In The Bahamas, capital gains are defined as profits or gains derived from the disposal of capital assets. Capital assets include real estate, stocks, bonds, and other investments. There is no distinction between short-term and long-term capital gains for tax purposes.
Calculation of Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The formula for calculating capital gains is as follows:
Capital Gain = Selling Price - Acquisition Cost - Expenses
Adjustments or deductions may be allowed in the calculation of the gain, including expenses related to the sale (e.g., brokerage fees, legal fees) and any improvements made to the asset during ownership.
Tax Rates Applicable to Capital Gains
Capital gains in The Bahamas are taxed at a flat rate of 10%. This rate applies to all categories of capital gains, regardless of the holding period or the nature of the asset disposed of.
Legal Framework
The taxation of capital gains in The Bahamas is governed by the following legal provisions:
- Income Tax Act, 2018
- Section 10(1): Defines capital gains as profits or gains derived from the disposal of capital assets.
- Section 10(2): Specifies the formula for calculating taxable capital gains.
- Section 10(3): Sets the tax rate for capital gains at 10%.
Policy Objectives
The capital gains tax system in The Bahamas aims to generate revenue for the government while ensuring that individuals and businesses contribute their fair share of tax on profits realized from investments and asset disposals. The flat tax rate of 10% provides a simple and transparent tax regime that encourages investment and economic growth.
