The Tribune

The long-awaited Tax Residency Certificate (TRC) product will be launched by year-end 2020 in a bid to ease pressures on The Bahamas and its permanent residents, a Cabinet minister has pledged.

Elsworth Johnson, minister of financial services, trade and industry and Immigration, told the Bahamas Financial Services Board's (BFSB) virtual annual general meeting (AGM) that the product's launch was a "high priority" given international demands for proof as to whether expatriate permanent residents are legitimately domiciled in this nation.

TRCs, which have been talked about for some years, would have their own taxpayer identification number (TIN) and confirm that the holder has been properly domiciled in The Bahamas. Besides confirming this is their main place of residence, these certificates will help certify the holder's compliance with their home country tax laws.

And they will also help to address Organisation for Economic Co-Operation and Development (OECD) claims that this nation’s economic permanent residency product is in danger of being abused by tax evaders.

The OECD sparked major concern within the Bahamian financial services industry and wider economy in 2018 when it included The Bahamas’ key investment product on a list of regimes that could undermine global automatic tax information exchange.

Many viewed it as a further broadening of the OECD’s efforts beyond pure tax information exchange and transparency to investment products and regimes it deems potentially harmful to the global crackdown on tax avoidance and evasion.

The listing report called for “financial institutions to undertake enhanced due diligence on clients that are citizens or residents of countries with [investment citizenship or investment residency] programmes to prevent cases of [tax] avoidance and tax evasion”.

Apart from creating negative perceptions of The Bahamas in the minds of potential investors, the OECD listing’s demand for enhanced scrutiny, and likely extra costs, time and exposure involved, threatened to deter wealthy investors from applying for permanent economic residence - thereby undermining a key component of the foreign direct investment (FDI) regime that has been in place for decades.

Meanwhile, in an effort to forge improved ties between financial services and Immigration, Mr Johnson said The Bahamas' first-ever deputy director of financial services will be based at Monarch House - the Department of Immigration unit that deals with permanent residency and citizenship applications - in a bid to "bridge the gap".

He added that Monarch House will deal with enrollment, payment and collection of documents, as the Government seeks to address concerns over the speed and efficiency with which permanent residency applications are dealt.

It also wants to fully implement the Department of Immigration's Integrated Management System to permit cashless transactions, online application processes and the potential online/external delivery of client documents.

Mr Johnson, saying the Extended Visa Stay initiative proposed by the Economic Recovery Committee was just weeks from launching, added that reforms to the Companies Act; International Business Companies Act; the Property (Execution of Deeds and Documents) Act; the Rule Against Perpetuities (Abolition) Act; and the Foundations Act will soon be brought to Parliament.

"Several other pieces of legislation are being drafted and reviewed with the objective of creating a modern legislative framework for the long-term stabilisation and growth of the financial services sector," Mr Johnson said. "Many of these changes have been requested by our industry partners for many years, and, once again, my ministry has made it a priority to deliver results."

Besides appointing the first director of financial services for five years, a new director of trade and consultant charged with overseeing the roll-out of new Alternative Dispute Resolution legislation to establish The Bahamas as a centre for International Commercial Arbitration have also been hired.

Mr Johnson said his ministry's trade unit has digitised the process for companies applying for concessions under the Industries Encouragement Act.