Bahamas Economy Overview

Currency

B$ Bahamian Dollar
(BSD)

Working hours

40 hours/week

Public/bank holidays

11 public holidays

Capital

Nassau

Languages

English-based creole language

Population

415,223

Minimum hourly salary

23.19 BSD

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Failure to comply with NIB regulations can result in penalties and interest charges for the employer. Therefore, it’s crucial to ensure timely reporting and payment.

Fun fact

Located in the Atlantic Ocean, the Bahamas consists of 700 tropical islands. Only about 30 of them are inhabited by people.

The Commonwealth of the Bahamas is a tiny island group in the Caribbean north of Cuba and northwest of Hispaniola. Previously inhabited by Taino people, the Bahamas became a British possession in 1718 and only gained independence in 1971.

Since then, the population has grown to 408,000 and the country’s nominal GDP expanded to $13.82 billion in 2023. This growth is set to increase, according to the IMF, by 2.3% in 2024. The Bahamas has one of the highest per capita GDPs in the western hemisphere at an estimated $32,560 making this a high-income country.

As the tourism industry accounts for roughly 70% of the country’s GDP, it took a massive hit in 2020 due to the pandemic, but recent growth has shown that the nation’s economy is back on track. If you’re considering doing business in the Bahamas, the time might be just right – read on to find out more about the advantages and challenges of setting up shop in this island nation.

Overview of the Bahamas' Economy

The Bahamas uses its own currency, the Bahamian dollar (BSD). However, it’s pegged 1:1 with the US dollar, which keeps it quite stable. The nation’s economy has grown steadily since its independence from Britain in 1971, except for during the global pandemic, which crippled its tourism industry temporarily.

In 1980, the GDP was $2.6 billion and is now more than five times that amount. Tourism and related services make up the lion’s share of the country’s GDP, with the country highlighted as a major stop for cruise ships. Financial services are also an increasingly important part of the nation’s economy.

Offshore financial services contribute roughly 15% to GDP, and the Bahamas, because of its favorable tax regime and relaxed regulations, has the most offshore entities in the world. As far as exports go, local resources and manufacturing also add significantly to the economy.

Export Percentage of Total Exports (2022)
Oil, gas, and coal43.8%
Shipbuilding32.4%
Aluminum and derivatives7.0%
Books and newspapers3.3%
Plastics3.2%
Cement, salt and stone2.3%

Foreign direct investment (FDI) is also a significant part of the economy, allowed in 15 sectors (primarily tourism) and contributing roughly 4% of GDP. Most FDI inflows come from the US, which also has important and ubiquitous trade and transportation links with the Bahamas. The Bahamian economy is continuing to grow steadily, and the Bahamas is considered a high-income country.

However, while the per capita GDP is very high, real salaries reveal a large income disparity. The minimum wage in the Bahamas is 260 BSD/week or 1,125 BSD/month, while the average salary is roughly 3,900 BSD/month. This average is likely inflated by high-income earners as many Bahamian workers’ salaries are far below this average.

Combined with 5.6% employer contributions to social security, hiring Bahamian employees can still be quite affordable.

Taxes

Employer Tax: 5.9%

Social Security Contributions

5.9%

Employee Tax: 3.9%

Social Security Contributions

3.9%

National Insurance

9.8%

Income tax

There is no individual income or payroll tax in the Bahamas.

Business Regulation in the Bahamas

Starting a new business or expanding into a new market can be full of challenges. However, once you know the local rules, it can be a lot easier to make your business plans. The Bahamas has attempted to diversify its economy and attract investment by making it easier for foreign businesses to set up in this country.

Here are some of the regulations you should know about:

Registration and Compliance

When planning to do business in the Bahamas, it’s crucial to look at the possible types of businesses you can open and choose the best structure for your needs. According to the World Bank, this is a seven-step process that requires an average of 11 days to complete. You need to choose and register a name, submit necessary documents, and gain approval from the Registrar General.

There are many types of business structures to choose from in the Bahamas and most don’t need to pay any corporate income tax. The international business company or IBC form is probably the most common. As of July 2023, the Business License Act 2023, IBCs recording revenue earned in or from activity within the Bahamas must obtain business licenses. 

Taxes and Investments

The Bahamas doesn’t levy personal income, corporate income, or capital gains taxes on most businesses. However, there is a business license tax assessed on businesses that require licenses. IBCs, for example, must pay 0.5% if they have annual turnovers between 100,000 and 500,000 BSD, 0.75% for turnovers between 500,000 and 5 million BSD, and 1.25% for over 5 million BSD.

