Chapter

THE BAHAMAS

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: December 5, 1973.
Exchange Arrangement
CurrencyThe currency of The Bahamas is the Bahamian dollar.
Other legal tenderCommemorative coins in denominations of B$10, B$20, B$50, B$100, B$150, B$200, B$250, B$l,000, and B$2,500 in gold, and B$10 and B$25 in silver are legal tender but do not circulate. The U.S. dollar circulates concurrently with the Bahamian dollar.
Exchange rate structure
DualIn addition to the official exchange market, there is a market in which investment currency may be negotiated between residents through the Central Bank of The Bahamas (CBB); the current premium bid and offer rates are 20% and 25%, respectively. The use of investment currency is prescribed for the purchase of foreign currency securities from nonresidents and direct investments outside The Bahamas. In certain circumstances, the CBB may also permit residents to retain and use foreign currency from other sources to make such outward investments.
Classification
Conventional pegged arrangementThe Bahamian dollar is pegged to the U.S. dollar, the intervention currency, at par. Buying and selling rates for the pound sterling are also officially quoted, with the buying rate based on the rate in the New York market; the selling rate is 0.5% above the buying rate. The CBB deals only with commercial banks. For transactions with the public, commercial banks are authorized to charge a commission of 0.50% buying and 0.75% selling per US$1, and 0.50% buying or selling per £1.
Exchange taxA stamp tax of 1.5% is applied to all outward remittances.
Exchange subsidyNo.
Forward exchange marketCommercial banks may provide forward cover for residents who are due to receive or must pay foreign currency under a contractual commitment. Commercial banks may not, however, sell foreign currency spot to be held on account in cover of future requirements without the CBB’s permission. Authorized dealers may deal in foreign currency forward with nonresidents without prior approval from the CBB. Commercial banks may execute forward deals among themselves at market rates and must ensure when carrying out all forward cover arrangements that their open spot or forward position does not exceed the equivalent of B$500,000 long or short.
Arrangements for Payments and Receipts
Prescription of currency requirementsThe exchange control system of The Bahamas makes no distinction between foreign territories. Settlements with residents of foreign countries may be made in any foreign currency or in Bahamian dollars through an external account. Foreign currencies comprise all currencies other than the Bahamian dollar.
Payment arrangementsNo.
Regional arrangementsThe Bahamas is a member of the CARICOM.
Administration of controlExchange control is administered by the CBB, which delegates to authorized dealers the authority to approve allocations of foreign exchange for certain current payments, including payments for imports up to B$100,000; approval authority for cash gifts is not delegated, except in the Family Islands.
International security restrictionsNo.
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeResidents, other than authorized dealers, are not permitted to hold or deal in gold bullion. However, residents who are known users of gold for industrial purposes may, with the approval of the CBB, meet their current industrial requirements. There is no restriction on residents’ acquisition or retention of gold coins.
Controls on external tradeAuthorized dealers are not required to obtain licenses for bullion or coins, and no import duty is imposed on these items. Commercial imports of gold jewelry do not require a license and are duty free, although a 10% stamp tax is required. A 1.5% stamp tax payable to customs is also required on commercial shipments of gold jewelry from any source.
Controls on exports and imports of banknotes
On exports
Domestic currencyA traveler may export banknotes up to B$200.
Foreign currencyBahamian travelers need CBB approval to export foreign banknotes.
On imports
Domestic currencyImportation is subject to CBB approval.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyThese accounts are permitted, but approval is required.
Held abroadThese accounts are permitted, but approval is required.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsWith the prior approval of the CBB, authorized banks may also open external accounts in Bahamian dollars for nonresident companies that have local expenses in The Bahamas and for nonresident investors. Authorized banks may freely open external accounts denominated in Bahamian dollars for winter residents and for persons with residency permits who are not gainfully employed in The Bahamas. Persons of a foreign nationality who have been granted temporary resident status are treated in some respects as nonresidents but are not permitted to hold external accounts in Bahamian dollars. External accounts in Bahamian dollars are normally funded entirely from foreign currency originating outside The Bahamas, but income on registered investments may also be credited to these accounts with the approval of the CBB.
Convertible into foreign currencyYes.
Blocked accountsThe accounts of residents emigrating from The Bahamas who are redesignated upon departure as nonresidents are blocked for amounts in excess of B$25,000 for a period of four years. Balances on blocked accounts are transferable through the official exchange market after that time or through the Investment Currency Market at any time; they may also be invested with the approval of the CBB in certain resident-held assets, or they may be spent locally for any other purpose.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsPrior approval from the CBB is required to make payments for imports exceeding B$100,000, irrespective of origin, except in the Family Islands, where this authority is delegated to clearing bank branches. This approval is normally given automatically upon submission of pro forma invoices or other relevant documents proving the existence of a purchase contract.
