Bahamas Central Bank Relaxes Exchange Controls

by Leroy Baker, Tax-News.com, New York

02 February 2006

The Central Bank of the Bahamas has announced the relaxation of exchange controls relating to real estate investments, foreign currency transfers, mortgages, and debt and equity instruments all of which have taken place with immediate effect.

The latest action by the bank is in line with its commitment to achieving a gradual yet meaningful liberalization of exchange controls, and the measures follow earlier adjustments introduced in May 1995 and September 2002, both of which provided for an increased delegation of authority to commercial banks over a broad range of current account transactions such as payments for imports, travel and services.

Unlike earlier initiatives, these new measures focus almost exclusively on the relaxation of certain capital account restrictions, with the specific objectives of providing enhanced opportunities for residents to participate in and finance investments overseas and at the same time address several of the recommendations in the Bahamas Stock Exchange Committee’s Report to the Government on measures to deepen domestic capital markets.

Currently, residents purchasing securities or making real estate investments overseas must do so through the Investment Currency Market (ICM), at a premium bid and offer rate of 25% and 20%, respectively. With immediate effect, these rates are reduced by half, to 12.5% and 10.0%, respectively.

Residents may invest up to $25,000.00 per family unit, once every ten years at the official rate, to purchase time share units abroad.

With immediate effect, the investment limit is increased to $25,000.00, with amounts in excess of $25,000.00 per year, to be purchased at the Investment Currency Market (ICM) rate.

The maximum amount which a person may transfer out of the country when emigrating, i.e., taking up permanent residency abroad, is immediately increased from the foreign currency equivalent of B$125,000 to B$250,000 per family unit, per annum, at the official rate.

Temporary residents are now permitted to borrow up to a maximum of B$50,000.00 for consumer related purposes. This represents an increase from previous borrowing limits of B$15,000.00 for the purchase of vehicles, and up to B$6,000.00 for defraying local expenses.

Temporary residents who have resided and worked in The Bahamas for at least three years may obtain B$ mortgage loans of up to $200,000.00 to finance owner occupied dwellings. Previously, this group of individuals was permitted to borrow up to 50 percent of the mortgage amount in Bahamian dollars.

Individuals and related investment vehicles (e.g. trusts or settlements) may now invest, within limits, in both private and public sector debt and equity instruments. All investments must be funded from Bahamian (B$) earnings.

For obligations of companies listed on BISX, investments may be up to an aggregate of 10% of the respective issue/offering, and for public sector securities, for which the Central Bank acts as registrar, up to an overall limit of $100,000 per person/entity.

Within prescribed limits and arrangements, resident investors, including individuals, pension funds and institutions may invest in any company listed on a recognized stock exchange, by way of a representative Bahamian Dollar denominated securities listed on BISX.

Equities of Bahamian Companies listed on BISX may now be cross listed on principal CARICOM exchanges (i.e. Barbados, Jamaica, ECU and Trinidad & Tobago), within prescribed limits.

Foreign companies listed on principal CARICOM exchanges may list issued and outstanding equity securities on BISX.

In addition, financial institutions and other private enterprises designated resident for Exchange Control purposes, with no term restrictions on their operations in The Bahamas (e.g. temporary construction entities and consultancy firms would not qualify) may now invest, within specified limits, in debt and equity instruments of the private sector as well as public sector debt obligations.

Recommended