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US Expat Taxes in Bahamas

Is the Bahamas a tax haven? Yes — the Bahamas imposes no personal income tax, no capital gains tax, no inheritance or estate tax, no gift tax, and no wealth tax on individuals, regardless of residency or citizenship. That is why it is one of the world's best-known tax havens. But there is a critical catch for Americans: a US citizen or Green Card holder living in the Bahamas still owes US federal tax on their worldwide income, and because the Bahamas levies no income tax there is NO foreign tax to credit. The Foreign Tax Credit (Form 1116) is therefore worthless here — the Foreign Earned Income Exclusion (Form 2555, up to $132,900 for 2026) becomes the primary tool to reduce US tax, and FBAR and FATCA reporting on Bahamian accounts still applies in full. The Bahamas is only genuinely tax-free if you are NOT a US person. The Bahamas funds its government through indirect and transaction-based taxes rather than income tax. The main ones are Value Added Tax (VAT) at a standard rate of 10% (reduced from 12% effective January 1, 2022), real property tax on Bahamian real estate, stamp duty and VAT on property conveyances, annual business licence fees based on turnover, customs and import duties, and National Insurance (social security) contributions. The tax authority is the Department of Inland Revenue (DIR), part of the Ministry of Finance. While long regarded as a secrecy-friendly offshore centre, the Bahamas now participates in the OECD Common Reporting Standard (CRS) for automatic exchange of financial-account information and has signed a FATCA Model 1 Intergovernmental Agreement with the United States, so Bahamian banks report US account holders to the IRS. The Bahamas has also enacted economic substance requirements and, under the OECD's global minimum tax (Pillar Two), introduced a Domestic Minimum Top-up Tax of 15% on very large multinational groups (consolidated revenue of €750 million or more) effective for fiscal years beginning in 2025 — so the jurisdiction is no longer entirely income-tax-free for in-scope multinationals, though individuals and ordinary local businesses remain free of income tax.

Tax Treaty Information

No Tax Treaty
  • No income tax treaty exists between the United States and the Bahamas, and none is under negotiation. Because the Bahamas levies no income tax, a treaty would have little to offer on double taxation in any case
  • No totalization (social security) agreement: self-employed US citizens in the Bahamas owe US self-employment tax (15.3%) in full, with no offset
  • The Bahamas imposes no withholding tax on dividends, interest, or royalties, so the absence of a treaty does not increase withholding — there is none to reduce
  • Double taxation relief for US persons comes from the Foreign Earned Income Exclusion (Form 2555) and Foreign Housing Exclusion, NOT the Foreign Tax Credit, because no Bahamian income tax is ever paid
  • The Bahamas has signed a FATCA Model 1 Intergovernmental Agreement with the US and participates in the OECD Common Reporting Standard (CRS), so financial-account information is exchanged automatically with the IRS

FBAR & FATCA Requirements

US citizens and Green Card holders in the Bahamas must report all Bahamian financial accounts on FinCEN Form 114 (FBAR) if the aggregate value of all foreign accounts exceeds $10,000 at any point during the calendar year. Reportable accounts include accounts at Bahamian and international banks operating in the Bahamas (such as Commonwealth Bank, Fidelity Bank Bahamas, RBC Royal Bank (Bahamas), Scotiabank Bahamas, and CIBC Caribbean), brokerage and investment accounts, trust accounts, and insurance policies with a cash surrender value. The tax-free status of the Bahamas does NOT exempt you from these reporting obligations. FATCA Form 8938 applies for expats whose foreign financial assets exceed $200,000 on the last day of the year or $300,000 at any point during the year (higher thresholds apply to taxpayers filing jointly). The Bahamas signed a FATCA Model 1 Intergovernmental Agreement with the United States, requiring Bahamian financial institutions to identify and report US account holders to the Bahamian competent authority, which forwards the data to the IRS. The Bahamas also participates in the OECD Common Reporting Standard. FBAR non-willful penalties can reach roughly $10,000 per violation; willful violations carry penalties up to the greater of $100,000 (inflation-adjusted) or 50% of the account balance. Form 8938 penalties start at $10,000. US persons who own shares in a Bahamian IBC may also have Form 5471 obligations, and holders of non-US mutual funds or pooled investments should watch for PFIC reporting on Form 8621. The IRS Streamlined Foreign Offshore Procedures allow non-willful filers to catch up by filing 3 years of returns and 6 years of delinquent FBARs with no penalties assessed.

