Corporate Tax in Bahamas | What Businesses Should Know

Understanding Corporate Tax in the Bahamas: An IntroductionCopy link to section

The Bahamas levies no general corporate income tax. For most companies, the rate is zero, and this position reflects the permanent baseline tax system of the country rather than a temporary incentive or special regime. No Income Tax Act or Corporate Tax Act of general application exists, so the absence of a profits tax arises from the absence of enabling legislation rather than from an exemption granted under it.

One exception now applies. Effective 1 January 2024, the Domestic Minimum Top-Up Tax Act introduced a 15% minimum tax that reaches only large multinational groups with global revenues of EUR 750 million or more, leaving the 0% rate intact for everyone else.

This article explains what corporate tax in the Bahamas means for a foreign owner: where the zero rate still holds, where the new top-up tax bites, and what turnover-based and substance obligations sit alongside both. It will be most useful to non-resident investors, international groups, and advisers weighing an International Business Company or a domestic entity. For a baseline reference, the PwC summary confirms the absence of corporate income, capital gains, and withholding taxes.

Is There a Corporate Tax in the Bahamas? Confirming the Zero Rate PositionCopy link to section

For the large majority of businesses, the answer is no. The jurisdiction applies a 0% corporate income tax rate, with no capital gains tax and no withholding tax on dividends paid to non-residents.

The same holds for personal income tax, inheritance tax, and wealth tax, none of which exist here. Companies incorporated or doing business in the country pay no corporate, payroll, or transfer tax of the kind found in most onshore systems.

A single carve-out applies. Entities that form part of an in-scope multinational group are subject to the Domestic Minimum Top-Up Tax; all entities outside the Pillar Two perimeter remain at 0%.

This puts the country in narrow company. Of 226 jurisdictions surveyed by the Tax Foundation, only 15 impose no general corporate income tax, and all are small island nations.

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The Legal Basis for the Absence of a Traditional Corporate Profits TaxCopy link to section

No statute imposes a corporate profits tax. The zero rate is structural: there is simply no enabling law of general application, so there is nothing to tax profits under.

The point was made plainly at official level when the top-up tax arrived. The Prime Minister described that measure as "the first-ever corporate income tax introduced in The Bahamas," which tells you that before November 2024 no such legislation existed at all.

Because there was no profits tax to protect, the country also had no transfer pricing rules for most of its history; such rules served no purpose where profits went untaxed. Legislation enacted in response to the EU Code of Conduct Group and the OECD BEPS Project addressed economic substance, not profits taxation.

The Business Licence Fee: A Turnover Based Charge on CompaniesCopy link to section

Companies trading in the country pay no profits tax, but most pay an annual business licence fee. This charge is calculated on gross turnover for the preceding year, not on profit, and it functions as the main recurring levy on domestic activity.

The fee generally applies to businesses with turnover above BSD 100,000. No threshold applies to International Business Companies or to financial services entities, which pay regardless of size.

The compliance calendar is fixed. Licences expire on 31 December, renewal is due no later than 31 January, and the licence tax itself must be paid by 31 March, with penalties and surcharges for late settlement.

Larger firms face an audit requirement. Any business, IBCs included, with turnover above BSD 5 million must submit audited financial statements prepared under IFRS or US GAAP, together with a Business Licence Return audited by an accountant licensed by the Bahamas Institute of Chartered Accountants.

One important interaction with the new top-up tax: under the Business Licence Act 2023 as amended by the DMTT Act, 2024, entities liable for the Domestic Minimum Top-Up Tax are exempt from the business licence tax, provided they notify the Financial Secretary of their status.

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The Domestic Minimum Top-Up Tax: The Bahamas Pillar Two RegimeCopy link to section

The Domestic Minimum Top-Up Tax Act was enacted on 29 November 2024 to implement Pillar Two of the OECD/G20 two-pillar solution. The House of Assembly approved the bill on 6 November 2024 and the Senate on 18 November 2024.

Although enacted late in the year, the Act is deemed to have taken force retroactively from 1 January 2024, applying to fiscal years beginning after 31 December 2023. The country chose a Qualified Domestic Minimum Top-Up Tax, which lets the jurisdiction where low-taxed group entities sit collect the top-up itself.

