1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Government encourages foreign direct investment (FDI), particularly in the tourism sector. With the exception of nine (9) sectors reserved exclusively for Bahamian only investment, the Government does not give preferential treatment to investors based on nationality. Foreign investors may negotiate to receive incentives, which could include special tax concessions and direct marketing and budgetary support.
The Government provides guidelines for foreign investments through its National Investment Policy (NIP), which is administered by The Bahamas Investment Authority (BIA) in the Office of the Prime Minister. Large foreign investment projects require approval by the National Economic Council (NEC), which includes members of the Cabinet of The Bahamas. The approval process provides opportunities for Bahamian businesses with competing interests to lobby Cabinet members to delay review or approval of FDI applications. The Embassy is aware of several cases in which investors who have submitted applications have not received responses or have experienced significant delays in the approvals process. For example, the Embassy has been contacted by American companies seeking to do business in the aviation sector whose applications have been stonewalled due to the impact of lobbying efforts on Cabinet members in the decision-making process. The Government reports that it is in the process of streamlining the vetting and approval process for foreign direct investment.
Limits on Foreign Control and Right to Private Ownership and Establishment
The National Investment Policy (NIP) explicitly reserves certain sectors of the economy exclusively for Bahamian investors, which acts as a non-tariff trade barrier for investments which do not fit clearly within the NIP. These sectors are listed on the BIA website at www.bahamas.gov.bs/bia . The government has made exceptions to this policy on a case-by-case basis but generally these sectors should be avoided as there is no guarantee of market access.
Beyond the areas reserved for Bahamian only participation in the National Investment Policy, rights to private ownership and establishment are maintained and respected. 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 a 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.
All business engagements are subject to licensing and approval by the relevant authorities but, once approved, foreign and domestic private entities may engage in business activity without impediment. They may also freely establish, acquire, and dispose of interests in their business enterprises.
Other Investment Policy Reviews
The Bahamas is ranked 121 (out of 190 economies) in terms of the ease of doing business in the 2017 World Bank Doing Business Report . The report underscored historically problematic issues related to starting a business, getting electricity, getting credit, dealing with construction permits, and protecting minority investors. On the positive side, the report highlighted improvements in The Bahamas in the areas of trading across borders and registering property, although the country is still among the lower ranked economies in those areas. The Government is making efforts to improve its ranking and asserts that the recent drop is because of perceived improvements in the ease of doing business in other countries, rather than any increased difficulty in doing business in The Bahamas. To address the decline in ranking, the Government has undertaken a full review of business and investment processes in conjunction with the development of its twenty-year National Development Plan.
According to the 2017 Heritage Foundation Index of Economic Freedom , The Bahamas ranks 90th in the world in economic freedom. The report asserts that The Bahamas appears gradually to be losing competitiveness compared with other countries that are moving more rapidly to expand economic opportunity. The report states that while the overall regulatory system is conducive to entrepreneurial activity, the weak rule of law, lingering protectionism, and bureaucracy continue to hold back the emergence of a more dynamic and sustainable private sector. The report, however, says that the country’s relatively sound management of fiscal policy contributes to macroeconomic stability, and that investment management and financial services play a vital role in sustaining overall economic strength.
The Bahamas Investment Authority (BIA) is the first point of contact for foreign investors and operates as the principal investment promotion agency for The Bahamas. The BIA serves as a “one-stop shop” to assist investors in navigating the approvals process through various departments and agencies of the Government to ensure that requirements are met before the investment application is submitted to the National Economic Council or Cabinet for approval. The services of the BIA are available to all investors.
Investors who invest at least USD $500,000 may apply for permanent residency. The GCOB is reportedly considering raising this ceiling to a million dollars.
The BIA, with the support of the Ministry of Tourism, engages in regional and international conferences and trade shows to promote investment in the country. It also maintains functional cooperation arrangements with the Caribbean Association of Investment Promotion Agencies (CAIPA) and benefits from grant funding from the EU Development Fund.
The Government introduced an online business license registration system in 2015 for Bahamian companies; foreign investors, however, should continue to submit applications through the BIA.
The Bahamas Chamber of Commerce and Employers’ Confederation (Chamber of Commerce) encourages Bahamian companies to participate in trade missions abroad. Exchange controls maintained by the Central Bank places limitations on outward investment by Bahamians.
4. Industrial Policies
Tax relief is the most significant investment incentive in The Bahamas. Currently the government does not impose taxes on income, estates, or inheritances in the country, but instead raises revenue from real property tax, import duties, value added tax, and various permit and license fees.
Industry and region-specific incentives available under various laws are offered to any qualifying individual and may include waivers on import duties, property tax abatement, and, in some cases, land grants and extended leases for private development.
Foreign Trade Zones/Free Ports/Trade Facilitation
The 1955 Hawksbill Creek Agreement established Freeport on the island of Grand Bahama as a 230-square mile free trade and economic development zone under private ownership and control of the Grand Bahama Port Authority (GBPA).
While enabling legislation guarantees that the free trade zone continues to 2054, the Grand Bahama (Port Area) Investment Incentives Act, 2016 provides that certain tax concessions or extensions are granted only upon application to the Government’s Investment Board. In addition, there are fees imposed by the GBPA for businesses operating in Freeport that are not subject to national regulation and, in some instances, licensees report that the process lacks transparency.
Additional information is available at http://www.gbpa.com .
Performance and Data Localization Requirements
The Bahamas maintains formal performance requirements for investments, including proof of adequate and legitimate sources of funding and economic and environmental impact assessments. Such requirements are negotiated on a project-by-project basis, and, particularly in the case of larger developments, are written into “heads of agreement,” between the government and the investor. It is noteworthy that these agreements also include government obligations to the investor.
There is no policy of forced localization or a requirement for technology transfers, but there is official encouragement to direct benefits to local producers and the transfer of skills to the local labor market. This engagement is a part of the negotiations with the Government and it is not uncommon for an investor to gain greater concessions where there is a direct benefit to local business, job creation, or an investment that supports the transfer of skills and technology.
Work permits are facilitated for key foreign employees as part of the investment approval process, but government policy generally favors the employment of Bahamian nationals. Fees for work permits are not tied to administrative costs and have been developed as a revenue measure and, depending on the category of employee, can cost up to USD $12,500 annually. Work permits for less senior employees and those without specialized skills are generally more difficult to obtain. Growing unemployment makes it increasingly difficult to get a work permit and new approvals are subject to an extensive and potentially lengthy review process. Most permits are issued by the Immigration Board but, in high profile or sensitive positions, Cabinet approval may be required.
There is no requirement for access to source codes, or a requirement for local data storage. There are a growing number of data storage facilities in The Bahamas and new entrants are offering services to both regional and international companies.
10. Political and Security Environment
The Bahamas has no history of politically motivated violence and, barring a few incidents leading up to the general elections in 2012, the political process is violence-free and transparent. Past incidents were relatively minor and included damage to political party installations, signage, billboards, and a few reported altercations between opposing party members.