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Bahamas Commits To Information Sharing Agreement With United States

by Amanda Banks,, London

18 December 2003

The Bahamian House of Assembly on Monday unanimously approved a bilateral Tax Information Exchange Agreement (TIEA) with the United States, with the new legislation set to come into force on January 1, 2004.

The conclusion of the agreement means that the Bahamas will achieve permanent Qualified Jurisdiction status. One of the major advantages of this for Bahamian firms will be a 50% reduction in withholding taxes on US-sourced investment income. The US gave The Bahamas provisional QJ status in 2000, but made an extension to the full six years conditional on The Bahamas signing a TIEA with the US before the provisional period expired. This led to extensive negotiations during 2001, which ended in the TIEA being signed in January 2002, according to the Nassau Guardian.

The TIEA will not, however, be retroactive and will only apply on criminal matters from January 1, 2004. Civil tax matters will be covered by the TIEA from January 1, 2006.

Commenting on the agreement earlier in the year, Attorney General Alfred Sears told the Bahamas Institute of Financial Services that the TIEA with the US is an essential weapon with which to combat the threat of money laundering and other financial crime. He also noted that it is vital that the jurisdiction sells itself as a “responsible and significant player” to global regulators and investors alike.

There are a number of main commitments in the broader area of transparency that the Bahamas must adhere to as a result of the agreement. These include: revealing, when required under the agreement (but only after the US has exhausted all reasonable alternative avenues of enquiry) beneficial ownership information to the tax authorities in the case of companies, partnerships and trusts; maintaining audited accounts to internationally accepted standards; and allowing access to banking data for the Bahamian authorities in respect of the TIEA rules.

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