Financial industry hails ‘certainty’ on tax residency

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Tanya McCartney

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Financial services executives yesterday hailed the government’s plans to codify its tax residency initiative via legislation as providing “certainty and transparency” for both investors and global regulators.

Tanya McCartney, pictured, the Bahamas Financial Services Board’s (BFSB) chief executive, told Tribune Business that the industry is awaiting implementation of an initiative designed to certify high net worth individuals’ compliance with their home country tax laws and genuine presence in this nation as their major domicile.

She added that the government’s plans to place the tax residency certificate initiative into statue law, as outlined by Elsworth Johnson, minister of financial services, trade and industry and immigration, would “give it a stronger footing” that encouraged investors as well as the likes of the European Union (EU) and Organisation for Economic Co-Operation and Development (OECD).

To qualify for a tax residency certificate, which gives successful applicants the right to reside in the Bahamas for up to three years, persons must stay in this nation for a minimum 90 days per year and not spend more than 183 days in any other country annually. A “substantial presence test” will be conducted if there are suspicions that persons are abusing this criteria.

Mr Johnson outlined the government’s plans in a World Finance article carrying his byline, which was published this week, and Ms McCartney said: “That’s a signalling of the direction we’ll be going in, which we would welcome.

“It’s a restatement of our commitment to actually introduce the tax residency certificate, and the minister has indicated to us that this residency programme would be codified into statute... He has indicated to us the intent to legislate to give it a stronger footing,

“We believe what is intended is competitive, and we look forward to receiving that legislation [when it is released for consultation]. The industry would be happy to see it in place and implemented. We’re happy he’s reiterated what the Government indicated is its position and we’re looking forward to seeing it implemented.”

The tax residency certificate initiative was developed under Mr Johnson’s ministerial predecessor, Brent Symonette, as a means for expatriate residents and investors to prove they are domiciled here and complying with both local tax laws and those of their home country.

Each certificate will have its own Taxpayer Identification Number (TIN) in a bid to address concerns expressed by the likes of the OECD, which claims The  Bahamas’ permanent residency product is in danger of being abused by tax evaders. It will confirm that the holder is a permanent resident of The Bahamas, and not liable to pay tax in their home countries.

Ms McCartney said yesterday that the BFSB’s Immigration working group had benchmarked The Bahamas’ tax residency certificate against rival jurisdictions, finding its terms to be both competitive and consistent with what is on offer elsewhere.

“Apart from competitiveness it is important for us to make very clear what tax residency means in The Bahamas. That is very important with regard to international regulators and initiatives,” she told Tribune Business.

“Where one’s taxed depends on their residency. It makes clear what the requirements are to all international bodies and defines what residency is for those investors wanting to set up tax residency in The Bahamas.

“Number one, it provides clarity and certainty, and number two, by defining what tax residency means and what would be included it brings transparency. It leads to transparency for both the client and international bodies; certainty and transparency.”

Ms McCartney said the tax residency certificate initiative will also encourage high net worth clients and their families to follow their assets to The Bahamas by domiciling here, and support the recent growth in family offices and more personalised services.

“With the growth in the number of family offices we see here in The Bahamas, we believe our location is an allure to make people choose The Bahamas as a place to reside,” she added. “Without a doubt we are seeing that.

“That is driven by proximity to the US, the political and economic stability that most countries can’t boast of, and quality of life. We have more developments that allow for business as well as residency, and that is certainly something persons from Latin America have found quite attractive.”

Mr Johnson, in the World Finance article, wrote: “Having recognised the importance of adopting a modern, progressive and development-focused Immigration framework, the Ministry of Financial Services has developed a tax residency programme that can serve as a gateway to more permanent residence for high-net-worth individuals.

“This programme grants successful applicants the right to reside in The Bahamas for a period of up to three years and bestows upon them a certificate of tax residence. To maintain access to these benefits, however, investors must make The Bahamas their home (or main) residence, living in the country for at least 90 days and declaring they will spend less than 183 days in any other single country. If they fail to abide by these rules, a ‘substantial presence test’ will be conducted to ascertain whether their benefits should be withdrawn.”

He added: “The ministry also recognises that the issue of residency is hugely important given global developments in tax transparency. With this in mind, the concept of residency – and, specifically, tax residency – in The Bahamas has been carefully defined. This has helped the country’s financial services sector remain progressive, while also keeping up to date with a changing global landscape.

“As always, a fine balancing act must be struck. The Bahamas will continue to abide by the highest regulatory standards – both domestic and international – while delivering new products and services that maintain the archipelago as one of the world’s most respected providers of financial services.”