Published on and written by Cyril Jarnias
Owning a seaside villa or a rental apartment in an archipelago with no income tax is a dream. Tax-wise, the Bahamas are indeed among the most attractive jurisdictions in the world: no income tax, no capital gains tax, no inheritance tax, no wealth tax. But for a French taxpayer, the story gets more complex once you cross this tax haven with French tax law… especially since there is no tax treaty between France and the Bahamas.
This article covers local taxes in the Bahamas (no property tax or local capital gains, but stamp duties on transactions), the French tax treatment of capital gains and the IFI (real estate wealth tax), as well as the risks of double taxation. It aims to guide a French taxpayer or investor before buying or selling property in the Bahamas.
An ultra-light Bahamian tax environment… but only locally
In the Bahamas, the tax structure relies heavily on indirect taxes and property ownership, rather than on income or overall wealth. For a property owner, three main blocks dominate: no income tax or capital gains tax, Value Added Tax (VAT) on transactions, and the Real Property Tax (annual property tax).
On the local level, the situation can be summed up as follows: income from property (rent, capital gains) is not taxed as such; only the acquisition and holding of the property are taxed through various mechanisms.
No income tax, capital gains tax, inheritance tax, or wealth tax
The available texts are unanimous: the Bahamas does not levy personal income tax, general corporate income tax, or capital gains tax. In practice, the country does not tax:
Overview of the main taxes and duties absent in the Bahamian archipelago, offering an attractive tax environment for individuals and investors.
Rental income received by an individual from a Bahamian property is not taxed.
Profits made from the resale of real estate are exempt from tax.
No tax on gains from the sale of shares, businesses, or other assets.
Gifts and inheritances are not subject to any taxation.
No wealth tax is levied on net global wealth.
For a purely Bahamian investor, real estate profits can therefore be collected with no local income tax or capital gains tax. For a French person, however, this only applies in the Bahamas: France taxes its residents on their worldwide income and capital gains, in the absence of a contrary treaty.
Main local property taxes: VAT and Real Property Tax
In practice, a French person buying and holding property in the Bahamas will mainly face two major categories of local levies:
Two main types of property taxes exist: VAT on property transfers and the annual Real Property Tax.
Additional specific duties may apply (for example, fees related to permits for foreigners) as well as special rules for rentals or structures such as condo-hotels or real estate companies. But the core issue for a French individual remains the combination of VAT + Real Property Tax.
VAT on real estate transactions: 10% for non-Bahamians
The taxation of real estate transfers has long been based on a form of stamp duty. This mechanism has gradually been integrated into the Value Added Tax, which applies to most property transfers.
For foreign investors, the rule is simple: any acquisition is subject to a single, very high VAT rate.
General principle: VAT on the highest value
VAT on real estate transfers applies to the market value that is the highest among:
– The price stated in the deed of sale.
– The value estimated by an independent appraiser.
– The value used for Real Property Tax, if higher.
The tax authority (the VAT Comptroller) may use the highest of these values to calculate the tax. In practice, this limits attempts to understate the contract price to reduce the tax cost.
Specific treatment for foreign buyers, including French
For a non-Bahamian buyer (individual or foreign company), the regime is very clear: the applicable rate is a flat rate of 10%, regardless of the transaction amount. A French person buying a villa for $1 million therefore incurs VAT of $100,000, in addition to notary fees and other closing costs.
We can summarize the VAT treatment according to the buyer profile as follows:
| Type of buyer | VAT rate on real estate acquisition |
|---|---|
| Bahamian individual | Progressive scale from 2.5% to 10% |
| Local Bahamian company | Flat 10% above certain thresholds |
| Non-Bahamian individual (e.g., French) | Flat 10%, regardless of price |
| Non-local company | Flat 10% |
For reference, the progressive scale for Bahamian nationals is as follows:
| Transaction value (Bahamian buyer) | Applicable VAT rate |
|---|---|
| < $100,000 | 2.5% |
| $100,000 to $300,000 | 4% |
| $300,000 to $500,000 | 6% |
| $500,000 to $700,000 | 8% |
| $700,000 to $1,000,000 | 9% |
| > $1,000,000 | 10% |
A French person cannot benefit from this preferential scale, except in very specific situations (e.g., holding via a local structure meeting Bahamian law criteria, which is beyond the scope of this article).
Allocation of VAT between seller and buyer
In practice, the allocation of VAT is contractual:
– In many transactions, the cost of VAT (10% for a foreigner) is split 50/50 between seller and buyer.
– In other arrangements (so-called “net” sales), the buyer bears the entire VAT.
