Bills passed to bolster financial services
Financial services professionals saw legislation pass in the House of Assembly yesterday that may demonstrate the jurisdiction’s innovation, flexibility and commitment to international tax transparency standards.
The Bahamas Executive Entity (BEE) bill was passed, creating a new product for financial structuring that industry participants hope will give an edge in marketing to high and ultra-high net worth clients. Ten bills to amend existing legislation were also passed with the goal of bringing the record keeping requirements of certain entities operating out of The Bahamas up to international standards.
“These bills, Mr. Speaker, speak to both our continuing need to ensure that our jurisdiction is well regulated, as well as ensure that we remain competitive as a jurisdiction in servicing the legitimate needs of our clients,” State Minster of Finance, Zhivargo Laing, told the House in his contribution yesterday.
In addition to providing for account record keeping for certain entities, the amendments correct some technical inconsistencies in provision for the access and treatment of information, according to Laing.
The important amendments represent the jurisdiction’s response to record-keeping deficiencies identified by the Organization for Economic Cooperation and Development (OECD) in its Phase I Peer Review of The Bahamas, released in April this year.
The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes gave this jurisdiction a mostly clean review then, but marked one of the 10 considered categories as ‘out of place’. It called for The Bahamas to ensure reliable accounting records, including underlying documentation, are held for a minimum of five years.
The Bahamas had to “fix” that hole to show its legislation was up to international standards for tax information exchange and transparency.
The bills passed in response include: The Bahamas and the USA Tax Information Exchange Agreement (TIEA) (Amendment) Bill 2011, International Tax Cooperation (Amendment) Bill 2011, Segregated Accounts Companies (Amendment) Bill 2011, Purpose Trust (Amendment) Bill 2011, Investment Funds (Amendment) Bill 2011, Partnership Limited Liability (Amendment) Bill 2011, International Business Companies (Amendment) Bill 2011, Foundation (Amendment) Bill 2011, Exempted Limited Partnership (Amendment) Bill 2011, and the Purpose Trusts (Amendment) Bill 2011.
The Business License Act and the Companies Act would govern record-keeping requirements for domestic companies, but were not among the legislative changes made to meet OECD recommendations.
In his contribution to the debate, opposition member of Parliament for the Elizabeth constituency, Ryan Pinder, said he was surprised that those bills were not tabled for amendment, taking some credit for that decision. According to Pinder, had those bills been included, it would make business conduct unnecessarily onerous for domestic companies.
“It was my recommendation that domestic companies should not be included in the OECD accounting records demand,” Pinder said. “We have to ensure Bahamian owned businesses are not unnecessarily given obstacles to their success.”
A number of other jurisdictions had the same or a similar record-keeping issue raised prior and have since made changes to their legislations which have gotten a pass by the Global Forum. Financial services professionals hope the amendments passed yesterday will meet the requirements for The Bahamas too, before the Phase II peer review, scheduled for July 2012.
The BEE will allow a special entity to carry out executive functions in a wealth preservation structure. It could be used to address management of succession issues and concentration of power issues faced by many wealthy clients.
In addition to being a valuable marketing tool on its own, many in the industry hope that it will show the close relationship of public and private sector to keep the jurisdiction on the cutting edge of innovations in financial services.
Also passed yesterday were the Companies (Winding Up Amendment) Bill 2011, and the International Business Companies (Winding Up Amendment) Bill 2011.