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The Commercial Entities (Substance Requirements) Act, 2018 (“CESRA”) is intended to ensure entities claiming to be tax resident in The Bahamas have real nexus to the jurisdiction. CESRA became effective 31 December 2018. A requirement of substantive presence to justify tax residency is now an important standard among international financial centers.
All ‘commercial entities’ incorporated, registered or continued to The Bahamas are required to comply with CESRA. All ‘commercial entities’ must report compliance with their obligations under CESRA to the Ministry of Finance.
How are commercial entities defined?
A ‘commercial entity’ is:
Other entities such as Bahamian foundations or trusts are not subject to the requirements of CESRA.
What is an ‘included entity’?
CESRA imposes different requirements depending upon whether a commercial entity is deemed an ‘included’ entity or a ‘non-included’ entity. Only ‘included entities’ must have substantial economic presence in The Bahamas, e.g. local offices performing core income generating activities, and staffing with adequate and relevant qualifications, skills or experience.
An ‘included entity’ is a CAC, IBC, PA, LLP or ELP that is not:
but either itself is engaged in, or if a holding company, where one or more of its subsidiaries is engaged in a ‘relevant activity’.
‘relevant activities’ are the following business activities:
What reporting is required?
All commercial entities, irrespective of whether they are ‘included’ or ‘non-included entities’, are required to report their compliance with CESRA to the Ministry of Finance using the Department of Inland Revenue’s e-portal no later than the last calendar day 9 months following their fiscal year end.
Are there any transitional provisions?
Special provisions apply to commercial entities incorporated, registered or continued to The Bahamas prior to or on 30 December 2018, as follows:
Commercial entities incorporated, registered or continued to The Bahamas on or after 31 December 2018 are not granted a transitional period and are therefore immediately subject to substance requirements from the date of incorporation, registration or continuation, as the case may be and must report within 9 months of their fiscal year end.
See examples of reporting deadlines and reporting periods illustrated in the table below.
|Date of incorporation, registration or continuation (“Start Date”)||Fiscal Year End||First Date of Compliance with CESRA||First Reporting Period||First Reporting Deadline|
|On or Before 30 December 2018||30 September 2019||01 July 2019||01 July 2019 – 30 September 2019||30 June 2020|
|31 December 2019||01 July 2019||01 July 2019- 31 December 2019||30 September 2020|
|31 March 2020||01 July 2019||01 July 2019- 31 March 2020||31 December 2020|
|30 June 2020||01 July 2019||01 July 2019 – 30 June 2020||31 March 2021|
|On or After 31 December 2018||31 March 2020||Immediately||Start Date – 31 March 2020||31 December 2020|
|30 June 2020||Immediately||Start Date – 30 June 2020||31 March 2021|
|30 September 2020||Immediately||Start Date – 30 September 2020||30 June 2021|
|31 December 2020||Immediately||Start Date – 31 December 2020||30 September 2021|
What is the entity’s fiscal year?
Other CESRA reporting details.
For those desiring more information:
See more detailed summary of the purpose and requirements of the Act in the Delaney Partners Legal Update of March 2019:
For further assistance or clarification:
If you have further questions, please contact the commercial lawyers of Delaney Partners at email@example.com or your administrator at Delaney Corp.
Disclaimer: This publication is intended for information purposes only and does not constitute legal, accounting or tax advice.
© Delaney Partners, January 2020
1 Pursuant to a Public Notice issued by the Regulatory & International Affairs Unit of the Ministry of Finance of The Bahamas on 29 July 2019.