New Bahamas' VAT policy to be implemented on 1st of January 2015
From January 1st, 2015 visitors and residents alike in the Bahamas can expect to be paying more for just about everything as the new VAT bill comes into effect.
While there has been a six month reprieve (VAT of 15% was originally scheduled to be implemented on July 1st 2014), there are still some concerns regarding the new Bahamas VAT bill. The Bahamas is a popular yacht charter destination which depends heavily on tourism and as a result local business people and residents are concerned about how this new VAT bill may impact the industry.
Over the past 20 years the Bahamas government has always required yachts wishing to charter in Bahamian waters to be registered, and have charged a 4% tax on the charter fee which is paid by the charter client. At present it is not believed that this new VAT will lead to a “double taxation” situation.
The proposed VAT policy will be a single rate of 7.5% across the board with the only exception being zero rated exports. Even though the 7.5% rate is a significant reduction on the 15% that was initially proposed by the government, it has still been met with a great deal of unhappiness. One of the reasons for this is that the new VAT policy will have fewer exceptions, the details of which are still yet to be released, which makes it exceptionally difficult for merchants and hospitality providers to fully prepare for the changes.
As businesses are forced to charge 7.5% more on most goods and services, their margins will be squeezed as they seek to remain competitive and retain customers. Amid concerns about implementation the Prime Minister promised that the administrative structures would be in place by October 1st 2014, and that this would be followed by an in depth public education campaign so implementation can be effected on January 1st 2015.
While the politics surrounding the VAT bill are likely to be hotly debated in the coming months, it would appear likely that the bill will be implemented as planned and not be delayed further. Visitors travelling after January 1st 2015, therefore, need to be prepared for the additional 7.5% VAT that will be levied on local goods and services in the Bahamas.