerce attorney by clicking here.

W. A. Brenford Christie is the managing partner of the Bahamas-based business law firm Lord Ellor & Co.  He is a qualified commercial lawyer admitted to the Bahamas Bar and the Bar of England & Wales.   He also offers consultant services with respect to E-commerce regulatory compliance and data protection.

Email: brenford@lordellor.com