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Are you Canadian and thinking about earning foreign income while living in The Bahamas? You’re not the only one, since thousands of Canadians and Americans conduct business in and out of The Bahamas. But how does living in The Bahamas and Canada affect your taxes?
Travelers and business people alike are used to working in other countries and making a foreign income while still paying taxes only to one country–how do they do it? Tax treaties make this possible. Luckily for Canadians, Canada has tax treaties with 93 countries, but is a Canada Bahamas Tax Treaty one of them?
At Better Home and Gardens, we always make sure we know all the ins and out of the financial changes that might happen for our clients when purchasing luxury real estate in The Bahamas, and we’re here to help. Our experienced real estate agents are at your side every step of the way, ensuring that purchasing your luxury dream home is as easy as possible. MCR Bahamas is committed to locating the ideal residence that caters to your unique taste and lifestyle while providing insight and guidance to ensure you make the best choice for you and your family.
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Is there a Canada-Bahamas Tax Treaty?
So while there isn’t an official Canada Bahamas Tax Treaty, there are many reasons why The Bahamas is one of Canada’s leading trading partners in the Caribbean.
With over $350 million in Canadian exports, Canada’s administration shares excellent diplomatic relations with The Bahamas. The two countries share mutual values of people-to-people ties, economic resilience, and mutually beneficial partnerships.
How do Canadians avoid double taxation as residents of The Bahamas? Easy! When living in The Bahamas, there is no personal income, corporate, wealth, inheritance, or capital gains taxes. And, you’ll benefit from a range of other tax benefits.
Despite the lack of an official Canada Bahamas Tax Treaty, Canada and The Bahamas have various tax agreements that make The Bahamas an excellent place for Canadians to live and invest.
What tax agreements do Canada and The Bahamas have?
Most of the tax benefits Canadians experience in The Bahamas aren’t realized through a Canada Bahamas Tax Treaty. The two countries don’t share a treaty, but individual and international tax rules allow Canadians to benefit from The Bahamas’ taxes.
Canada and The Bahamas acknowledge an exchanged tax agreement on the “Exchange of Information on Tax Matters.” The enforcement of this agreement is an effective means for the two countries to share knowledge about any taxes imposed by Canada or The Bahamas.
But this piece of legislation doesn’t dictate any specific tax benefits for Canadians in The Bahamas. So, what makes The Bahamas such a great place to invest for Canadians? It must be more than the waterfront condominiums, great weather, and reputable Bahamian schools, right?
Benefits for Canadians Living in The Bahamas Besides a Tax Treaty
The Bahamas’ economic policy invites investment and relocation from thousands of Canadians each year. Whether you’re a corporate entity looking to expand your business or an average Joe seeking a break from high international taxes or cold weather, The Bahamas offers some relief.
Individual Tax Benefits
Canadians pay some of the highest taxes globally, with some Canadians paying as much as 33% in taxes on personal income. Changing tax residence to The Bahamas is almost a culture shock, with income tax dialing down to zero.
Other taxes Canadians don’t have to pay in The Bahamas include:
Capital Gains Tax: This is one of the most significant taxes in Canada, as it can reach as high as 50%, depending on your income bracket. If Canadians sell a home that isn’t their primary residence, they can be on the hook for forking up 50% of its appreciation. While you can avoid the brunt of the burden by making RRSP contributions and capitalizing on other capital losses (among other avenues), capital gains are a significant tax.
Canadians who score permanent residency in The Bahamas don’t have to pay capital gains tax on their property. This benefit makes it a valuable investment spot for real estate, as investors reap any appreciation on their properties.
Corporate Tax: High corporate tax rates sometimes hinders business in Canada. However, if you move your business to The Bahamas, you’ll enjoy paying nothing in corporate taxes.
Inheritance Tax: While Canadians don’t pay estate tax, Canadians with US citizenship or residency might be familiar with it. A few states like Connecticut, Washington, Kentucky, and 15 others have inheritance and estate taxes of up to 16%.
However, they are usually for estates valued around 4-5 million, with a select few states implementing these taxes on smaller values ($1 million for Rhode Island, for example).
Bahamian residents don’t have to pay inheritance taxes on properties transferred to them by passing family members. So, high-roller real estate investors can keep much of the value of their estate within their families.
Wealth Tax: Canadians don’t pay wealth taxes, but those with residency or citizenship in additional countries like Colombia, France, and Norway might be familiar with this tax. The governments of countries enforcing wealth taxes assess a taxpayer’s total asset market value. Assets include bank balances, stock investments, cars, real estate, trusts, pensions, and more.
Bahamian residents enjoy full benefit of their net worths without paying any wealth taxes.
But how can Canadians reap the tax benefits of The Bahamas? The best way is to immigrate and achieve permanent residency through investment.
If you invest or purchase property in The Bahamas worth at least $750,000, you’ll be allowed to apply as a permanent resident. There are also other avenues for Bahamian residency, but many require specific occupational requirements or familial ties to The Bahamas. Below you’ll find different ways to achieve permanent residence:
- Marriage: If you’ve been married for five years to a Bahamian, you can apply for permanent residency. Keep in mind that you’ll have to prove you’ve been living together as husband and wife.
- Birth: If your mother is a Bahamian citizen, you can apply for permanent residency even if her husband is not a citizen of The Bahamas.
- Police and Prison Officers, Nurses, Doctors, and Teachers: If you’ve worked in law enforcement, education, or healthcare for at least 10 years, you’ll be eligible for permanent residency. Doctors are also able to apply after serving for at least 20 years.
- Priests: Priests are eligible after serving for at least 20 years.
- Work Permits: You can apply for permanent residency if you’ve held a legal work permit for over 20 years.
Canadians enjoy many tax benefits in The Bahamas, but it’s not always about the money. The Bahamas offers Canadians a laid-back lifestyle, filled with sunshine, clear oceans, views, and some of the best beaches in the world.
The Bahamas operates in Eastern Standard Time (EST), making it easy for Canadians that adopt a business-first lifestyle. Many find this a bonus as it’s easy to conduct business with Canadians and Americans through regular communication and video conferences.
Family-oriented Canadians will also enjoy the long list of reputable international schools in The Bahamas, as well as the friendly culture and vibe of Bahamian people.
Finally, The Bahamas is home to Nassau’s International Airport, Lynden Pindling International Airport, which receives daily flights from Canada and the US. It’s never been easier to go back and forth between your new, beachy home and your roots in Canada.
What other taxes are in The Bahamas?
The list of Bahama taxes is notoriously low–without any income, inheritance, and capital gains tax–but the country does collect some taxes.
VAT: VAT, or Value-Added Tax, is a tax imposed on various products. Like sales tax, the consumer, seller, and other parties pay VAT on a product throughout its journey through the supply chain. The VAT standard rate in The Bahamas is 10%.
Stamp Duty: Stamp duty applies to real estate transactions. While you won’t have to pay capital gains later, residents pay stamp duty upon every real estate purchase. Currently, the duty is 3.5% of the property purchase price.
Import Duties: Canadians might face a high import tax when shipping their vehicles into The Bahamas. The country charges an import duty on all imported goods, ranging from 0-75%.
Are you a Canadian who’s moving to The Bahamas?
Why not trade winter winds and high taxes for sunshine in a tax haven? If you’re a Canadian considering moving to The Bahamas, contact us at Better Homes and Gardens MCR Bahamas today.
Explore buying and leasing opportunities for gorgeous waterfront properties and trendy condominiums in the paradise of Bahamas with the support of the best real estate team in The Bahamas!