Starting a small business in Nassau: licences, VAT and first steps

The first thing most new businesses in Nassau need is not a lease, a logo or a loan. It is a reserved trade name. Almost everything that follows – the approvals from other agencies, the business licence, the bank account – is filed against that name, so it pays to get the order of operations right.

This guide sets out that order for a small, Bahamian-owned business on New Providence: a bakery, a cleaning service, a design studio, a tour desk. It is general information rather than legal or tax advice. Rules, forms and fees change, and the Department of Inland Revenue, the Registrar General's Department and, where foreign ownership is involved, the Bahamas Investment Authority have the final word. Confirm anything involving money with them.

The tax picture in brief

The Bahamas has no personal income tax, and a small domestic business does not pay corporate income tax. What you will deal with instead is the annual business licence tax, value added tax once you pass the registration threshold, National Insurance contributions, customs duty and VAT on imports, and real property tax if you own your premises. It is a shorter list than in many countries, but each item has its own deadlines.

Step 1: Decide how the business will be owned

Sole trader. You and the business are legally the same person. It is the simplest and cheapest set-up, but business debts are your personal debts.

Partnership. Two or more people trading together. A written partnership agreement, drawn up by an attorney, saves arguments later about who put in what and who takes out what.

Limited company. Incorporated through the Registrar General's Department, a company is a separate legal person, which limits your personal exposure. It also brings a registered office, directors, annual filings and fees, and a bank that will ask for more documents. Plenty of owners start as sole traders and incorporate once the business has proved itself.

If you are not Bahamian, read the section on foreign owners further down first, because your options are narrower.

Step 2: Reserve a trade name

Search for the name you want and reserve it through the Registrar General's Department, which handles business names and company incorporations online. Have two or three alternatives ready; names too close to an existing business, or that suggest a government connection you do not have, are likely to be refused. If you are forming a company, the name is reserved as part of incorporation.

Keep the reservation reference. You will quote it on almost every form that follows.

Step 3: Collect the approvals your trade requires

The business licence is the last stamp, not the first. Many activities need a sign-off from another agency first, requested using your trade name reference, and the Department of Inland Revenue's licence guidance sets out which approvals attach to which activity. In broad terms:

• Food and drink. Anything that prepares or sells food needs public health approval and a premises inspection, and food handlers need health certificates. Serving alcohol requires a separate liquor licence.
• Premises. If you are changing the use of a building, or working from a residential street, check planning and zoning rules before you sign a lease. Premises open to the public can expect a fire safety inspection.
• Transport and tours. Taxis and other public service vehicles are licensed through the Road Traffic Department, and anyone selling excursions to visitors should check what the Ministry of Tourism requires.

Approvals that involve an inspection take longest, so request them as soon as you have a name and an address.

Step 4: Apply for the business licence

Applications are made online through the Department of Inland Revenue tax portal, where you open an account and receive a taxpayer identification number (TIN). Upload your identification, the name reservation, your approvals and details of the business. A complete application can be turned round within days; incomplete ones are what cause delays. Display the licence where customers can see it.

Licensing is governed by the Business Licence Act 2023, which replaced the 2010 Act in July 2023. The tax is a percentage of turnover, set in bands. Businesses turning over less than $100,000 a year are exempt from the tax, although they still need the licence. Above that, the rate starts at 0.5 per cent of turnover and rises in steps for larger businesses. Check the current bands with the department before you budget.

The annual calendar matters as much as the first application:

• Licences expire on 31 December each year.
• Renewal applications are due by 31 January, with a declaration of the previous year's turnover.
• The licence tax itself is due by 31 March.

Smaller businesses support their turnover figure with an income statement; larger ones need a report from an independent accountant or audited accounts. Late filing and late payment both attract penalties and interest. Put the renewal in your diary for the first week of January, not the last.

Step 5: Register with National Insurance

The National Insurance Board runs the country's social security scheme, and contributions are compulsory. If you are self-employed, you register and contribute for yourself. If you hire staff, you register as an employer, deduct the employee's share from wages and pay it over each month with your own share. Employer registration can be done through the Inland Revenue portal, and a licence will not be approved or renewed while contributions are outstanding.

