Engaging a contractor in the Bahamas runs on a business licence and an invoice. There is no personal income tax and no withholding tax, so a foreign client pays gross. The contractor’s costs are National Insurance at 10.3% on earnings up to B$830 a week, any licence tax and VAT if registered. The legal risk is classification, because the Employment Act counts an implied contract of service as employment. This guide covers the licence, the contractor’s costs, reclassification, the contract and the paperwork.
Licence, VAT or neither
Business licence. The Business Licence Act, 2023 applies to persons carrying on business in or from within The Bahamas. The tax on it is turnover-based: exempt under B$100,000, 0.5% from B$100,000 to B$500,000, 0.75% from B$500,000 to B$5 million, with no deduction for costs. Licences expire on 31 December, renewal is due by 31 January and the tax by 31 March (Chambers, checked 2026-10-29).
VAT. The rate is 10%, and registration is required once taxable revenue passes B$100,000 in any 12 months (PwC, checked 2026-10-29). The VAT comptroller has said a service whose recipient uses it outside The Bahamas is an export and zero-rated, and that the supplier must hold records from the recipient to support that treatment (Tribune, checked 2026-10-29). Expect a Bahamian contractor to ask you where the service is used.
The contractor’s tax and contributions
Income tax. None. The Bahamas has no personal income tax (PwC, reviewed 21 July 2026, checked 2026-10-29) and imposes no withholding tax on any payments (PwC, reviewed 21 July 2026, checked 2026-10-29).
National Insurance. A self-employed person contributes 10.3% on earnings up to B$830 a week (PwC, checked 2026-10-29). They set an expected income level at the start of each year, and the NIB can review it (NIB, checked 2026-10-29). At the ceiling that is about B$85 a week. The client pays none of it, but a contractor quoting a net rate must cover it.
Reclassification risk
The Employment Act defines a contract of employment as a contract of service or apprenticeship, whether express or implied, and whether oral or in writing; an employee is anyone working under one (Employment Act 2001, checked 2026-10-29). The act does not define an independent contractor, and the label in your contract does not decide the question. We found no published Bahamian test, so treat the usual facts as the ones a claimant would use: one client, fixed hours, a set monthly fee and your instructions on method (contractor misclassification).
Reclassification has a payment consequence too. For a contract of service within The Bahamas, the Employment Act requires wages to be paid in the currency of The Bahamas at regular intervals of not more than a month (Employment Act 2001, s. 60, checked 2026-10-29). If the role is a job, hire through an EOR instead.
What to put in the contract
- A written services agreement scoped to deliverables, with the fee, currency, receiving account and who bears transfer charges.
- An invoice for every payment, matched to the payment reference, carrying the contractor’s licence details and VAT number if registered.
- IP assignment in writing. We did not verify a Bahamian default rule for software, so assign the rights explicitly and ask local counsel about formalities.
- Independence markers: the contractor’s own equipment and schedule, the right to work for other clients, and a fee tied to deliverables.
Taxes and paperwork
The contractor’s side. Hold a business licence, pay licence tax, register with the NIB and contribute, and register for VAT above the threshold.
The client’s side. Pay gross against the invoice. US payers collect a W-8BEN from an individual and file no 1099: pay for work done in the Bahamas is foreign-source income (irs.gov, checked 2026-10-29). The Bahamas is not on the IRS treaty list (irs.gov, checked 2026-10-29).
How to pay contractors in the Bahamas
A SWIFT wire to a Bahamian bank account is the standard route, and Wise delivers BSD from supported sending countries (wise.com, checked 2026-10-29). Some platforms pay USD directly. A Central Bank notice of 31 March 2026 bars foreign-currency settlement between residents but allows resident foreign-currency accounts to receive foreign-currency revenue (Central Bank, checked 2026-10-29). Rails, costs and platforms are compared on our Bahamas payouts page.
Contractor of Record in the Bahamas
A Contractor of Record is the contracting party for the contractor and reduces reclassification risk; it does not remove it. In the Bahamas the work still has to look independent, and the COR also collects the invoice, checks the licence and keeps contracts consistent across a team. Read the liability clause in the contract rather than the product name. Where the role is a job, with your hours, your tools and core work, hire through an EOR instead. Compare providers in our COR rating.