The Bahamas has introduced tax residency certificates for people who have been granted permanent residency, typically under an investor migration programme.
The certificates will be issued only to those who spend a minimum of 90 days in the Bahamas in one year, and no more than 183 days in one other country. They will carry unique taxpayer identification numbers (TIN), which will demonstrate to the holder's country of birth or citizenship that the Bahamas is his principal domicile, and thus his financial accounts are subject to international information exchange agreements under CRS.
The change follows criticism by the Organisation for Economic Co-operation and Development (OECD) that its residence-by-investment scheme was being used by money launderers and tax evaders to dodge Common Reporting Standard (CRS) requirements.
This is something that industry has been asking for some time"
The OECD has suggested that residence-by-investment schemes could "offer a back door to money launderers and tax evaders" by circumventing the Common Reporting Standard (CRS), under which the tax authorities of various jurisdictions routinely collect information on their tax residents' financial accounts and pass it to their counterparts in other countries. The individual could, for example, tell his bank that he is resident only in his adopted country for tax purposes, whereas in practice he lives elsewhere, perhaps in several other jurisdictions.
Brent Symonette, minister of financial services, trade and industry and Immigration, told the Society of Trust and Estate Practitioners (STEP) Caribbean Conference these certificates will help certify their compliance with home country tax laws and address OECD claims.
"When the DPM (deputy prime minister), attorney general and myself were in Paris months ago, the OECD stated that they had an issue with persons using permanent residency as a way of avoiding tax requirements in their own country.
"What is up at the Attorney General's Office at the moment, and has been approved in principle, is that we will have a permanent residency certificate. This means you would have to spend a minimum of 90 days in this country - not consecutively - but over the year, and no more than 183 days in one other country.
"Let's say you were born in France; you would get a tax information number on your permanent residency [certificate], and you would use that in any country in the world and say: Look, this is my tax information number in The Bahamas. I am a permanent resident in The Bahamas and that would offset any taxes that are required in that country or any other country in the world."
Tanya McCartney, the Bahamas Financial Services Board's (BFSB) chief executive, told local news outlet Tribune Business there had to be a distinction between permanent residency and tax residency to protect both the jurisdiction, its clients and residents.
"This is something that industry has been asking for some time; to create certainty around how individuals will be able to objectively demonstrate that they are tax residents. We have a number of persons who are permanent residents in the country.
"We need to distinguish between permanent residency and tax residency so that we do not run afoul of any international regulations. We had submitted recommendations to government some time ago about implementing a tax residency certificate. What was approved was the result of a collaborative effort between the public and private sector. We stand ready and willing to work expeditiously to see that this is implemented," she added.