1. Openness To, and Restrictions Upon, Foreign Investment
Policies towards Foreign Direct Investment
The government encourages FDI, particularly in the tourism and financial services sector. The country provides incentives for second home ownership and currently has over 270 licensed banks and trust companies, 120 broker dealers and investment advisory firms, and 60 fund administrators operating in the jurisdiction. The National Investment Policy (NIP) and the Commercial Enterprises Act (CEA) explicitly encourage foreign investment in certain sectors of the economy. These sectors are : touristic resorts; upscale villas, condominium, timeshare, and second home development; international business centers; aircraft and maritime services; marinas; information and data processing; information technology services; light industry manufacturing and assembly; agro-industries; mari-culture; food and beverage processing; banking and other financial services; offshore medical centers and services; e-commerce; arbitration; international arbitrage; computer programming; software design and writing; bioinformatics and analytics; and data storage and warehousing.
The Bahamas has an investment promotion strategy that includes multiple government agencies working to attract foreign direct investment. The Bahamas Investment Authority (BIA) (www.bahamas.gov.bs/bia) administers the NIP, functions as the investment facilitation agency and acts as a ‘one stop shop’ to assist investors in navigating a potentially cumbersome approvals process. The Embassy is not aware of any formal retention strategies, but each administration has consistently supported new investment and has generally honored agreements made by previous administrations. The current government has introduced policies and legislative support for Micro, Small and Medium Enterprises (MSMEs), defined as companies with fewer than 10 employees, representing 85 percent of registered businesses. In late 2018, the government created an MSME policy and the Small Business Development Centre (SBDC) which provides business advisory services for startups and entrepreneurs, training and entrepreneurial professional development opportunities, mentorship and incubation services, access to capital, and advocacy for individual businesses, sectors within the economy and MSMEs as a community.
The Bahamas still reserves certain sectors of the economy for Bahamian investors. The reserved areas are: wholesale and retail operations (although international investors may engage in the wholesale distribution of any product they produce locally); commission agencies engaged in import or export; real estate and domestic property management; domestic newspapers and magazine publications; domestic advertising and public relations firms; nightclubs and restaurants except specialty, gourmet, and ethnic restaurants and those operating in a hotel, resort or tourist attraction; security services; domestic distribution of building supplies; construction companies except for special structures; personal cosmetic/beauty establishments; commercial fishing including deep water fishing, shallow water scale fish, crustacean, mollusk, and sponge-fishing; auto and appliance service operations; public ground transportation, cabotage and the domestic gaming industry.
With the exception of these sectors, the Bahamian government does not give preferential treatment to investors based on nationality, and investors have equal access to incentives, which include land grants, tax concessions, and direct marketing and budgetary support. The government provides guidelines for investment through its NIP, which BIA administers in the Office of the Prime Minister, and through the Commercial Enterprises Act (CEA) administered through the Ministry of Financial Services, Trade & Industry and Immigration. The CEA provides incentives to domestic and foreign investors to establish specific investment projects, including approval of a specified number of work permits for senior posts and the expedited issuance of work permits.
Large foreign investment projects, particularly those that do not fit within the NIP or CEA require approval by the National Economic Council (NEC) of The Bahamas. This process generally requires environmental and economic impact assessments for review by multiple government agencies prior to NEC consideration.
Bureaucratic impediments are not limited to the NEC approvals process, and the country continues to lag on international metrics related to starting a business. According to the 2020 World Bank Doing Business rankings, The Bahamas scores 119 overall, 181 in registering property, 77 in getting construction permits, 152 in access to credit, and 71 in resolving insolvency. All these categories saw a decrease in ratings from 2018 metrics, with the exception of getting construction permits. The Embassy is aware of cases where the Bahamian government failed to respond to investment applications, and several cases where there have been significant delays in the approvals process. Despite challenges, investment continues to grow in tourism, finance, construction, and quick-serve restaurant franchises.
