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The Bahamas Achieves Qualified Jurisdiction Status

Mandy Robinson, Tax-news.com, London

12 January 2001

It is good news for The Bahamas as the US Treasury Department has anounced that it is bestowing the much coveted Qualified Jurisdiction (QJ) Status upon the island.

Approved status for The Bahamas means that financial institutions in the jurisdiction can avoid imposing a 30 per cent withholding tax on US source income for properly documented clients and can also deduct reduced rates under tax treaties applying in particular cases. Furthermore they will not be required to identify their non-US clients to the IRS.

Together with the raft of the new and amended financial services legislation that has recently been officially implemented by The Bahamas government, the approved QJ status will no doubt be a boost in The Bahamas' confidence in its removal from the OECD blacklist this year. In the Nassau Guardian news service this week, Ian Fair, chairman of the Bahamas Financial Services Board, said: 'It is obviously very, very good news because it clearly indicates recognition and acknowledgment that the laws that we have put in place and amended meet international standards.'

With regard to the hopeful removal of The Bahamas from the blacklisting, he added: 'Our chances have been increased. They have been enhanced by this because the only country which keeps a constant watch on us is our great neighbour, the United States.' Earlier this week finance minister Sir William Allen led a delegation to Barbados where discussions took place with the OECD and the various jurisdictions included on the blacklist.

The Bahamas' application for QJ status was submitted in mid-2000 but the US treasury deliberated for some months over the "Know Your Customer (KYC)" rules regarding the governing of bank transparency, the implementation of which is a key condition for obtaining QJ status - it was only recently that The Bahamas had introduced the KYC system.

According to the US Treasury Department the QJ agreement has a duration of 6 years after which time the agreement may be renewed upon the signatures of both the jurisdiction and the IRS.

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