Pretino P. Albury
Partner
Compliance challenges of Bahamas Business Licence Act
October 15, 2024
On 1 July 2023, The Bahamas introduced significant regulatory changes with the Business Licence Act 2023, imposing new compliance requirements on businesses, particularly in key sectors. The first year of the legislation has exposed significant compliance gaps in mid-market businesses, creating an audit bottleneck.
Pretino Albury, Partner at Kreston Bahamas and President of the Bahamas Institute of Chartered Accountants (BICA), explains the challenges the update has uncovered.
Businesses affected
The amendments to the Business Licence Act specifically address large companies with annual revenues of $5 million or more, which represent about 1% of business licence registrants. These reforms aim to ensure that the largest businesses are taxed appropriately, while 91% of smaller businesses— those reporting revenues under $100,000—remain unaffected by these changes.
Increased scrutiny
By the first quarter of 2024, officials at The Department of Inland Revenue (DIR) reported that up to 20% of Business Licence filings were under additional scrutiny. Albury noted the strain this put on the system, stating: “The audits revealed internal control and process deficiencies in many businesses, especially private companies that had outdated practices.”
Challenges with initial compliance and audits
During the rollout, businesses encountered significant difficulties, particularly with the mandatory audit requirements. “BICA and the Bahamas Chamber of Commerce urged for a delay in mandatory audits, citing a lack of preparedness among businesses and the accounting profession,” Albury explained. Although a one-year delay was denied, the DIR granted a six-month extension for audits, with a new deadline of 30 June 2024.
However, even with the extension, many companies struggled to meet the deadline, leading to an overwhelming number of requests for additional time. “Approximately 75% of companies required further extensions, justifying our initial request for a longer delay,” Albury added. As a result, audits extended into October and November 2024, far beyond the initial April deadline.
Internal control deficiencies
The audit process uncovered significant deficiencies in internal controls across a range of businesses. “Many companies were still using outdated accounting methods from 15 to 20 years ago, and some were not compliant with International Financial Reporting Standards (IFRS),” Albury stated. This was particularly true for private companies, many of which had not previously faced such stringent oversight. “The findings were a wake-up call for larger companies in particular,” he added.
Positive steps
Despite these challenges, the audits also provided opportunities for improvement. Auditors made recommendations to strengthen systems and processes, leading to long-term enhancements. “These findings, though surprising to many businesses, have Bahamas Business Licence Act throws mid-market a compliance challenge resulted in significant recommended remedies,” Albury commented. If implemented, these changes are expected to have a lasting positive impact on business operations and compliance.
Future deadlines
Looking ahead, concerns about future audit deadlines persist. BICA is recommending another extension for the 2025 filing period, proposing that the deadline be moved from April to June. “We anticipate that another year of mandatory audits will put pressure on both accountants and businesses,” Albury warned. However, he remains optimistic: “While businesses and accountants have faced challenges, the process has led to positive recommendations, ensuring better preparedness in the coming years.” Albury concluded: “The real test will be determining whether these audits increase business licence revenue or confirm that companies were already compliant.
