On 20 February 2024, the Council of the European Union (“EU”) met and approved its list of non-cooperative jurisdictions for tax purposes (the “List”), which removed The Bahamas from the List. The removal of the Bahamas from the List highlights the efforts taken by the Government of The Bahamas and the financial services industry in The Bahamas to address and rectify the deficiencies identified by the EU and the Organisation for Economic Cooperation and Development (“OECD”) and exhibits the jurisdictions’ commitment to transparency and cooperation, as a pre-eminent financial hub.
In October 2022, The Bahamas was added to the List due to the perceived ineffective implementation of substance requirements, as the OECD’s Forum for Harmful Tax Practices (“FHTP”) had identified deficiencies in compliance actions and exchanges of information by The Bahamas following the conclusion of its 2021 monitoring exercise.
In August 2023, however, the Government of The Bahamas introduced the Commercial Entities (Substance Requirements) Act, 2023 (“CESRA”), repealing and replacing the Commercial Entities (Substance Requirements) Act, 2018. The following month, the Ministry of Finance launched a new reporting portal for CESRA. Additionally, throughout 2023 and 2024, the Ministry of Finance, in its capacity as the Authority under CESRA, increased its level of investigations of Bahamian entities and exchanges of information with relevant foreign jurisdictions.
In the press release communicating the decision of the Council, it was stated that the EU’s Code of Conduct Group (Business Taxation) considered The Bahamas to be “compliant with the standard for jurisdictions with no or only a nominal corporate income tax.”
The decision of the Code of Conduct Group (Business Taxation) comes in the wake of the FHTP publishing the results of its Harmful Tax Practices Peer Review in which The Bahamas was identified as “Not harmful”. The FHTP also acknowledged that The Bahamas’ domestic legal framework on economic substance “meets all aspects of the [OECD’s] standard”, with only minor areas for further improvement being identified.
The Government of The Bahamas has welcomed the removal of The Bahamas from the List and has expressed its commitment to maintain its status as a responsible international exchange partner and its rating as “Not harmful” by the FHTP.
The efforts taken by the Government of The Bahamas and the financial services industry underscore The Bahamas’ commitment to being a premier jurisdiction for financial services and a leading international financial center.
Contact us for more information on how the decision of the EU’s Code of Conduct Group (Business Taxation) may affect you or your business.
Bryan A. Glinton | Partner, bglinton@gsolegal.com
Dwayne Whylly | Partner, dwhylly@gsolegal.com
Reference Links:
Council of the EU Press Release 20 February 2024
Council of the EU’s Conclusions on the Revise EU List of Non-cooperative Jurisdictions for Tax Purposes
OECD’s Harmful Tax Practices – Peer Review Results (Update as of February 2024)