Foreign Earned Income Exclusion (FEIE)

The Foreign Earned Income Exclusion is the single most important tool for US expats in the Bahamas, because the country imposes no income tax and therefore generates no Foreign Tax Credits to offset US tax. You can exclude up to $132,900 of earned income for 2026 by meeting either the Bona Fide Residence Test (genuine residence in the Bahamas for a full calendar year) or the Physical Presence Test (330 full days in a foreign country within any 12-month period). Key limitations apply. The FEIE only covers earned income (salary, wages, self-employment income) — it does NOT shield passive income such as dividends, interest, capital gains, or rental income, and in the Bahamas there is no foreign tax credit to fall back on, so that passive income is taxed by the US at full rates. Earned income above the FEIE ceiling is fully US-taxable with no offset. Self-employment income excluded under the FEIE remains subject to US self-employment tax (15.3%); with no US-Bahamas totalization agreement there is no way to avoid it. US expats in the Bahamas can also claim the Foreign Housing Exclusion (Form 2555, Part IX) for qualifying housing costs above the base amount ($21,264 for 2026) — valuable given that Nassau, Paradise Island, and the high-end Family Islands are expensive — but high earners with significant investment income often still owe meaningful US tax because the FTC is unavailable. Because the Bahamas does not tax investment income, US-side planning (asset location, PFIC avoidance, and timing of capital gains) matters more here than treaty or FTC planning.

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Common Tax Issues in Bahamas

  • 1Is the Bahamas a tax haven? Yes for non-US persons — no personal income tax, no capital gains tax, no inheritance or estate tax, no gift tax, and no wealth tax. But US citizens and Green Card holders remain taxed by the US on worldwide income, so the 'tax haven' benefit does not extend to Americans
  • 2No Foreign Tax Credit available: because the Bahamas levies no income tax, US expats cannot generate FTCs (Form 1116). The Foreign Earned Income Exclusion (Form 2555) is the primary and often only relief from US tax
  • 3Income above the FEIE threshold ($132,900 for 2026) is fully taxable by the US with no offset — a key trap for high earners and investors who assumed the Bahamas was entirely 'tax-free'
  • 4Self-employment tax (15.3%) still applies to self-employed US citizens; there is no US-Bahamas totalization agreement to prevent double social security contributions
  • 5Indirect taxes do exist: 10% VAT, real property tax, stamp duty and VAT on conveyances, annual business licence fees, customs duties, and National Insurance contributions
  • 6Financial-account reporting (FBAR and FATCA Form 8938) and PFIC rules apply in full despite the tax-free status; the Bahamas exchanges account data with the IRS under both FATCA and the OECD CRS
  • 7Domestic Minimum Top-up Tax: very large multinational groups (consolidated revenue €750M+) face a new 15% OECD Pillar Two top-up tax in the Bahamas from 2025 — relevant only to in-scope corporates, not to individuals or ordinary local businesses

Filing Deadlines

Regular FilingApril 15 (US); June 15 (automatic 2-month extension for US citizens living abroad — no form required, though interest accrues from April 15). The Bahamas has no personal income tax return; businesses file VAT monthly or quarterly and pay an annual Business Licence fee (generally due by March 31)
ExtensionOctober 15 (US, via Form 4868); December 15 additional extension available by letter for taxpayers abroad
FBAR DeadlineApril 15 (auto-extended to October 15)

Local Tax Rates

Income Tax

0% — the Bahamas imposes no personal income tax on individuals (residents or non-residents) and no general corporate income tax. A 15% Domestic Minimum Top-up Tax applies only to very large multinational groups (consolidated revenue €750M+) from 2025 under OECD Pillar Two

Capital Gains

0% — no capital gains tax, no inheritance or estate tax, no gift tax, and no wealth tax

VAT/GST

10% standard VAT (reduced from 12% effective January 1, 2022); some goods and services are zero-rated or exempt. Other taxes include real property tax, stamp duty and VAT on conveyances, business licence fees, customs duties, and National Insurance contributions

