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Bahamas Refines Guidance For New VAT Regime

by Mike Godfrey, Tax-News.com, Washington

18 November 2014


The Bahamas Ministry of Finance and VAT Department have announced that they are to revise the main value-added tax (VAT) guide and sector-specific guidance notes based on private sector feedback. The new regime will be introduced from January 1, 2015.

"We want to ensure that the private sector receives ongoing clarity about the VAT framework. The next version of the sector-specific guidance notes and the general VAT Guide will do this," a spokesperson for the Ministry said. "In addition we will introduce the first set of detailed guidance on pricing, accounting, and record-keeping."

The spokesperson said amended VAT regulations are now ready for promulgation, once final sign-off is received from the Cabinet.

The Government said that, in any revision to the rules, the international financial and professional services sectors will remain "unequivocally" zero-rated. It said guidance notes for the financial sector will reinforce the zero-rated treatment of products and professional services supplied in the international sector. VAT will not be charged on the end range of these products and services provided to non-resident clients.

"We will continue to provide the clarity that is needed to ensure there is complete understanding that VAT is not supposed to be passed along in the prices for products and professional services that are considered exports in the context of the offshore or international sector."

It has further clarified that income-producing homes and condos may qualify as commercial investments. The VAT Department said that for local real estate services, even when these are supplied to non-residents, VAT would always apply as the benefit of the services are considered to be received in the Bahamas.

However some non-residents have permission to hold real estate as income-producing investments. Under the VAT legislation, these holdings will qualify as commercial properties. These properties would always be required to register and charge VAT if annual earnings exceed the USD100,000 threshold. Once they meet and satisfy the registration requirements, they will also qualify for input tax credits.

Another clarification for real estate is that transfers of commercial property will only be subject to VAT on legal fees and commission, and not the stamped conveyances. This will remain the practice until stamp tax on conveyances is reduced or eliminated, the Government said.

Next, for the hotel industry, authorities seek to address inquiries from hoteliers regarding how to transition from the hotel occupancy tax to the VAT. As of January 2015, all stays in hotels and holiday rental properties will be subject to VAT, instead of the room tax.

"We have worked with the Bahamas Hotel and Tourism Association (BHTA) to grandfather hotel packages secured before September to remain subject to the occupancy tax that was paid with the reservation. As properties complete their VAT registration, they are also permitted to advertise and book the VAT for 2015 stays."

The VAT Department is immediately allowing VAT registrants to adopt this practice, so as to minimize VAT-related adjustments when guests check out from properties in 2015. In the meantime, the Ministry of Finance said it is working closely with the hotel sector to notify online and foreign travel agencies of the pending introduction of VAT.

TAGS: Finance | Currency | VAT tax authority guidance | tax | investment | Bahamas | VAT legislation | accounting | fees | tax authority | offshore | legislation | regulation | services

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