That choice matters for sequencing. Where a QDMTT is in place, it takes priority over the Income Inclusion Rule and the Undertaxed Profits Rule that other countries might otherwise apply, so the revenue stays local rather than flowing abroad.

The country has not signalled any intention to adopt an IIR or a UTPR of its own. The legislation incorporates the GloBE Model Rules by reference, including the Administrative Guidance and Consolidated Commentary in force at enactment, and the Minister of Finance may bring in further Inclusive Framework documents by order.

Revenue from the measure is projected at roughly USD 140 million a year. A fuller treatment of the legislation is set out in the DMTT Act analysis published by Lennox Paton.

Which Companies Fall Within Scope: Large Multinational Enterprise GroupsCopy link to section

The top-up tax targets the largest groups only. It applies to multinational enterprise groups with annual consolidated revenues of EUR 750 million or more, equivalent to roughly USD 800 million, in at least two of the four fiscal years preceding the relevant year.

The threshold test uses a look-back. For fiscal year 2025, for instance, group revenues in at least two of the years 2021 to 2024 must reach or exceed EUR 750 million.

Group membership follows the consolidated accounts. An entity is in scope where its results are reported line by line in the consolidated financial statements of the ultimate parent, and the rules extend to 50%-owned joint ventures reported under the equity method.

Excluded entities such as pension funds are not themselves taxed, yet their revenue still counts toward the group threshold test. An entity is treated as located here if it is tax resident in the jurisdiction or operates through a permanent establishment of a non-resident, and tax residency turns on incorporation in the country or on a place of effective management situated there.

For most foreign owners, the practical conclusion is straightforward: domestic companies with smaller turnover, and groups below the EUR 750 million line, fall outside the top-up tax entirely.

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How the 15 Percent Top-Up Tax Base and Liability Are CalculatedCopy link to section

The 15% figure is an effective rate, not a headline rate on profit. Where an in-scope group's effective tax rate on its Bahamian profits falls below 15%, it must pay a top-up to bring the rate up to that floor.

Because the local corporate income tax rate is zero, the top-up generally closes the full gap to 15% on qualifying Bahamian profits. The QDMTT Safe Harbour can apply, deeming the top-up payable in other jurisdictions in respect of the country's constituent entities to be zero, which keeps collection in local hands.

The legislation deliberately omits the GloBE articles dealing with the IIR, the UTPR, and the allocation of top-up tax among constituent entities. The profit base itself, including substance-based income exclusions and deferred tax adjustments, follows the GloBE Model Rules incorporated by reference, with no separate local modifications published beyond those excluded articles.

Two interactions with the business licence fee deserve attention:

• DMTT-liable entities are exempt from the business licence tax under the amended section 38 of the Business Licence Act, 2023.
• A proposed 2025 amendment to section 7 of the DMTT Act would let businesses paying business licence tax credit it against their top-up liability, capped at the DMTT payable for the fiscal year.

Filing, Returns, and Payment Obligations for In-Scope CompaniesCopy link to section

In-scope groups file the GloBE Information Return issued by the OECD, in line with Article 8.1 of the GloBE Model Rules. The return carries the financial detail needed to compute the group's effective tax rate, including profits, taxes paid, and jurisdictional data.

The standard deadline is 15 months after the fiscal year-end. For the transition year, that window extends to 18 months.

Timing of first application has a wrinkle worth flagging. The Act applies to fiscal years beginning after 31 December 2023, but it does not reach a constituent entity for a fiscal year beginning before 1 January 2025 unless the group or one of its entities is already subject to an IIR or UTPR elsewhere for that year.

Administration is still being built. The online registration portal has not launched, and the government is developing a digital platform for registration, filing, and payment, with full implementation targeted for March 2027.

Treatment of Foreign-Owned Companies and International Business CompaniesCopy link to section

The most significant recent shift affects International Business Companies. From 1 January 2024, IBCs domiciled in the country are taxed on overseas revenue for the first time, through a 0.25% levy on revenue from operations outside the jurisdiction.

The charge is banded. It starts at BSD 2,500 on the first BSD 1 million of foreign-source revenue and rises to a ceiling of BSD 100,000. Before the Business Licence Act 2023, such entities paid only BSD 300 for a licence, so the change is substantial.

The policy answers OECD and EU concerns about preferential treatment of foreign-owned entities. Certain categories pay business licence tax regardless of turnover, including IBCs, financial services entities, family offices, and businesses earning revenue from proprietary trading.

