The Tribune

By Fay Simmons

Tribune Business Reporter

jsimmons@tribunemedia.net

The Attorney General has warned that The Bahamas is threatened with losing “a material amount” of its investment funds due to likely tax reforms in Brazil.

Ryan Pinder KC, speaking at the Nassau Conference, explained that the threat posed to The Bahamas’ investment condominium (ICON) product underlined his call for renewed innovation in the financial services industry to maintain its competitive advantage.

The ICON was specifically developed for the Brazilian market as an offshore structure through which investors from that country could hold and make investments while, at the same time, remaining compliant with home country tax laws. It was a version of the same product they are familiar with at home, but tax law changes are seemingly set to eliminate any advantage from using The Bahamas.

Mr Pinder said: “Brazil is close to passing controlled foreign corporation laws which would eliminate any tax benefit of holding financial investments in an offshore fund. We could end up losing a material amount of funds in The Bahamas, with clients unwinding their structures before year-end. We enjoyed the prosperity of our innovation for ten years; it is now time to innovate again.”

He explained that the ICON was marketed “aggressively” in Brazil, resulting in a large number of such products becoming licensed as fund structures in The Bahamas. Many of the assets were held in custody locally. The ICON was created through a joint venture between the Bahamian government, the financial services industry and the Brazilian legal community to ensure it resembled the domestic investment condominiums in Brazil.

Mr Pinder said: “As a country we have worked hard over the years to develop the financial services market in Brazil. The ICON was developed jointly between The Bahamas’ government, the Bahamian financial services industry and the Brazilian legal community. The ICON created another influx of licensed funds originating from Brazil, providing a product that was structurally familiar to the investment condominium in Brazil.

“As a result of these innovations, a material amount of funds licensed in The Bahamas originated from Brazil. This is now all at risk due to tax changes that are proposed in Brazil.”