VAT is levied at 10% on most goods and services. Employers also pay just 5.9% of workers’ salaries toward social security.

Employment Laws

Employees in the Bahamas work eight hours a day and 40 hours per week. They should receive at least one 24-hour period of rest per week and an annual paid leave of 10 working days. Bahamians are also entitled to 11 paid public holidays per year.

Maternity leave is granted for up to 12 weeks. There is no mandated paternity leave, but fathers can take up to a week of unpaid leave per year for family purposes. Employees are allowed one week of paid sick leave per year.

Employees with 1-12 years of service are given two weeks’ notice in case of termination, and after 12 years, workers are given four weeks’ notice. Severance is paid at the rate of two weeks’ pay for each year worked to a maximum of 24 weeks. 

Intellectual Property

The Bahamas has strong intellectual property laws that help protect companies’ rights. In the Bahamas, trademarks can be registered for 14 years and then renewed. Copyrights last for the author’s life plus 70 years, and patents last for 16 years.

Benefits of Doing Business in the Bahamas

There are several clear benefits to doing business in the Bahamas, including:

  • Close proximity and trading links to the US
  • English-speaking for easy communication
  • Politically and economically stable with currency pegged to the US dollar
  • No personal income, corporate income, or capital gains taxes.
  • Government support and initiatives for foreign investment and market diversification

Business Expansion Options in the Bahamas

Of course, there are also challenges to doing business in the Bahamas that need to be considered. These include:

  • High import taxes used as a source of revenue for the government
  • Complex and time-consuming bureaucracy
  • High costs of energy and utilities

Exploring Business Opportunities in the Bahamas

There are multiple ways to start doing business in the Bahamian market. These are the most common methods used:

Bahamas Employer of Record (EOR)

This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground. 

An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities. They may also provide additional services, such as talent acquisition and visa support.

LEARN MORE

Recruitment Agencies

Recruitment agencies in the Bahamas help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Bahamian labor laws.

For businesses looking to grow in the Bahamas, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

LEARN MORE

Bahamas Professional Employer Organization (PEO)

Another option is to work with a professional employment organization (PEO) or employer of record (EOR). These service providers own entities in the Bahamas and use them to hire employees on your behalf. Using their services, you can hire Bahamian workers without having to own an entity in the Bahamas.

LEARN MORE

Subsidiary Incorporation

You can open a subsidiary in the Bahamas, which is owned fully or in part by your foreign-based business. Most enterprises choose to set up International Business Companies (IBCs), though other structures like partnerships, limited liability companies, and joint ventures are also possible. As a subsidiary, this entity can be set up as an independent company that can do business on its own and own assets and debts, though still be owned by your parent company.

Branch Registration

If you don’t want to set up or buy a subsidiary in the Bahamas, you can simply open a branch office. This structure is not considered an independent entity and all liability for it falls to the parent company. A branch office may do business on behalf of the parent and doesn’t need capitalization.

It may, however, have to pay high import tariffs on supplies sent from outside the Bahamas.

Business Opportunities in the Bahamas

The Bahamas offers a range of exciting business opportunities for investors and entrepreneurs, thanks to its strategic location, favorable tax regime, and thriving tourism industry. The country’s stunning natural beauty, political stability, and close proximity to the United States make it an attractive destination for businesses looking to expand their operations in the Caribbean.

Some of the most promising sectors include:

Business OpportunityReason
Tourism and HospitalityThe Bahamas’ pristine beaches, crystal-clear waters, and warm climate attract millions of visitors annually, creating opportunities for investments in resorts, hotels, restaurants, and water sports activities.
Financial ServicesThe country’s favorable tax laws and relaxed regulations have made it a hub for offshore banking and financial services, presenting opportunities for financial institutions, trust companies, and asset management firms.
Real Estate DevelopmentThe demand for luxury properties and vacation homes in the Bahamas continues to grow, offering potential for investments in high-end residential developments, resort communities, and commercial real estate projects.
Renewable EnergyWith its abundant solar and wind resources, the Bahamas presents opportunities for investments in renewable energy projects, which can help reduce the country’s dependence on imported fossil fuels and lower energy costs.
Agribusiness and FisheriesThe Bahamas’ fertile soil and rich marine resources offer potential for investments in sustainable agriculture, aquaculture, and seafood processing, which can help diversify the economy and create jobs in rural areas.

With a stable economy, excellent connections to the US, and a very favorable taxation system, the Bahamas is a very attractive place to do business for many companies.

If you want to break into this market, you can open a branch, start up a subsidiary, or work with an EOR to help you hire Bahamian workers easily.