The Bahamas is widely regarded as a tax-friendly destination, attracting individuals, businesses, and investors seeking a low-tax environment. With no income tax, capital gains tax, or corporate tax, it stands out as an attractive jurisdiction for expatriates and international companies. While often referred to as a tax haven, this reputation is primarily due to the absence of direct taxation. However, understanding the full scope of the Bahamian tax system—including indirect taxes like VAT, customs duties, and property taxes—is essential for those looking to live, invest, or operate a business in the country. After securing your Bahamas eVisa, it’s useful to know the Bahamas tax system features no income, corporate, or capital gains tax, making it an attractive destination for investors and residents.

Key Features of the Bahamian Tax System

The cornerstone of the Bahamian tax system is the absence of direct taxes, making it one of the most tax-friendly jurisdictions in the world. Individuals and businesses are not subject to income tax, capital gains tax, or inheritance tax, allowing them to retain more of their earnings.

Although the Bahamas does not impose direct taxes, the government funds public services and infrastructure through indirect taxes, such as VAT, customs duties, and property taxes. This unique system continues to attract individuals and businesses looking for a low-tax environment while maintaining a well-developed economy.

No Corporate or Capital Gains Tax in Bahamas

Businesses registered in the Bahamas also benefit from a tax-free structure. There is no corporate tax, capital gains tax, or withholding tax on profits.

Implications for Businesses:

• International businesses operating in the Bahamas enjoy tax-free earnings.
• Investors do not pay capital gains tax on the sale of assets, stocks, or properties.
• No withholding tax is imposed on dividends or interest paid to foreign shareholders.

The Pillars of Bahamian Revenue: Indirect Taxes and Fees

The primary sources of government revenue in the Bahamas come from indirect taxes and fees, including:

1. Value Added Tax (VAT)

Value Added Tax (VAT) is a consumption tax applied at each stage of production and distribution based on the added value of goods and services. The Bahamas has a standard VAT rate of 10%, which applies to most goods and services. However, certain items are either zero-rated, such as exports and some essential food products, or exempt, including financial services and real estate transactions below a specific threshold. Businesses with an annual turnover exceeding B$100,000 must register for VAT and are responsible for collecting and remitting it to the government. This tax serves as a key revenue source for public services and infrastructure in the Bahamas.

2. Property Tax

Property tax in the Bahamas is an annual levy on real estate, with rates varying based on property type and value. Owner-occupied properties enjoy a tax exemption up to a certain threshold, after which a percentage-based tax applies. Commercial properties are taxed at a lower rate for the initial portion of their assessed value, with a higher rate on the excess amount. Undeveloped land owned by non-Bahamians is subject to a separate tax rate. Certain exemptions or concessions may apply, particularly for agricultural land and designated development projects. Property tax serves as a key revenue source while promoting investment in developed real estate.

3. Customs Duties

Customs duties are a major revenue source for the government, as the country relies heavily on imports. These duties apply to most imported goods, with rates varying based on the type of item—luxury goods and those competing with local products often face higher tariffs. The duty is calculated based on the Cost, Insurance, and Freight (CIF) value of the goods, with rates ranging from 0% to 220%. Since the Bahamas does not impose income or corporate taxes, customs duties play a crucial role in funding public services and infrastructure.

Key Customs Duties Information:

• Essential goods such as basic food items may have lower duties or exemptions.
• Luxury items, such as automobiles and electronics, often have higher tariffs.
• A 10% VAT is also applied on most imported goods.

4. Stamp Duty

Stamp duty is applied to certain transactions, particularly property sales and legal documents. Examples include:

• Real Estate Transfers: The rate varies based on the value of the property.
• Mortgages: A percentage of the mortgage amount is subject to stamp tax.
• Insurance Policies: Stamp tax is applied to insurance premiums.
• Contracts and Agreements: Certain contracts may require stamp duty.

5. Business License Fees

All businesses operating in the Bahamas are required to obtain an annual business license and pay a corresponding fee. The fee structure varies depending on the type of business activity and its annual turnover. Businesses must renew their licenses annually and comply with the regulations set forth by the Business Licence Act.

