The Bahamas has enacted the [International Tax Cooperation Act, 2010 ](http://www.bfsb-bahamas.com/legislation/itca2010.pdf) (Act) which came into force on July 1, 2010. The Act provides the framework legislation that enables The Bahamas to give effect to any treaty or international agreement as specified in the Schedule that provides for exchange of information in tax matters. Effectively, the Act implements into domestic law the internationally agreed principle for the exchange of tax information universally endorsed by the United Nations, the G20 and the Organisation for Economic Cooperation and Development. In particular, it gives authority to the Government to bring the Tax Information Exchange Agreements (TIEAs) signed in 2009 and 2010 into effect.
The Act provides clarity on the definition of Competent Authority as defined in the respective governing Agreement. In the case of The Bahamas, this would be the Minister of Finance or his duly authorised representative. Likewise defined is the “Requesting” and “Requested” States, specifically linking them to the governing Agreement.
With regard to the procedures to be followed in respect to a request, the Act stipulates that a request must be in writing and must be signed by a senior official designated by the “Requesting” State. The Act provides safeguards against so-called fishing expeditions, with provisions relating to what a request must contain, deferring to the provisions of the respective governing Agreement. For example, it provides that a request shall contain “such” of the following particulars as “may be specified” within its governing Agreement:
1. The identity of the person under examination or investigation;
2. A statement of the information sought, including its nature, and the form in which the requesting state wishes to receive the information from the requested state;
3. The period of time in respect of which the information is requested;
4. Where a request seeks information relating to a timeframe outside the taxable period specified in the request, the request must clearly establish the connection between that taxable period and the timeframe for the information sought;
5. The tax purpose for which the information is sought;
6. The grounds for believing that the information requested is held in the “Requested” state or is in the possession or control of a person that is subject to the jurisdiction of the “Requested” state;
7. To the extent known, the name and address of any person believed to be in possession of the “Requested” information;
8. A Statement that the request is in conformity with the law and administrative practices of the “Requesting” State, that if the “Requested” information was within the jurisdiction of the “Requesting” State then the Competent Authority of the “Requesting” State would be able to obtain the information under the laws of the “Requesting” State or in the normal course of administrative practice and that the request is in conformity with its Governing Agreement;
9. A Statement that the “Requesting” State has pursued all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties;
10. An indication as to whether the information is required for determining, assessing and collecting taxes or for the investigation or prosecution of tax offences involving the contravention of a tax administration or other relevant law;
11. Where the request is in respect of the determining, assessing and collecting of tax, the law imposing the tax;
12. Where the request involves a contravention of a tax administration or other relevant law, the law contravened or believed to have been contravened;
13. Evidence that the information being sought is foreseeably relevant to the administration or enforcement of the tax laws in respect of determining, assessing and collecting taxes or for the prosecution of tax offences or involves the contravention of tax administration law (as the case may be).
The Act also sets out the empowerment of the Minister responsible to require production of information and the procedures for dealing with information received. Under provisions of the Act, the Minister may allow representatives of a Competent Authority of a “Requesting” Stage to interview individuals and examine records in The Bahamas, under strict conditions, including the provision of written consent to such by the persons to be interviewed or whose records are to be examined to the Competent Authority, and compliance with relevant entry laws of The Bahamas.
The Act defines offences relating to contravention of provisions and sets penalties for such, and under broader powers provided for the making of subsidiary legislation, the Minister can create further offences and prescribe penalties for such. There is due process for judicial review and challenge, where a person feels aggrieved by the performance of the Minister or any other person of any function under the Act.
In terms of Agreements to be signed going forward, the Act provides that the Minister shall by Order amend the Schedule to give effect to such agreements.
Also enacted has been an amendment to The Bahamas and the United States of America Tax Information Exchange Agreement, effectively (i) ensuring consistency with the level of penalties in the International Tax Cooperation Act 2010 that will give effect to the other TIEAs The Bahamas has entered into; and (ii) empowering the Minister to permit, at his discretion, the United States Competent Authority to conduct interviews in The Bahamas with persons that voluntarily consent to participate in such interviews, and on such conditions as the Minister may set.