Local practice, negotiations, and market conditions determine who bears what. For a French investor, this point must be clarified very early in the letter of intent and preliminary contract.
Special cases: leases, gifts, and corporate structures
In the Bahamas, the VAT regime is not limited to fee simple sales:
– Certain short-term leases may be subject to a form of stamp duty or VAT, with rates of 2.5% on the annual rent for terms under 5 years, and specific rules for longer leases.
– Gratuitous transfers (gifts between close relatives) may, in some cases, be “zero-rated”, i.e., benefit from a 0% VAT rate if strict conditions are met (e.g., gift between spouses, between parents and adult children, or transfer to a purely family company or trust).
For a French person considering intra-family transfer of a Bahamian property, these zero-rate rules can be locally interesting. However, they must be very carefully coordinated with French gift and inheritance tax rules, since France does not automatically recognize the Bahamian exemption.
Real Property Tax: the Bahamian “property tax”
While the Bahamas does not tax income or capital gains, it does heavily tax land and building ownership through the Real Property Tax. The amount depends on three main parameters:
– The nature of use (primary residence, rental residence, commercial building, vacant land, etc.).
– The owner’s status (Bahamian, foreigner, entity, charitable organization, etc.).
– The property’s market value.
Calendar and payment incentives
The Real Property Tax is due each year, with:
– A filing obligation with the Department of Inland Revenue.
– A payment deadline of March 31.
– A 10% discount on the year’s tax if full payment is made before that date.
– A surcharge system for persistent late payment, which can significantly increase the bill if the tax is not settled before December 31.
For a French owner, following the local tax calendar avoids accumulating penalties. Furthermore, France only recognizes a possible tax credit if foreign taxes have actually been paid, even in the absence of a tax treaty (as with the Bahamas), which remains a point of caution in case of an audit.
Owner-occupied properties
For residences occupied by the owner for at least part of the year, Bahamian law provides a relatively favorable regime, with a substantial exemption, then moderate rates, and an annual cap.
The typical structure is as follows:
| Value bracket (owner-occupied residence) | Real Property Tax rate |
|---|---|
| Up to $300,000 | Full exemption |
| From $300,001 to $500,000 | 0.625% |
| Above $500,000 | 1% |
| Annual tax cap (per sources) | $120,000 to $150,000 |
Some sources mention a cap of $120,000, others a cap raised to $150,000 in a recent text. In any case, the idea is that a resident owner cannot have their property tax bill exceed a certain annual amount, even for a very high-value property.
Older variations mention an exemption of $250,000 and a rate of 0.75% on the next bracket: legislative changes show a moving target, hence the importance of verifying the applicable scale for the year of acquisition and each year of ownership.
Residences with 4 units or fewer
Small purely residential properties (up to four dwellings, used only as homes) may be subject to a mixed treatment, combining a flat rate and percentage rate:
– Up to $75,000 in value: flat tax of $300.
– Above $75,000: application of a 0.625% rate on the excess.
This measure aims to ease the burden on small properties and the local middle class, while maintaining a progressive mechanism beyond a certain level.
Mixed-use and multi-unit properties: application of area percentages
When a building is partly owner-occupied and partly rented (e.g., a duplex where the French owner occupies one apartment and rents the other), the Bahamian tax authority allocates the base according to the proportion of occupied floor area.
If the owner occupies 60% of the building, then 60% of the value up to $300,000 may benefit from the owner-occupied exemption, and the rented portion will be subject to the scale for rental or commercial properties.
This mechanism is fully applicable only for buildings with four units or fewer. Beyond that, the commercial classification prevails, with a significantly heavier scale.
Commercial properties and rentals owned by foreigners
For a French person buying an income-producing building or a property mainly intended for rental, the country generally applies the “commercial or foreign-owned rental property” grid, which is significantly more expensive than that for owner-occupied homes.
The typical structure is as follows:
| Market value (commercial or foreign rental property) | Approximate annual rate |
|---|---|
| Up to $500,000 | 0.75% |
| From $500,001 to $2,000,000 | 1% |
| Above $2,000,000 | 1.5% |
Other sources more schematically mention a rate of 1% on the first $500,000 and 2% above. These discrepancies are due to successive reforms and fine legal categories. In any case, the message is clear: as soon as a property enters the commercial/rental sphere, the property tax bill increases sharply.
Vacant land held by foreigners
An important point for French people who might consider buying only land for future development: vacant land held by non-Bahamians is subject to a specific regime, rather discouraging over the long term.
