An amendment made to the Stamp Act which appears to remove one of the long-standing "incentives to invest" in The Bahamas is causing "disquiet" in the financial and legal communities, with practitioners seeking clarification from the government on the law and its intended effect.
The amendment, whose wording suggests a new five percent tax on all profits, dividends and payments for services remitted out of the country, appears to remove the ability to engage in unrestricted repatriation of profits from investments in this country.
A legal source, who declined to be named, said: "The legal profession is still trying to figure out exactly what this means. I have been told that the goal was to capture growing concerns doing business in The Bahamas such as banks, oil refineries, breweries and the like that are repatriating profits to foreign parent companies, and it was not intended to capture real estate transactions.
"Apparently a guidance note is supposed to be issued to clarify the issue by the government."
Section 4(b) of the Stamp (Amendment) Bill 2013 calls for the insertion of a new item into the Stamp Act, which would apply a five percent duty on any amount above $500,000 "remitted or transferred outside of The Bahamas", whether in the form of a "bill of exchange, draft, money order, mail transfer of money, traveler's check or letter of credit." This applies in the case that such funds are being sent to a "related party where such payment represents dividends or profits or payments for services to be rendered by the related party."
There is concern that this change would negate the Bahamas Investment Authority's previous commitment to investors that they would be subject to "no restrictions on repatriation of profits", as highlighted in numerous promotional publications, would impose additional costs on investors and possibly reduce the attractiveness of The Bahamas as an investment destination.
However, the government's thinking may be that foreign companies operating in this nation - whether it be Atlantis, or international banks - could afford to contribute more in terms of revenue to the government out of what may otherwise simply be remitted out of the country to their parent entities.
A source in the financial services community, added: "At the moment there is a lot of disquiet about it. What I have been told is that they are going to give some clarification on it, and that it is not intended to affect the international banks. We are waiting to hear back from the Ministry of Finance."
Messages left for Minister of State for Finance Michael Halkitis seeking clarification on the matter, were not returned up to press time yesterday.
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