By NATARIO McKENZIE
Tribune Business Reporter
THE financial services industry yesterday hailed the long-awaited introduction of tax residency certificates as a means to ensure The Bahamas “does not run afoul” of global watchdogs.
Tanya McCartney, the Bahamas Financial Services Board’s (BFSB) chief executive, told Tribune Business there had to be a distinction between permanent residency and tax residency to protect both the jurisdiction, its clients and residents.
She said: “This is something that industry has been asking for for some time; to create certainty around how individuals will be able to objectively demonstrate that they are tax residents. We have a number of persons who are permanent residents in the country.
“We need to distinguish between permanent residency and tax residency so that we do not run afoul of any international regulations. We had submitted recommendations to government some time ago about implementing a tax residency certificate. What was approved was the result of a collaborative effort between the public and private sector. We stand ready and willing to work expeditiously to see that this is implemented.”
Ms McCartney was responding to confirmation by Brent Symonette, minister of financial services, trade and industry and immigration, that the government has approved the creation of tax residency certificates.
The minister told the Society of Trust and Estate Practitioners (STEP) Caribbean conference that the government has approved the development of a product that will each have their own taxpayer identification number (TIN).
Besides confirming that The Bahamas is the holder’s main domicile, these certificates will help certify their compliance with home country tax laws and address Organisation for Economic Co-Operation and Development (OECD) claims that this nation’s economic permanent residency product is in danger of being abused by tax evaders.
The OECD sparked major concern within the Bahamian financial services industry and wider economy last year when it included The Bahamas’ key investment product on a list of regimes that could undermine global automatic tax information exchange.
Many viewed it as a further broadening of the OECD’s efforts beyond pure tax information exchange and transparency to investment products and regimes it deems potentially harmful to the global crackdown on tax avoidance and evasion.
The listing report called for “financial institutions to undertake enhanced due diligence on clients that are citizens or residents of countries with [investment citizenship or investment residency] programmes to prevent cases of [tax] avoidance and tax evasion”.
Apart from creating negative perceptions of The Bahamas in the minds of potential investors, the OECD listing’s demand for enhanced scrutiny, and likely extra costs, time and exposure involved, threatened to deter wealthy investors from applying for permanent economic residence - thereby undermining a key component of the foreign direct investment (FDI) regime that has been in place for decades.
Mr Symonette, speaking to the tax residency situation earlier this week, said: “When the DPM (deputy prime minister), attorney general and myself were in Paris months ago, the OECD stated that they had an issue with persons using permanent residency as a way of avoiding tax requirements in their own country.
“What is up at the Attorney General’s Office at the moment, and has been approved in principle, is that we will have a permanent residency certificate. This means you would have to spend a minimum of 90 days in this country - not consecutively - but over the year, and no more than 183 days in one other country.
“Let’s say you were born in France; you would get a tax information number on your permanent residency [certificate], and you would use that in any country in the world and say: ‘Look, this is my tax information number in The Bahamas. I am a permanent resident in The Bahamas and that would offset any taxes that are required in that country or any other country in the world.”