The local scale notably provides:
| Value of vacant land (foreign owner) | Annual rate |
|---|---|
| Up to $7,000 | Flat $100 |
| Above $7,000 | 2% of the excess value |
In addition, under certain conditions, a penalty rate of about 7% on the value may apply when land acquired by a non-Bahamian remains undeveloped beyond a certain period after purchase. The clear objective is to encourage foreign investors to build, rather than hold vacant land.
Specific exemptions for Bahamians… not for French
Several exemptions exist, but generally concern:
– Properties owned by Bahamians in certain islands (Family Islands), fully exempt from Real Property Tax.
– Vacant land owned by Bahamians, exempt from property tax.
– Properties owned by churches or charitable organizations.
– Certain approved agricultural properties as commercial farms.
Foreigners, including French, remain subject to Real Property Tax on all their real estate rights in the Bahamas, subject to special regimes for certain entities (e.g., foreign companies that may, in specific cases, be exempt).
Capital gains on real estate: exemption in the Bahamas, but not necessarily in France
Locally, the resale of real estate in the Bahamas is not subject to a specific capital gains tax. The seller pays no capital gains tax in that country, regardless of the gain amount or holding period. The only charges at the time of resale will essentially be:
– Possible VAT/”stamp duty” on the transaction, depending on the sale structure.
– Legal fees, real estate agent fees, registration fees, etc.
For a purely Bahamian investor, the strategy can therefore focus on the combination of “high VAT on entry + regular property tax + no tax on exit”. For a French tax resident, the situation changes completely once you cross France’s tax borders.
French tax resident: taxation in France of capital gains on properties located in the Bahamas
Reference texts on tax treaties recall a fundamental principle: in the absence of a treaty between France and the state where the property is located, French domestic law applies without a general mechanism to eliminate double taxation. The Bahamas is not among the countries that have signed a tax treaty with France.
Direct consequence:
A French tax resident who sells real estate in the Bahamas must declare the capital gain in France, subject to French real estate capital gains tax (for second homes or investments). No tax credit applies because the local Bahamian capital gains tax is zero.
France therefore applies, for a foreign property without a treaty, the standard real estate capital gains regime:
– Income tax rate: 19% on the net capital gain.
– Social contributions: 17.2% (except in special cases of non-residents covered by a European social security scheme, who may be subject to a reduced rate of about 7.5%).
– A total charge of 36.2% on the net capital gain after applying allowances for holding period.
– An additional levy of 2% to 6% may apply for net capital gains exceeding €50,000.
Allowances for holding period lead to a gradual exemption:
– Full exemption from income tax after 22 years of ownership.
– Full exemption from social contributions after 30 years.
– Complete exemption (income tax + social contributions) only after 30 years.
A French person selling a property located in the Bahamas after 10 years with a large capital gain pays no tax in the Bahamas, but is taxable in France on that gain, subject to a partial allowance for holding period.
No France–Bahamas tax treaty: no shield against double taxation
Bilateral tax treaties are designed to:
– Determine which state has the primary right to tax an income or capital gain.
– Organize the elimination of double taxation through exemption or tax credit.
However, the Bahamas are explicitly cited in analyses as an example of a state with no treaty with France. This absence leads to several important consequences:
– France can tax a French tax resident without restriction on income and capital gains from properties located in the Bahamas.
– Taxes possibly paid in the Bahamas (e.g., Real Property Tax, VAT on the transaction) do not give rise to a classic treaty tax credit mechanism.
– Real double taxation is therefore possible in other areas (e.g., if one day the Bahamas created a tax on a flow already taxed in France).
On the real estate capital gains front, double taxation does not arise, since the Bahamas has no capital gains tax. France alone taxes the gain, which paradoxically simplifies the equation… but increases the bill for the French taxpayer.
Case of a French non-resident owning property in France AND in the Bahamas
For a French person who has become a non-resident, the treatment differs depending on the country where the property is located:
For a property in France sold by a non-resident, the tax is 19% plus social contributions, with a rate that can reach 75% for residents of non-cooperative states or territories (NCST). For a property in the Bahamas, taxation depends on the country of residence; double exemption is possible if the country of residence does not tax foreign capital gains, but the French regime applies if the seller remains a resident of France.
Doctrinal analyses show that the Bahamas appears on the list of non-cooperative states or territories for certain years. This classification mainly affects French taxation of real estate capital gains on properties located in France held by residents of these countries, with a tax rate that can reach 75% on the income tax portion, but the underlying logic illustrates France’s particular sensitivity towards this type of jurisdiction.