Efforts to accelerate Foreign Direct Investment (FDI) have been announced but remain unclear. In response to the losses from Hurricane Dorian and the economic fallout from COVID-19, the government announced requirements for domestic and foreign investment would be liberalized and eligible investment proposals under review would be accelerated to speed up economic recovery. Public pronouncements alluded to a streamlined approach for reviewing lower value applications that now go to the NEC for approval, prioritizing foreign investment proposals that could generate inflows and stimulate construction activity, and expediting investment applications to specifically assist Grand Bahama and the Abacos post-Hurricane Dorian. Despite these announcements, the Embassy is not aware of any formal guidelines concerning changes to investment procedures that have been made publicly available.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign investors have the right to establish private enterprises and, after approval, companies operate unencumbered. Key considerations for the Bahamian government include economic impact, job creation, infrastructural development, economic diversification, and environmental protection. With the assistance of a local attorney, investors can create the following types of businesses: sole proprietorship, limited or general partnership, joint stock company, or subsidiary of a foreign company. The most popular all-purpose vehicles for foreign investors are the International Business Company (IBC) and the Limited Duration Company (LDC). Both benefit from income, capital gains, gift, estate, inheritance, and succession tax exemptions. Investors are required to establish a local company and be registered to operate in The Bahamas.
Regarding the reserved sectors of the economy referenced above, the government has made exceptions to this policy on a case-by-case basis but generally, there is no guarantee of market access or right of establishment in these areas. The Embassy is aware of several cases in which the Bahamian government has granted foreign investors waivers to the policy and allowed full market access.
Other Investment Policy Reviews
The Bahamas ranks 119 out of 190 countries in terms of the ease of doing business in the 2020 World Bank Doing Business Report, with a Distance to Frontier score of 59.9, indicating its economy was 40.1 percentage points away from the frontier constructed from the best performances across all economies and across time. ( )
The Bahamas has not benefitted from a WTO trade policy review as it is the only Western Hemisphere country that is not a member of the global organization. The current government has re-engaged with the Accessions Division of the WTO, initially announcing an aim of full membership by 2019 and formerly relaunching accession negotiations at the Fourth Working Party in April 2019. However, the Minister with responsibility for international trade later described the 2019 target as purely aspirational, confirming it was unlikely accession would take place before 2025. There is a growing and vocal domestic constituency against WTO accession that has likely slowed the government’s course.
Neither the OECD nor UNCTAD have conducted investment policy reviews. The Bahamas achieved the G-20 standard on transparency and cooperation on tax matters, a standard initially advanced by the OECD.
According to the 2020 World Bank Doing Business Index, starting a business in The Bahamas takes 12 days, requires seven separate procedures, and costs the same for both men and women. In 2017, the Bahamian government streamlined this process and launched an e-business portal, which facilitated limited liability companies to register online ( ). In early 2018, the government removed certain documentary requirements to register or renew registration of companies and is considering allowing company fees to be applicable on the date of incorporation to expedite the annual process.
All companies with an annual turnover of $100,000 or more are required to register with the government to receive a tax identification number. The registration process is generally viewed as an impediment to the ease of doing business. Additionally, companies are required to provide financial reports on a monthly or quarterly basis.
In mid-2019, as part of the business license application process, the government announced provisional licenses for “low-risk” businesses including home-based businesses, sole proprietors, and other small businesses in non-regulated sectors. The government also removed the fee for starting a new business and implemented a system to renew business licenses in under 48 hours. Foreign companies, as well as incorporated companies, businesses with storefronts or operating in regulated industries, are not eligible for provisional licenses, expedited renewals, or new business license fee exemptions.
The Bahamian government does not promote nor incentivize outward investment. The government does not prohibit its citizens from investing internationally, however, all outward direct investments by residents require the prior approval of the Exchange Control Department of the Central Bank of The Bahamas ( – controls). Applications are considered in light of the probable impact the investments may have on The Bahamas’ balance of payments, specifically business activities that promote the receipt of foreign currency.
During the COVID-19 pandemic, in an effort to maintain adequate foreign reserves to support the Bahamian dollar fixed exchange rate and preserve access to foreign exchange for priority international transactions, on May 4, 2020, the Central Bank announced the suspension of approvals of applications to purchase foreign currency for transactions via the Investment Currency Market (ICM) and the Bahamas Depositary/Depository Receipt (“BDR”) program. The Central Bank announced foreign exchange access through the channels would resume once market uncertainties around the COVID-19 pandemic subsided. Meanwhile, the ICM was expected to continue to facilitate the repatriation of foreign currency income, capital gains, and liquidated capital at the appropriate premium.