Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

THE BAHAMAS

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: December 5, 1973.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
Other security restrictionsYes.
References to legal instruments and hyperlinksAfghanistan Order, Public Notice published October 22, 2003; Public Notice dated October 2, 2003; International Obligations (Economic and Ancillary Measures) Act, 1993; International Obligations (Economic and Ancillary Measures) (Afghanistan) Order, 2001; Exchange Control Regulations (Iraq) Directions, 1990.
Exchange Arrangement
CurrencyThe currency of The Bahamas is the Bahamian dollar.
Other legal tenderCommemorative gold coins in denominations of B$10, B$20, B$50, B$100, B$150, B$200, B$250, B$1,000, and B$2,500 and silver coins denominated B$10 and B$25 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 among residents through the Central Bank of The Bahamas (CBB). The use of investment currency is prescribed for the purchase of foreign currency securities from nonresidents and direct investments outside The Bahamas. The current premium bid and offer rates are 12.5% and 10%, respectively. Existing investors were permitted, until March 31, 2006, to liquidate their original capital investment through the investment currency market. Effective January 17, 2006, the authorities reduced the premium on approved purchases of securities and foreign real estate to 12.5% from 25%. In certain circumstances, the CBB may permit residents to retain and use foreign currency from other sources to make outward investments. Certain external investments (including investment in foreign stocks by company-based retirement funds) may be effected at the official exchange rate without paying the investment currency premium.
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 in foreign currency under a contractual commitment. Commercial banks may not, however, sell foreign currency spot to be held on account to cover future requirements without the CBB’s permission. ADs may deal forward in foreign currency with nonresidents without prior approval from the CBB. Commercial banks may execute forward deals among themselves at market rates, but they must ensure when carrying out all forward cover arrangements that their open spot or forward position does not exceed 10% of the respective bank’s capital base.
References to legal instruments and hyperlinksChapter 360-Exchange Control Regulations; Stamp Act, with amendments; Banks and Trust Companies (Foreign Currency Position) Regulations, 2005; www.centralbankbahamas.com/public/ForCurrency05.pdf.
Arrangements for Payments and Receipts
Prescription of currency requirementsThe exchange control system of The Bahamas makes no distinction among foreign territories. Settlements with residents of foreign countries may be made in any foreign currency or in Bahamian dollars through an external account. Foreign currency is defined as all currencies other than the Bahamian dollar.
Controls on the use of domestic currencyNonresidents may not access domestic currency for capital purposes; however, they may have access to domestic currency up to certain limit for working capital in businesses they operate.
For current transactions and paymentsn.a.
For capital transactionsn.a.
Use of foreign exchange among residentsOfficially, all settlements between residents must be in domestic currency.
Payments arrangements
Regional arrangementsThe Bahamas is a member of CARICOM, but it does not participate in the common market.
Administration of controlExchange control is administered by the CBB, which delegates to ADs the authority to approve allocations of foreign exchange for certain current payments, including payments for imports up to the equivalent of B$500,000. The approval authority for cash gifts up to the equivalent of B$10,000 a year is delegated to authorized banks.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or tradeResidents, other than ADs, 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.
On external tradeADs 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 a total of B$200.
Foreign currencyBahamian travelers need CBB approval to export foreign banknotes.
On imports
Domestic currencyImportation is subject to CBB approval.
References to legal instruments and hyperlinkswww.bfsb-bahamas.com/legislation.
Resident Accounts
Foreign exchange accounts permittedPermission from the CBB is required to open and hold these accounts. Permission is normally granted to persons earning substantial amounts of foreign exchange who make regular payments abroad.
Held domesticallyYes.
Approval requiredYes.
Held abroadYes.
Approval requiredYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedThese accounts may be credited with payments in foreign currency from residents of The Bahamas with the specific permission of the CBB, payments in foreign currency from nonresidents, and foreign currency receipts arising from dealings between nonresidents and ADs. These accounts may be interest-bearing. Accounts may be debited for payments to residents or nonresidents, for payments to other foreign currency accounts, and for payment of foreign currency costs involved in dealings between nonresidents and ADs.
Approval requiredYes.
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. Foreign nationals 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 expected to be funded entirely from foreign currency originating outside The Bahamas, but income from registered investments may also be credited to these accounts with the approval of the CBB. These accounts may not bear interest.
