TAX NEWS - 2010

Bahamas Tax: Canada deal offers double tax benefit

The Bahamas yesterday signed its 22nd Tax Information Exchange Agreement (TIEA) with Canada, as Tribune Business revealed exclusively this week, the deal containing a clause that, just as this newspaper predicted, places it on an equal footing with Barbados in terms of 'double tax' benefits.

Brent Symonette, minister of foreign affairs, confirmed that the Canada TIEA contained a clause that the dividend profits of Canadian companies based in the Bahamas would not be taxed upon repatriation back home.

Several financial services industry services had previously told Tribune Business that if the final Tax Information Exchange Agreement agreement stuck to initial drafts seen last year, then the deal with Canada was one of the best for this country in terms of providing reciprocal economic/trade benefits.

These sources told this newspaper that the proposed Canadian TIEA they had seen offered to place the Bahamas on an equal footing with Barbados, effectively giving it a 'double taxation' treaty with Ottawa without entering a formalised arrangement.

Currently, major Canadian-owned banks, especially FirstCaribbean, have their regional headquarters domiciled in Barbados, largely because of that nation's 'double tax' treaty with their homeland. The treaty ensures their profits are only taxed once - at the lower Barbadian rate - rather than at the higher Canadian thresholds, and has acted as a major draw for Canadian companies seeking to do business in the region to establish their bases there.

"Canada had proffered an agreement last year that was more attractive than anyone else's," one Bahamian financial industry source told Tribune Business yesterday, "so I hope they go with that.

"If the agreement is signed as it was offered, as it was on the table, in 2009, we are treated as having double taxation [rights] even though we do not have an agreement, so we will be in the same position as Barbados. We'd get the same sort of treatment when the Canadian-owned banks repatriate their profits back home."

Another highly-placed Bahamian financial services executive confirmed to Tribune Business: "I understand that the TIEA with Canada was suppose to be one of the better ones. "We have a double taxation treaty, in effect, but also there was going to be an exchange of other things - know how, and opportunities for Bahamian businesses to do business with Canadian businesses. Certainly, there was a market for Bahamian goods and services."

Yet the executive added: "I understand it would be a good one, but until I see the final signed document I just don't know. It's just that in the art of negotiations, some things fall away and others don't.

"This one has been talked about for quite a while, and because of the linkages with Canada, universities and other things, everyone is waiting to see this one."

The Canada Tax Information Exchange Agreement is also likely to have linkages with current trade talks taking place between Ottawa on the one hand, and the Bahamas and CARICOM on the other, over a replacement trade agreement for CARIBCAN that would be WTO-compliant.

The Bahamas has been a key destination for Canadian foreign direct investment (FDI), especially in sectors such as banking, tourism and construction, while a Canadian firm, Vancouver Airport Services (YVRAS), is managing the transformation of Lynden Pindling International Airport (LPIA).

On the reverse, Canada remains an important market for Bahamian exports such as crawfish, while many Bahamians receive their tertiary education at Canadian colleges and universities.