Rental income: exemption in the Bahamas, possible taxation in France
Since there is no income tax in the Bahamas, rents received by an owner are not taxed locally as income. However:
There is no classic income tax on rentals, but specific levies (around 7.5%) may apply. The Real Property Tax, higher for rental and commercial properties, constitutes an economic burden on the rental portfolio.
For a French tax resident, rents derived from a Bahamian property must in principle be declared in France as rental income, in the absence of a derogatory treaty. The absence of Bahamian tax does not relieve this obligation, and no treaty tax credit reduces the French tax.
IFI (Real Estate Wealth Tax): the value of Bahamian properties is included in the wealth tax base
Since the transformation of the ISF (Solidarity Tax on Wealth) into the IFI (Real Estate Wealth Tax), France no longer taxes overall financial wealth but focuses on real estate wealth. The entry threshold remains set at €1.3 million in net value as of January 1 of the year, with a progressive scale up to 1.5% for the largest estates.
For a French tax resident, real estate located in the Bahamas is fully included in the IFI base, since in the absence of a specific treaty, France taxes the worldwide real estate values of its residents. The mechanism is as follows:
The owner must assess their Bahamian property at its market value on January 1, convert it into euros, and add it to their other real estate assets. Related debts (e.g., mortgages) are deductible under certain conditions. If the net total of real estate assets exceeds €1.3 million, IFI is due starting from €800,000 according to the progressive scale.
The IFI scale ranges, by brackets, from 0.5% to 1.5%, with reduction mechanisms for estates close to the threshold. No provided text mentions any provision allowing specific exclusion of properties located in the Bahamas from this calculation. For a French person considering a major acquisition in the archipelago, the impact on the IFI is therefore a central parameter.
French declarations and obligations in the presence of a property in the Bahamas
For the French tax authorities, a property held abroad, even in a country without a treaty, remains fully visible and must be declared. The main obligations are as follows:
Declare rental income under the category of property income (forms 2042 and 2044). In case of a sale, declare capital gains under the regime applicable to foreign properties with allowances and possible surtax. If your net real estate wealth exceeds €1.3 million, declare the value of the property for IFI. Finally, mention any foreign bank accounts used to collect rents via the specific form.
The absence of a tax treaty does not in any way alleviate these obligations; on the contrary, it limits the means to mitigate any double taxation.
Coordinating Bahamian taxation and French law: a few strategic benchmarks
Even when strictly staying within the field of factual information, a few guidelines emerge for a French person looking at the Bahamas as a real estate investment ground.
First, locally, taxation is very favorable on flows (rents, capital gains), but relatively heavy on:
– Entry (10% VAT for a foreigner).
– Holding (Real Property Tax, particularly for rental properties and foreign vacant land).
Second, on the French side, the absence of a treaty means:
Income and capital gains from the Bahamas are taxed at French rates, with no possibility of a treaty tax credit. Furthermore, properties located in the Bahamas are fully included in the IFI for French residents.
For a purely wealth-oriented investor, who wants an extended secondary residence and plans very long-term ownership, the scheme can remain interesting, especially if the capital gain is realized after 22 or 30 years (to benefit from French exemptions). Conversely, for a strategy of rapid property turnover or high rental profitability, the overlap of Real Property Tax and French taxation on income and IFI must be carefully calculated.
The presence of the Bahamas on the list of non-cooperative states requires increased vigilance from the French tax authorities, particularly regarding interposed structures and real estate capital gains on French assets held from this territory, necessitating expert tax advice in both Bahamian and French law.
Conclusion: local tax haven, international headache for a French person
On paper, real estate taxation in the Bahamas seems ideal: no income or capital gains tax, no inheritance tax, no wealth tax, and a system based mainly on VAT at acquisition and Real Property Tax on holding. For a Bahamian, or a foreign investor not concerned by French taxation, this framework allows for building real estate wealth with nearly zero tax pressure on flows.
In the absence of a tax treaty between France and the Bahamas, a French tax resident must declare and pay tax in France on rental income and capital gains at French rates, with no treaty tax credit. The value of Bahamian properties is included in the IFI base, and all foreign assets and income must be fully declared.
In practice, Real estate taxation in the Bahamas for French people: local taxes, capital gains, and tax treaty is not about choosing one tax system over the other, but about accepting to deal with both simultaneously, keeping in mind that the local tax haven does not neutralize the reality of French taxation. Only a quantified analysis, integrating Real Property Tax, VAT, French tax on income and capital gains, as well as the IFI, makes it possible to measure whether the Bahamian real estate dream withstands the test of the French tax return.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