6. Excise Tax

Excise tax applies to specific goods produced, manufactured, or imported into the Bahamas. Commonly taxed items include alcoholic beverages, tobacco products, and petroleum products. The rates vary depending on the product type, serving as both a revenue source and a regulatory measure to control the consumption of certain goods.

7. National Insurance Contributions

The Bahamas operates a social security system through the National Insurance Board (NIB), providing benefits such as retirement pensions, unemployment support, and sickness benefits. Both employers and employees must contribute to the NIB based on insurable earnings, with rates typically calculated as a percentage of the employee’s salary. These contributions help ensure financial security for workers and their families.

8. Departure Tax (Tourism Levy)

Travelers leaving the Bahamas must pay a departure tax, also known as a tourism levy. This fee is commonly included in airline ticket prices, making the process seamless for passengers. The revenue generated from this tax helps fund airport maintenance, infrastructure, and tourism-related services.

Tax Residency and Offshore Companies

Foreign individuals and businesses looking to benefit from the Bahamas' tax system often seek tax residency. Requirements for Tax Residency in the Bahamas include:

• Residing in the Bahamas for at least 183 days per year.
• Owning property or investing in the local economy.
• Obtaining a Certificate of Tax Residency from the government for international tax purposes.

Many international businesses establish International Business Companies (IBCs) in the Bahamas, benefiting from: Zero corporate tax, Confidentiality in ownership, and Asset protection and international banking advantages.

Taxation for Individuals The Bahamas

For individuals residing in the Bahamas, the primary tax implications revolve around consumption (VAT) and property ownership (property tax, if applicable). There is no income tax on salaries, wages, or other forms of personal income.

Taxation for Businesses in The Bahamas

Businesses operating in the Bahamas are primarily subject to VAT on their sales (if turnover exceeds the threshold), the annual business license fee, customs duties (if importing goods), excise tax (if applicable to their products), and National Insurance contributions for their employees. The absence of corporate income tax can be a significant advantage for businesses.

Tax Incentives and Special Economic Zones

The Bahamian government offers various tax incentives and operates special economic zones to attract foreign investment and promote specific industries. These incentives can include exemptions from certain taxes and streamlined regulatory processes. Examples include incentives for tourism development, manufacturing, and maritime activities.

Tax Administration and Compliance

The primary government agencies responsible for tax administration in the Bahamas include:

• Inland Revenue Department: Responsible for the administration of VAT, property tax, and business license fees.
• Customs and Excise Department: Responsible for the collection of customs duties and excise tax.
• National Insurance Board (NIB): Responsible for the administration and collection of National Insurance contributions.

Compliance with Bahamian tax laws and regulations is essential for both individuals and businesses. This includes registering for relevant taxes, filing returns accurately and on time, and paying any applicable taxes by the due dates.

Impact of Bahamian Tax on on Foreign Investors:

The Bahamian tax system, particularly the absence of income tax, can be highly attractive to foreign investors. This, coupled with the country's stable economy, strategic location, and thriving tourism and financial services sectors, makes it a compelling destination for international business and investment. However, it's crucial for foreign investors to understand the indirect tax obligations and any specific regulations related to their industry.

Recent Changes or Developments

The Bahamian tax system has undergone some changes in recent years, particularly with the introduction and subsequent adjustments to the VAT rate. It's advisable to stay updated on any recent legislative changes or policy announcements that may impact taxation in the Bahamas.

Conclusion

Bahamas offers the distinct tax environment of zero taxation on income, corporation, or capital gains that draws businesses, investors, and expatriates. Indirect taxation through VAT, customs duties, property tax, and business license fees is, however, utilized by the government to generate revenue. While the tax-friendly regime has enormous advantages, individuals and companies must understand their specific tax status in order to be able to plan finances. Paying close attention to detail and working with tax advisers can ensure compliance and optimize the advantages of living or doing business in the Bahamas.

Content Disclaimer: While this information was last updated in April 2025, we strongly suggest confirming all travel details with the appropriate governmental agencies, embassies, and airlines.