Elsworth Johnson, minister of financial services, trade and industry and Immigration, said during his national address that The Bahamas will via the Certificate give access to financial accounts and income records for foreign residents in compliance with global standards.
"By the end of 2020, the Ministry will launch the Tax Residency Certificate," he said. "This certificate will enable expatriate residents and investors to prove that they are resident in the Commonwealth of The Bahamas.
"Through this certificate, we will provide access to financial accounts and income records according to the Organisation for Economic Co-Operation and Development’s (OECD) Common Reporting Standards (CRS). The end result will be the elimination of opportunities for those who seek to use our financial systems for tax evasion and avoidance purposes.
"We are in the consulting phase of the Certificate’s implementation and working to draw together the differing views of key stakeholders. This will ensure that the final version of the Tax Residency Certificate legislation is the best version possible. Our efforts have been universally hailed by local and international observers alike."
TRCs, which have been talked about for some years, would have their own taxpayer identification number (TIN) and confirm that the holder has been properly domiciled in The Bahamas. Besides confirming this is their main place of residence, these certificates will help certify the holder's compliance with their home country tax laws.
And they will also help to address 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 in 2018 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.