The so-called “blacklisting” of various jurisdictions by the Financial Stability Forum, the Financial Action Task Force and the Organisation for Economic Co-operation and Development has forced financial service providers into increased due diligence, document transparency and acceptance of more restrictive regulations. Traditional structures, such as the trust and international business company (IBC), are likely to be used as part of more compliant structures or be replaced.
Some issues for consideration:
* Mind and Management: establish a business center in a low tax jurisdiction;
* Family Office Services: confidentiality and consolidation of family services;
* Hybrid Companies: multiple classes of shareholders and non-shareholder members;
* Purpose Trusts: trusts for non-charitable purposes, such as the continuation of a business;
* Protected Cell Companies: separate risks between different assets of one company;
* Private Foundations: Trust benefits but operated like a company without shareholders and
* E-commerce: servers, transaction processing and data collection, all in The Bahamas.
**Establishing the “mind and management”** of a business in The Bahamas, with sub-contracted services, can provide tax planning opportunities. Business centers have already been formed in The Bahamas for the purpose of Canadian, European and U.S. income tax planning. Assets should be held locally or otherwise controlled from The Bahamas and management decisions affecting the company’s business activity must be exercised from The Bahamas.
Consolidation of the management process over **family assets** answers the need for comprehensive wealth services for family offices, while providing cost savings and quality improvements to the family operation. Developing the right investment plan, making full use of tax and estate planning strategies and addressing family governance are some of the critical operational aspects for family offices.
**Hybrid Companies** are corporate entities with flexible membership structures. An example of a hybrid company is the company limited by guarantee and having a share capital. Here the ownership of the company can be given to the shareholders, while the guarantee members may receive other benefits, such as distributions of income. The Limited Duration Company is designed to provide the see-through tax features of a partnership, while preserving its corporate identity for limitations on liability and ease of administration. Legislation is already in place in The Bahamas for Hybrid Companies.
**Purpose trust legislation** allows for trust arrangements that benefit either private or public purposes, are perpetual in duration and may even have mixed applications to benefit both persons and purposes. Examples include corporate planning for employee benefit plans, enforceable by the corporation alone, or a trust to hold the shares of special purpose vehicles where it would be a negative for the parties involved to become shareholders. Draft legislation is now before the government.
By statute, **Protected Cell Companies** maintain a division between different accounts of the same company, so that the assets of one corporate account can be protected from the liabilities of other corporate accounts. This legal separation can normally only be achieved by the costly exercise of incorporating separate companies. Business opportunities include mutual fund structures, ship or aircraft owning companies and insurance companies. Draft Bahamian Protected Cell legislation is currently before the government.
In an In Brief – Bahamas Supplement article, *”Offshore Industry Attacked – Professional Advisers Respond”* we discussed the **Private Foundation** as a vehicle having the characteristics of a company without shareholders and yet providing trust benefits of privacy, asset protection and estate planning. We are pleased that Private Foundation legislation for The Bahamas has been drafted under the sponsorship of the Association of International Banks and Trust Companies and is on its way to the government.
The private sector and the government have collaborated to develop the domestic **electronic commerce business** and to attract international business to The Bahamas. A strategy and policy framework has been mapped out between the Bahamas Financial Services Board and the Ministry of Finance and draft legislation in the form of statutes for Data Protection, Electronic Commerce and Computer Misuse, are on their way to Parliament.
The principal Bahamian islands, namely New Providence and Grand Bahama, are convenient to most major U.S. cities. Modern communications, competitive costs and access to top tier professional services, make The Bahamas an attractive location.
Most importantly, The Bahamas does not tax corporate earnings, capital gains, dividends or sales. In response to FATF and FSF initiatives, The Bahamas has enacted legislation that will ensure international standards and best practices are observed, while still maintaining our competitive position and client confidentiality.