Hiring also brings duties under employment law, from written terms and the minimum wage to paid holidays and notice.

Step 6: Work out where you stand on VAT

Value added tax arrived in the Bahamas on 1 January 2015 at 7.5 per cent. The rate rose to 12 per cent in July 2018 and was cut to the current standard rate of 10 per cent from 1 January 2022. Some goods and services are zero-rated or exempt, so ask how your products are treated rather than assuming.

Registration becomes compulsory when your taxable sales exceed $100,000 in any 12-month period, looking either back over the past year or ahead over the next. Once you cross that line you must apply promptly, charge VAT, issue proper VAT invoices and file returns on the schedule the department sets, which depends on your turnover.

Businesses below the threshold can register voluntarily. The advantage is that you can reclaim the VAT you pay on stock, equipment and services. The disadvantage is more paperwork and, for customers who cannot reclaim VAT themselves, higher prices. A business selling mainly to other VAT-registered firms often gains; one selling mainly to households often does not. VAT is also charged at the border on most imports, alongside customs duty, so it is part of your landed cost either way.

Step 7: Open a bank account and set up the books

Bahamian banks carry out thorough due diligence, and opening a business account can take weeks. Expect to provide identification, proof of address, your licence or name reservation, references and sometimes a short business plan. Keep business and personal money separate from day one.

Good books are not optional. Your January renewal depends on a turnover figure you can support, and your VAT returns depend on clean records of what you charged and paid. An hour a week with your receipts will save a great deal of pain.

Step 8: Plan for island-specific risks

Hurricanes. The season runs from June to November. Insure stock and premises, read exactly what business interruption cover pays for, and back up records off-site. Our household hurricane calendar adapts easily to a shop or office.

Import lead times. Most stock arrives by sea, much of it from Florida. Allow time for shipping and customs clearance, and build duty and VAT into your prices. A customs broker is worth paying until you know the process.

Seasonality. Businesses that sell to visitors feel the late-summer and autumn slowdown. Keep enough cash to carry you through it.

The Family Islands. Trading on an Out Island means freight by mail boat or air and fewer suppliers close at hand. Our first-timer's guide to the Out Islands shows how different each island is.

If you are not Bahamian

Non-Bahamians need the prior approval of the Bahamas Investment Authority to do business in the country, and immigration permission to work in it. The national investment policy also reserves a long list of activities for Bahamians, including retail and wholesale trade, beauty establishments, security services, local construction, auto repair and many transport and tour services. Capital brought in from abroad falls under exchange control rules administered by the Central Bank of The Bahamas, and registering an investment properly at the start makes it easier to repatriate funds later. Talk to the BIA and a Bahamian attorney before you sign anything.

Where to find help

Access Accelerator, the government-backed small business development centre run with the University of The Bahamas and the Chamber of Commerce, offers training and has run grant and loan programmes for Bahamian small businesses; check what is open when you apply. The Bahamas Agricultural and Industrial Corporation is worth a call for farming, fisheries and handicraft ventures. You will find more practical guides in our business section.

Your start-up checklist

Frequently asked questions

Do I need a business licence if I work from home or sell online?

Yes. The Business Licence Act applies to anyone carrying on business in or from within the Bahamas, whatever the premises. If your turnover is below $100,000 you should not owe licence tax, but you still need the licence and must renew it each January.

When do I have to register for VAT?

When your taxable sales have exceeded $100,000 over the previous 12 months, or you expect them to over the next 12. You can register voluntarily below that level if reclaiming VAT on your costs makes sense. The Department of Inland Revenue can confirm how your goods or services are treated.

What happens if I miss the January renewal deadline?

Late filing attracts a penalty, and late payment of the licence tax attracts a further penalty plus interest. Banks, landlords and government buyers also often ask to see a current licence. File the renewal early, even if you pay closer to the March deadline.

How long does it take to get up and running?

A sole trader who needs no special approvals can move from name reservation to licence fairly quickly if every document is ready. Businesses that need inspections, such as restaurants and food stalls, should allow considerably longer, and applications involving foreign ownership longer still. A bank account is often the slowest piece, so start it alongside everything else.