Convertible into foreign currencyThese accounts are freely convertible into foreign currency.
Approval requiredNonresidents may maintain external Bahamian dollar accounts with ADs with CBB permission; however, no approval is required for conversion into foreign currency.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
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 non-oil imports exceeding the equivalent of B$500,000, irrespective of origin, except in the Family Islands, where this authority is delegated to clearing bank branches. This approval is normally given automatically on submission of pro forma invoices or other relevant documents proving the existence of a purchase contract.
Domiciliation requirementTransactions must be domiciled with a local AD.
OtherThe Customs Department import form must be completed, as part of application process.
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%.
Open general licensesOGLs must comply with the Agricultural Manufactories Act.
Other nontariff measuresSanitary or phytosanitary restrictions apply.
Import taxes and/or tariffsImport duties vary from zero to 210%. The tariff rate on most goods is 35%, and the average tariff rate is 31%. Stamp duties on imports vary from 2% to 7%. There is no import duty on certain tourism-related goods, but these goods are subject to stamp duties ranging from 8% to 20%.
State import monopolyNo.
References to legal instruments and hyperlinksStamp Tax Act; Agricultural Manufactories Act.
Exports and Export Proceeds
Repatriation requirementsYes.
Surrender requirements
Surrender to authorized dealersThe proceeds of exports must be offered for sale to an AD 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. Exemption from surrender requires CBB approval.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasExport licenses are not required, except for crawfish, conch, and arms and ammunition.
With quotasn.a.
Export taxesNo.
References to legal instruments and hyperlinksExport Manufacturing Industries Encouragement Act; Tariff Act; Fisheries Resources (Jurisdiction & Conservation) Act.
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. ADs 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. A CBB-issued “Personal Allowance” card must be presented to ADs to record foreign currency purchases.
Trade-related payments
Prior approvalCBB approval is required for transactions of more than B$25,000 for unloading and storage costs and commissions.
Quantitative limitsAn indicative limit of B$25,000 applies for most transactions.
Indicative limits/bona fide testYes.
Investment-related payments
Prior approvalFor all investments with approved status, permission is given on application for the transfer.
Payments for travel
Prior approvalYes.
Quantitative limitsADs may provide up to B$10,000 or its equivalent a person a trip for tourism and other personal travel. The limit on travel for educational purposes is B$10,000 a person a trip. For business or professional travel, the limit is B$50,000 a person a year. The allowance for tourist travel excludes the cost of fares and travel services, which is normally paid in Bahamian dollars to a travel agent in The Bahamas. Foreign exchange obtained for travel and any unused balance must be surrendered within one week of issue or, if the traveler is still abroad, within one week of returning to The Bahamas.
Indicative limits/bona fide testYes.
Personal paymentsThere is no limit for medical expenses.
Quantitative limitsADs may provide up to B$25,000 or its equivalent for education payments to institutions (B$2,500 a transaction if paid to the student), family maintenance, and alimony payments. CBB approval is required for amounts exceeding this limit.
Indicative limits/bona fide testYes.
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 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 with a limit exceeding the equivalent of B$25,000. Cards may not be used to pay for life insurance premiums and capital items.
Indicative limits/bona fide testCredit card transactions are subject to bona fide tests.
Other payments
Prior approvalPrior approval from the CBB is required for payments exceeding the equivalent of B$25,000 for professional services charges, subscriptions, membership fees, royalties, registration of patents, serial rights, and advertising.
Quantitative limitsYes.
Indicative limits/bona fide testYes.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsResidents are obliged to collect all proceeds without delay.
Surrender requirements
Surrender to authorized dealersAll foreign currency proceeds must be offered for sale to an AD on receipt. Foreign exchange obtained for travel and any unused balance must be surrendered within one week of issue or, if the traveler is still abroad, within one week of returning to The Bahamas.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsEffective January 17, 2006, the authorities have reduced the premium on approved purchases of securities and foreign real estate to 12.5% from 25%, expanded the list of foreign securities eligible for investment, allowed cross-listings of Bahamian and foreign companies in CARICOM exchanges, and authorized limited foreign investments by the National Insurance Board (the public pension fund).
Repatriation requirementsYes.
Surrender requirements
Surrender to the central bankYes.
Surrender to authorized dealersForeign exchange loans by nonresidents to residents must be converted by an AD to Bahamian dollars, unless exemption is granted by the CBB.