Import licenses and other nontariff measures
Negative listThe importation of certain commodities is prohibited or controlled for social, humanitarian, or health reasons. For all imports of agricultural products, a permit must be obtained from the Ministry of Agriculture. All other goods may be imported without a license. Customs entries are subject to a stamp tax of 7%.
Import taxes and/or tariffsImport duties vary from zero to 210%. The tariff rate on most goods is 42%, and the average tariff rate is 35%. Stamp duties on imports vary from 2% to 7%. There is no import duty on certain tourist-related goods, but these goods are subject to stamp duties ranging from 8% to 20%. On January 1, 2000, the fourth phase of the CARICOM CET came into effect.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsYes.
Surrender requirementsThe proceeds of exports must be offered for sale to an authorized dealer as soon as the goods have reached their destination or within six months of shipment; alternatively, export proceeds may be used in any manner acceptable to the CBB.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasExport licenses are not required, except for crawfish, conch, and arms and ammunition.
Export taxesYes.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersThere are no restrictions on current payments. However, there are limits on the approval authority delegated to commercial banks by the CBB. Authorized dealers may make payments to nonresidents on behalf of residents for certain services and other invisibles, such as commissions, royalties, education, and non-life insurance premiums, within specified limits. CBB approval is required for payments in excess of those limits or for categories of payments not delegated.
Trade-related payments
Prior approvalFor unloading and storage costs and commissions, CBB approval is required for transactions over B$3,000 and B$6,000, respectively.
Indicative limits/bona fide testYes.
Investment-related paymentsInformation is not available for amortization of loans or depreciation of direct investments.
Prior approvalFor all investments with approved status, permission is given upon application for the transfer.
Payments for travel
Prior approvalYes.
Quantitative limitsUnder delegated authority, the limits for tourist travel are B$1,000 a person above the age of 18 years and B$500 a person up to the age of 18 years a trip. For business or professional travel, the limit is B$10,000 a person a year. The allowance for tourist travel excludes the cost of fares and travel services, which are normally obtained against payment in Bahamian dollars to a travel agent in The Bahamas. Foreign exchange obtained for travel may not be retained abroad or used abroad for purposes other than travel; any unused balance must be surrendered within a week of issue or, if the traveler is still abroad, within one week of returning to The Bahamas.
Indicative limits/bona fide testYes.
Personal payments
Quantitative limitsUnder delegated authority, residents are entitled to a foreign exchange allowance of B$3,000 a person a trip for study-related costs.
Indicative limits/bona fide testSubject to adequate documentary evidence, an education allowance is granted by the CBB without a limit. Apart from a B$1,000 cash allowance, authorized dealers may approve all medical payments to doctors or medical establishments.
Foreign workers’ wages
Prior approvalYes.
Quantitative limitsThe limit is 50% of wages and salaries.
Indicative limits/bona fide testIf commitments outside The Bahamas are more than 50% of wages and salaries, additional amounts may be remitted. Temporary residents may also repatriate all of their accumulated savings resulting from their employment in The Bahamas.
Credit card use abroad
Prior approvalApproval is required for residents to hold an international credit card, which may not be used to pay for life insurance premiums and capital items.
Other payments
Prior approvalThere is prior approval for consulting and legal fees.
Quantitative limitsUnder delegated authority, the limit for subscription and membership fees is B$1,000, and that for consulting and legal fees is B$3,000.
Indicative limits/bona fide testAn indicative limit is applied to consulting and legal fees.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsResidents are obliged to collect all proceeds without delay.
Surrender requirementsAll foreign currency proceeds must be offered for sale to an authorized dealer without delay.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instrumentsAll outward capital transfers require exchange control approval, and outflows of residentowned capital are restricted. Inward transfers by nonresidents, which are encouraged, are required to go through the exchange control approval process, although the subsequent use of the funds in The Bahamas may require authorization.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsIn principle, inward investment by nonresidents is unrestricted. However, the consent of the CBB is required for the issue or transfer of shares in a Bahamian company to a nonresident and for the transfer of control of a Bahamian company to a nonresident. The extent of such approvals generally reflects the government’s economic and investment policy guidelines.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsResidents are not permitted to purchase foreign currency securities with official exchange, export proceeds, or other current earnings; payment must be made with investment currency. All purchases, sales, and swaps of foreign currency securities by Bahamian residents require permission from the CBB and are normally transacted through authorized agents, who are free to act on behalf of nonresidents in relation to such transactions without any further approval from the CBB. All foreign securities purchased by residents of The Bahamas must be held by, or to the order of, an authorized agent.