Local Resources

Department of Inland Revenue (Bahamas)

Bahamas tax authority — administers VAT, real property tax, business licence fees, and stamp duty

US Embassy in Nassau, Bahamas

Consular services for US citizens in the Bahamas

IRS International Taxpayers

IRS resources for US citizens abroad, including FEIE, FBAR, and FATCA guidance

Frequently Asked Questions: US Taxes in Bahamas

Is the Bahamas a tax haven?
Yes. The Bahamas is widely considered a tax haven because it imposes no personal income tax, no capital gains tax, no inheritance or estate tax, no gift tax, and no wealth tax on individuals — regardless of residency or citizenship. The government raises revenue mainly through VAT (10%), real property tax, stamp duty, business licence fees, customs duties, and National Insurance contributions. The important caveat for Americans: US citizens and Green Card holders are still taxed by the US on their worldwide income, so the Bahamas is only genuinely tax-free if you are not a US person. Since 2025, very large multinational groups also face a 15% OECD Pillar Two top-up tax.
What taxes do foreigners pay in the Bahamas?
Foreigners — like Bahamian citizens — pay no income tax, capital gains tax, or inheritance tax in the Bahamas, whether they are residents or non-residents. The taxes you will actually encounter are indirect or transaction-based: 10% VAT on most goods and services, annual real property tax on Bahamian real estate (owner-occupied homes are exempt on the first $300,000 of value, then 0.625% from $300,000 to $500,000 and 1% above $500,000, subject to an annual cap), stamp duty and VAT on property purchases, business licence fees if you operate a business, customs duties on imports, and National Insurance contributions if you are employed. There is no personal income tax return to file in the Bahamas.
Does the Bahamas have an LLC, and what are the benefits?
The Bahamas does not have a US-style limited liability company (LLC) statute. Its principal flexible corporate vehicle is the International Business Company (IBC), formed under the International Business Companies Act, which offers limited liability, fast incorporation, no minimum capital requirement, and no local income or corporate tax on ordinary companies. IBCs are commonly used for holding companies, asset protection, and international trade. Note that the Bahamas has enacted economic substance requirements for certain activities, and US owners of a Bahamian IBC generally face US reporting on Form 5471 plus possible controlled-foreign-corporation tax (Subpart F / GILTI) — so the US tax benefits are limited for US persons.
Who is the tax authority in the Bahamas?
The Department of Inland Revenue (DIR), part of the Ministry of Finance, administers taxes in the Bahamas — including VAT, real property tax, business licence fees, and stamp duty. There is no income tax department because the Bahamas has no income tax. National Insurance contributions are handled separately by the National Insurance Board (NIB). The DIR operates an online portal for VAT and business licence registration and filing.
Do I need to file US taxes while living in the Bahamas?
Yes. US citizens and Green Card holders must file a US federal tax return reporting worldwide income no matter where they live — and because the Bahamas has no income tax, you cannot use the Foreign Tax Credit. The Foreign Earned Income Exclusion (Form 2555, up to $132,900 for 2026) is your main tool to reduce US tax, and you must still file the FBAR and, if the thresholds are met, FATCA Form 8938.
Should I use the FEIE or the Foreign Tax Credit in the Bahamas?
Use the FEIE. In a zero-income-tax jurisdiction like the Bahamas, the Foreign Tax Credit (Form 1116) produces nothing because you pay no Bahamian income tax. The Foreign Earned Income Exclusion (Form 2555) is therefore the primary tool, supplemented by the Foreign Housing Exclusion. Earned income above the exclusion ceiling, and all passive income (dividends, interest, capital gains), remain fully US-taxable with no offset — which is why the Bahamas can still leave high earners with a meaningful US tax bill.
What accounts do I need to report on FBAR from the Bahamas?
All financial accounts in the Bahamas — including bank accounts, brokerage and investment accounts, trust accounts, pension or retirement accounts, and insurance policies with a cash surrender value — must be reported on FinCEN Form 114 (FBAR) if their aggregate value exceeds $10,000 at any time during the year. The Bahamas reports US account holders to the IRS under a FATCA Model 1 agreement and the OECD Common Reporting Standard, so non-reporting is easily detected.

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