The financial services industry has until June 1 to become fully compliant with the substance requirements of the Commercial Entities Substance Requirements (CESR) Act, 2018 before facing hefty penalties.
The industry guidelines that were issued to the industry Tuesday indicate that failure to comply would result in an administrative penalty of $150,000, with a possible further administrative penalty of $300,000, or being stricken from the register.
According to the guideline, only included entities incorporated prior to December 31, 2018 have six months from January 1, 2019 to meet or comply.
“The act includes robust and dissuasive sanctions for failure to meet the substance requirements, with the ultimate sanction leading to the striking-off of the included entity of Companies Register,” the guideline noted.
“Where the authority (government) deems an included entity to have failed to meet the substance requirements, the authority has the power to request onsite inspections and an audit at the expense of the company.”
The CESR Act was among a package of legislation passed in December 2018 aimed at implementing measures to ensure compliance with international standards on tax governance and transparency.
The European Union’s council will determine at its next meeting in March if The Bahamas has made sufficient legislative efforts to remain in good standing and avoid another blacklisting.
The new tax laws stipulate that commercial, regulated and non-included entities that are centrally managed and controlled provide proper reporting and evidence of compliance with the Act; that core income generating activities are not outsourced unless such entities can provide evidence of supervision and control of the outsourcing service provider; and that holding companies must have adequate human resources and premises in The Bahamas for holding and managing equity participation in other entities.
“We know the industry was anxiously awaiting these guidelines. Now that they have been released, all of our core stakeholder will have a clear sense of the framework to fully comply with the legislation. These guidelines were drafted with wide input of industry stakeholders, who we would like to thank for engaging with the government over the past months,” Deputy Prime Minister and Minister of Finance Peter Turnquest said in a press statement accompanying the guidelines.
“This collaborative effort is critical to our ongoing work to safeguard the industry and to ensure our global competitiveness.”
Paige started working as a business reporter in August 2016.
Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News