Sale or issue abroad by residentsSale proceeds from such resident-held foreign currency securities, if registered at the CBB by December 31, 1972, are eligible for sale in the investment currency market. Unregistered securities may be offered for sale at the official rate of exchange.
Bonds or other debt securities
Purchase locally by nonresidentsNonresident buyers of Bahamian dollar—denominated securities must fund the acquisition of such securities from foreign currency sources. Interest, dividends, and capital payments on such securities may not be remitted outside The Bahamas, unless the holdings have been properly acquired by nonresidents.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On money market instrumentsThe same regulations apply as for shares or securities of a participating nature.
On collective investment securitiesThe same regulations apply as for shares or securities of a participating nature.
Controls on derivatives and other instrumentsThe same regulations apply as for shares or securities of a participating nature.
Controls on credit operations
Commercial credits
By residents to nonresidentsA resident company wholly owned by nonresidents is not allowed to raise fixed capital in Bahamian dollars, although approval may be granted to obtain working capital in local currency. If the company is partly owned by residents, the amount of local currency borrowing for fixed capital purposes is determined in relation to residents’ interest in the equity of the company. Banks and other lenders resident in The Bahamas must have permission to extend loans in domestic currency to any corporate body (other than a bank) that is also resident in The Bahamas but is controlled by any means, whether directly or indirectly, by nonresidents. However, companies set up by nonresidents primarily to import and distribute products manufactured outside The Bahamas are not allowed to borrow Bahamian dollars from residents for either fixed or working capital. Instead, they must provide all their financing in foreign currency, and foreign currency loans are normally permitted on application.
To residents from nonresidentsResidents other than authorized banks must obtain permission to borrow foreign currency from nonresidents, and authorized dealers are subject to exchange control direction of their foreign currency loans to residents. Residents must also obtain permission to pay interest on, and to repay the principal of, foreign currency loans by conversion of Bahamian dollars. When permission is granted for residents to accept foreign currency loans, it is conditional upon the currency being offered for sale without delay to an authorized dealer, unless the funds are required to meet payments to nonresidents for which permission has been specifically given.
Financial credits
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Controls on direct investment
Outward direct investmentThe use of official exchange for direct investment abroad is limited to B$100,000 or 30% of the total cost of the investment (whichever is greater) for investments from which the additional benefits expected to accrue to the balance of payments from export receipts, profits, or other earnings within 18 months of the investment will at least equal the total amount of investment and will continue thereafter. Investments abroad that do not meet the above criteria may be financed by foreign currency borrowed on suitable terms, subject to individual approval from the CBB, by foreign currency purchased in the investment currency market, or by the retained profits of foreign subsidiary companies. Permission is not given for investments that are likely to have adverse effects on the balance of payments.
Inward direct investmentCBB approval is required.
Controls on liquidation of direct investmentIn the event of a sale or liquidation, nonresident investors are permitted to repatriate the proceeds, including any capital appreciation, through the official foreign exchange market.
Controls on real estate transactions
Purchase abroad by residentsResidents require the specific approval of the CBB to buy property outside The Bahamas; such purchases, if for personal use, may be made only with investment currency, and approval is limited to one property a family. Incidental expenses connected with the purchase of property for personal use may normally be met with investment currency. Expenditures necessary for the maintenance of the property or arising directly from its ownership may, with permission, be met with foreign currency bought at the current market rate in the official foreign exchange market.
Purchase locally by nonresidentsForeigners intending to purchase land for commercial purposes or property larger than five acres in size must obtain a permit from the Investments Board. If such an application is approved, payment for the purchase may be made either in Bahamian dollars from an external source or in foreign currency. Nonresidents wishing to purchase property for residential purposes may do so without prior approval but are required to obtain a Certificate of Registration from the Foreign Investment Board on completion of the transaction.
Sale locally by nonresidentsApproval is required.
Controls on personal capital movements
Loans
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsYes.
Settlement of debts abroad by immigrantsYes.
Transfer of assets
Transfer abroad by emigrantsYes.
Transfer of gambling and prize earningsResidents are not allowed to remit funds for gaming purposes.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadYes.
Lending locally in foreign exchangeExchange control approval is required to make loans to residents.
Open foreign exchange position limitsThe limit is B$500,000 for a long or short position.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsIn the securities market, a Mutual Funds Act and regulation that provides for licensing of Mutual Funds Administrators and Registration of Mutual Funds is enforced. Effective May 1, 1999, the Securities Industry Act provides for the Securities Commission to regulate the stock exchange and stock exchange operations.
Changes During 1999
Capital transactions
Other controls imposed by securities lawsMay 1. The Securities Industry Act provided for the Securities Commission to regulate the stock exchange and stock exchange operations.
Changes During 2000
Imports and import paymentsJanuary 1. The fourth phase of the CARICOM CET came into effect.

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