Controls on capital and money market instrumentsAll outward capital transfers require exchange control approval, and outflows of resident-owned capital are restricted. Inward transfers by nonresidents, which are encouraged, are required to be processed through the exchange control approval procedure, although the subsequent use of the funds in The Bahamas may also require authorization. Nonresidents may invest in obligations of companies listed on the BISX up to an aggregate of 10% of the respective issue or offering. They may also invest in public sector securities for which the CBB acts as registrar, subject to an overall limit of B$100,000 a person or entity.
On capital market securitiesThe Mutual Funds Act and a regulation that provides for licensing of mutual fund administrators and the registration of mutual funds are enforced. The Securities Industry Act authorizes the Securities Commission to regulate the stock exchange and stock exchange operations.
Shares or other securities of a participating natureResident companies may invest in equities of BISX-listed companies, up to a limit of 10% of the issue or offering, an investing entity. They may invest in other private and public sector securities, without limit.
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 employed by offshore and foreign-based institutions in The Bahamas may invest in employee stock option/share purchase plans through the official exchange market up to the equivalent of B$10,000 a person a year, on a noncumulative basis for contributory plans. Otherwise, residents 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 residents require permission from the CBB and are normally effected through authorized agents, who are free to act on behalf of nonresidents in relation to such transactions without any further approval from the CBB, at a 12.5% premium, effective January 17, 2006. Previously, the premium was 25%. All foreign securities purchased by residents of The Bahamas must be held by, or drawn to the order of, an AD.
Sale or issue abroad by residentsSale proceeds from resident-held foreign currency securities that were registered at the CBB prior to December 31, 1972, or that were acquired through the investment currency market, 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 these 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 regulations governing shares or other securities of a participating nature apply.
On collective investment securitiesThe regulations governing shares or other securities of a participating nature apply.
Controls on derivatives and other instrumentsThe regulations governing shares or other securities of a participating nature apply.
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. 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. 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 resident in The Bahamas but is controlled directly or indirectly by nonresidents. 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. 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 on the currency being offered for sale without delay to an AD, unless the funds are required to meet specifically authorized payments to nonresidents.
Financial creditsControls apply to all these transactions.
Guarantees, sureties, and financial backup facilitiesControls apply to all these transactions.
Controls on direct investment
Outward direct investmentThe use of official exchange for direct investment abroad is limited to B$1 million a person or entity, with an overall limit of B$5 million a transaction, which may be met once every three years. This limit applies to investments from which the additional benefits that are expected to accrue to the balance of payments from export receipts, profits, or other earnings within 18 months of the investment will be at least equal to the total amount of the 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. Foreign investments in domestic insurance companies and pension funds are not permitted.
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 Investments Board on completion of the transaction.
Sale locally by nonresidentsApproval from the CBB is required.
Controls on personal capital transactions
LoansControls apply to all these transactions.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsYes.
Settlements of debts abroad by immigrantsYes.
Transfer of assets
Transfer abroad by emigrantsThe maximum amount an emigrant may transfer abroad is the equivalent of B$250,000 a family a year. Excess amounts may be approved by the CBB on an individual basis.
Transfer of gambling and prize earningsResidents are not allowed to remit funds earned from gambling.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadYes.
Lending to nonresidents (financial or commercial credits)Prior exchange control approval is required if local real estate is offered as a security.
Lending locally in foreign exchangeExchange control approval is required to make loans to residents in foreign exchange.
Open foreign exchange position limitsThe limit is 10% of the authorized bank’s capital base.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Pension funds
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Currency-matching regulations on assets/liabilities compositionn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksBanks and Trust Companies (Equity Investments) Regulations, 2005; Banks and Trust Companies (Large Exposures) Regulations, 2006; www.bfsb-bahamas.com.
Changes during 2006
Exchange arrangementJanuary 17. The authorities reduced the premium on approved purchases of securities and foreign real estate to 12.5% from 25%.
March 31. Existing investors were no longer permitted to liquidate their original capital investment through the investment currency market.
Capital transactionsJanuary 17. The authorities reduced the premium on approved purchases of securities and foreign real estate to 12.5% from 25%, expanded the list of foreign securities eligible for investment, allowed cross-listings of Bahamian and foreign companies in CARICOM exchanges, and authorized limited foreign investments by the National Insurance Board (the public pension fund).

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