The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

A SENIOR banker says key VAT eliminations will end The Bahamas’ position as an “outlier” when measured against trust rivals while these and other reforms “point very much in the right direction” for the nation’s financial services industry.

Bruno Roberts, chairman of the Association of International Banks and Trust Companies (AIBT), in written replies to Tribune Business questions hailed the Government’s recently-unveiled initiatives - largely targeted at supporting The Bahamas’ private wealth management heritage by making it easy for wealthy investors and their family offices to choose this country as their primary residence - while warning that “none of this is a single fix” and execution remains key.

He branded the announcement by Jerome Fitzgerald, the minister of economic affairs, of plans to eliminate both VAT on trust services and the transfer of property between family members and into a trust, as “a significant step” in bringing The Bahamas on to a more competitive footing with rival jurisdictions and international financial centres that compete in the private wealth management space;

“The Bahamas was an outlier among its competitors in charging VAT on trust services. Cayman, BVI, Bermuda and Guernsey have no VAT or GST (goods and services tax) at all, and Jersey's GST is lower and can be mitigated for financial services entities. That added directly to the cost of using a Bahamian trust,” Mr Roberts explained.

“The family transfer change brings consistency. Property can already pass to family members tax-free by will, so it makes sense that a family can do the same during their lifetime through a trust. Families shouldn't be penalised for sound succession planning. The Government has said this will be done by year-end, and industry welcomes that."

The AIBT chair, who is also executive vice-president at The Private Trust Corporation, told this newspaper that what wealthy investors and their intermediary advisors prize above all is certainty. He praised the Government’s other planned actions, particularly plans to give the long-awaited Bahamas Tax Residency Certificate a legal basis in statute law, as this will enable families to prove this nation is their primary residence, or tax domicile, if they spend 90 non-consecutive days here.

“A tax residency certificate has been on the industry's wish list for several years,” Mr Roberts explained. “The BFSB (Bahamas Financial Services Board) working alongside AIBT recommended one to government some time ago, and the concept was first announced in 2019. What has changed is the momentum.

“Draft legislation is complete and the minister [Mr Fitzgerald] has committed to bringing it to Parliament. The demand is real and growing. Globally mobile families increasingly need to show a bank, or the tax authority in their home country, where they are tax resident. Until now a Bahamian permanent resident had no formal document to do that.”

He added: “The key benefit is certainty. The 90-day presence requirement meets the minimum standard set by the OECD, so the certificate will be credible internationally. It still recognises that wealthy families spend their year across several countries.

“It lets The Bahamas compete for primary residence, not just second homes. I wouldn't put a figure on new business yet. But every family that makes The Bahamas its tax home brings trust, banking, legal and family office work with it…. They need services across our whole ecosystem that are efficient, consistent, transparent and predictable - from government agencies to regulators to private sector providers.

“For the client, it's a formal, government-issued document confirming The Bahamas as their jurisdiction of tax residence. They can present it to banks and to foreign tax authorities. It removes doubt and reduces the risk of being claimed as tax resident somewhere else. The 90 days do not have to be consecutive, so it fits how international families actually live."

Brandace Duncanson, the Bahamas’ director of financial services, told a New York conference on Friday that the planned Bahamas Investor Concierge Unit represents a “one-stop, white glove service” for high net worth and ultra high net worth investors once they have elected to become economic permanent residents and qualified by purchasing property worth $1m and over or government bonds of a similar amount bearing a 2.5 percent interest coupon.

She added that the Unit would “co-ordinate across government agencies” with respect to investor needs, including residency permits for themselves and their families, as well as work permits for their staff and family office workers, plus approvals such as Business Licences. Representatives from the relevant agencies will be present within the Unit.

Ms Duncanson said the Unit’s goal is to make the process of becoming a resident and investor in The Bahamas “seamless” and “investor friendly”, plus “facilitate the ease of doing business”. She added that the Government will also treat the establishment of family offices as being equal to a typical foreign direct investment (FDI).

Speaking to the Investor Concierge Unit, Mr Roberts told Tribune Business: “Investors are sophisticated and time sensitive. What they value most is a clear, co-ordinated process, with Immigration, business licensing, exchange control and regulatory approvals handled in step rather than in sequence.

“The Concierge Unit is an important part of delivering efficient, consistent, transparent and predictable service across our ecosystem. A family deciding where to base itself and its family office needs to know how long approvals will take and what will be asked of them. When the experience is the same every time, that builds confidence, and confidence brings business.

“When a family makes The Bahamas home, the family office, the professionals and the spending tend to follow. On quality of life, the priorities are what any family weighs: Reputation, personal security, education, healthcare, connectivity and efficient public services. The Government has signalled it understands this. Industry stands ready to support that work."

Mr Roberts added that the reforms announced help to create a compelling product offering and proposition for The Bahamas’ target Latin American market. “Combined with the Usufruct Interest Act, the SAC (segregated accounts company) reforms and the IBC Act changes, The Bahamas now has a very strong, coherent offering for Latin American families,” he told Tribune Business.

“Usufruct, in particular, speaks the language of civil law clients. The announcements were very well received in São Paulo, and again at the Nassau Conference, because they give certainty to both industry and clients. Brazil is a natural market for us given our proximity, our expertise and our time zone. With these tools, we expect to compete much more effectively for that business.

“None of this is a single fix,” he warned. “It is about the whole ecosystem, public and private sector together, delivering a consistent, transparent and predictable experience. These initiatives are a strong step in that direction, and industry is committed to playing its part."

Mr Fitzgerald, speaking at the New York Outbound Summit on Fridat, reinforced the Government’s message to investors. “Our value proposition is about much more than tax,” he said. “If you are serious about investing in The Bahamas, we want to make it easier for you to do so….

“Our ambition is not simply to create another government office. Our ambition is to create a better investor experience. We want the process to be straightforward. We want it to be responsive. We want it to be efficient. And we want investors to feel that when they arrive in The Bahamas, they have a government that is ready to welcome them and help them navigate the process.

“We want substance. We want families to make their decisions in The Bahamas. We want them to employ Bahamians. We want them to use Bahamian lawyers, accountants, trust companies, financial advisers and other professional services. We want them to establish genuine connections to our economy. And, ultimately, we want The Bahamas to become more than the place where they hold an asset. We want it to become the place they call home.”