Some entities sit outside the licence net. Regulated investment funds and pure equity holding entities are exempt from the business licence requirement, and an IBC whose revenue comes solely from foreign operations may obtain a licence without the full domestic filing burden.

Substance rules now run alongside all of this. Under the Commercial Entities (Substance Requirements) Act 2023, entities incorporated, registered, or continued under local law must demonstrate genuine economic substance where they carry on a relevant activity:

• Banking, insurance, and fund management
• Financing and leasing
• Headquarters business, distribution, and service centres
• Shipping and commercial use of intellectual property
• Holding company activity where a subsidiary conducts any of the above

Substance declarations are filed by the entity's Registered Agent through the official portal within nine months of the financial year-end. Missing this obligation carries regulatory consequences independent of any tax position.

What the Corporate Tax Landscape Means for Businesses and InvestorsCopy link to section

For companies below the Pillar Two threshold, the core proposition is unchanged: no tax on corporate profits. Domestic operators face the turnover-based business licence fee rather than a profits charge, and groups under EUR 750 million stay clear of the top-up tax.

Two practical features support inward investment. The Bahamian dollar is pegged 1:1 to the US dollar, which removes currency risk for dollar-denominated investors, and incorporation typically completes within one to three business days.

Targeted relief is also available. Approved projects can secure exemptions from customs duties on raw materials and real property tax relief for up to 20 years, and the Business Development Incentives Programme Act, 2025 allows firms with turnover above BSD 50 million in qualifying investment activities, such as capital investment, research, training, or decarbonisation, to claim credits against business licence or top-up tax liabilities, with unused credits refundable in cash.

Payroll obligations remain light. The only employee-related contributions are to the National Insurance Board, at 4.65% from the employee and 6.65% from the employer on salary up to a ceiling of BSD 810 per week, with those rates effective 1 July 2024.

The Outlook for Corporate Tax Reform in the BahamasCopy link to section

The country is one of five zero-corporate-tax jurisdictions, with Bahrain, Guernsey, the Isle of Man, and Jersey, to have implemented a QDMTT under Pillar Two. Adoption followed a clear logic: refusing the measure would simply have let other countries tax in-scope groups' Bahamian turnover, sending that revenue abroad.

For businesses below the threshold, reform options remain open. The government has weighed keeping the existing business licence system against extending an income tax similar to the one applied to in-scope groups, stating that any broader tax would be introduced only if judged more equitable for local businesses.

It has also been candid about the scale of that task. Building a full income tax system from scratch is described as an enormous undertaking, and more time is wanted to assess whether such a system is worthwhile.

The reform direction carries some external history. In July 2022 the OECD found enforcement of the substantial activities standard needed "substantial improvement," and in October 2022 the EU listed the country as non-cooperative over economic substance reporting deficiencies combined with its zero or nominal corporate tax rate.

The stated aim is a "simpler, smarter, and more transparent tax system" under the "One Tax Bahamas" banner, incorporating the top-up tax and projected to operate from January 2026. The government's own materials on the reform are published on the Pillar Two page of the Office of the Prime Minister.

ConclusionCopy link to section

For most foreign owners, the absence of a corporate profits tax remains the defining feature of doing business here, but that single fact now carries a condition: whether the group clears the revenue threshold that brings the fifteen percent top-up charge into play. That threshold, not the zero rate headline, is where the real planning work begins.

Foreign-owned entities that fall outside the top-up scope still face the business licence fee on turnover, so confirming in-scope status and the applicable filing obligations is the concrete next step before any structure is finalised or maintained.

How Expanship Can Help Your Business in the BahamasCopy link to section

Expanship advises foreign owners on where their entity sits relative to the zero rate, the turnover-based business licence fee, and the top-up tax, then handles the registrations, returns, and substance filings that follow from that position. Alongside the tax work, we support the full lifecycle of a foreign-owned company in the jurisdiction.

• Company formation, including IBCs and domestic entities
• Registered agent and registered office services
• Business licence registration and annual filing
• Ongoing compliance and economic substance management
• Accounting, bookkeeping, and audit coordination
• Introductions to banking partners

To discuss your structure and obligations, contact Expanship Bahamas.

Frequently Asked QuestionsCopy link to section