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Bahamas: Parliament to Consider VAT Legislation

(Aug. 14, 2014) The Government of the Bahamas proposed new legislation on value-added tax on July 23, 2014; parliament is expected to consider the Value Added Tax Bill 2014 when it reconvenes in late August. (VAT Bill and Regulations (July 23, 2014), Government of Bahamas website [click on “Value Added Tax” and then on “Value Added Tax Bill and Regulations”]; Janne-Eve d’Auvergne, Bahamas: VAT Legislation Presented to Parliament, TAX NEWS SERVICE (Aug. 11, 2014), International Bureau of Fiscal Documentation online subscription database.)

The proposal would impose a VAT of 7.5%, beginning on January 1, 2015. Prices would have to be listed with the VAT amount included. Furthermore, if passed, the legislation would require companies with annual turnovers of at least BSD100,000 (about US$99,500) to register with the Ministry of Finance’s VAT Department, which is established in the bill as the unit to administer the tax. (d’Auvergne, supra; VAT Bill, § 12.) Related companies will be able to register once as a group. (d’Auvergne, supra.) The Ministry has published a guide to the VAT program that will be updated as policies evolve. (The Bahamas VAT Guide (July 30, 2014), Ministry of Finance website.)

Services Exemptions Planned

No goods will be exempt from VAT, but exports and some services will not be subject to the tax. The exempt services include:

· financial services such as bank-provided credit and deposit and savings plans, plus policies and annuities offered by insurance companies;
· other insurance products will be exempt only until June 30, 2015;
· tuition for educational services from pre-school through graduate-level study (but not other costs associated with education such as books and other materials);
· sale or rental of dwellings or land;
· services by government bodies that are connected with a taxable activity, if the amount involved is nominal or is not intended to recover the cost of the government service;
· day care or after-school care services;
· care for those who are elderly, indigent, or handicapped;
· health services provided to patients without cost at public facilities;
· services provided by a religious institution; and
· charitable services offered by a recognized charitable organization. (d’Auvergne, supra.)

VAT Processing

VAT tax returns must be filed within 28 days of the end of the reporting period. Those companies with a turnover of less than BSD400,000 may use a simplified return process based on a “flat-rate scheme.” The tax due will be either a set percentage of cash sales or input and output taxes based on cash receipts or cash payments. If a business files returns on a monthly basis, that business will receive any returns due to it in about two months. Some businesses, including those that file less frequently and those selling supplies for which the VAT is rated as zero, can request any refunds due them at the time that they file. (Id.) Diplomatic missions and international organizations may receive VAT refunds for some taxed transactions. (VAT Bill, § 8.) Taxes that are paid later than their due date are subject to interest charges. (Id. § 11.)

Comment by Minister

Minister for Financial Services and Investments Ryan Pinder welcomed the VAT proposal, stating, “[t]he VAT legislation will help us stimulate greater market access and greater trade. Duty rates on goods are going to proportionally decrease so that cost of goods shouldn’t be an inflationary aspect.” (Value Added Tax Bahamas, Government of Bahamas website (last visited Aug. 13, 2014) [click on “Value Added Tax”].)