Criteria for Determining Tax Residency in The Bahamas
According to the Income Tax Act of The Bahamas, an individual is considered a resident for tax purposes if they meet any of the following criteria:
- Physical presence in The Bahamas for more than 183 days in a calendar year.
- Domicile in The Bahamas, which is established by a person's permanent home or principal place of abode.
- Ordinary residence in The Bahamas, which implies a more continuous and permanent presence beyond mere physical presence.
For entities, residency is determined based on their place of incorporation or management and control.
Impact of International Tax Treaties on Tax Residency Criteria
The Bahamas has entered into several tax treaties with other countries to prevent double taxation and promote cross-border trade and investment. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For example, under the Bahamas-United States tax treaty, an individual is considered a resident of The Bahamas if they meet the following conditions:
- They have a permanent home available to them in The Bahamas.
- They are present in The Bahamas for at least 183 days during the taxable year.
- Their center of vital interests is in The Bahamas.
This treaty-specific modification provides a more detailed definition of residency for individuals, taking into account factors such as permanent home and center of vital interests. It aims to prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities.
