Effective July 1, 2014, a Value Added Tax (VAT) is being introduced in the Bahamas.\u00a0 The VAT will offset reductions in import duty rates and will provide a path to accession to the World Trade Organization and potentially new regional trade agreements.\u00a0 The new VAT rate will be 15% on goods and services.\u00a0 Currently over 130 countries impose VAT with rates ranging between 5% and 27%.\u00a0 In the Caribbean, a number of countries have imposed a VAT including, Trinidad and Tobago, Saint Kitts and Nevus, Guyana and Barbados.<\/p>\n
As the time for implementation quickly approaches, the financial services industry, in the Bahamas, is lobbying for a \u2018zero rated\u2019 status rather than VAT \u2018exempt\u2019.\u00a0 The zero rating would allow the financial services industry to avoid collecting the 15% VAT from their customers, while reclaiming the VAT paid on their input costs.\u00a0 If declared exempt, financial services companies, including banks, would avoid collecting the VAT from customers, but would not be permitted to reclaim the VAT on their input costs.<\/p>\n
An exempt rating could reduce profits, drive costs up and the financial services industry is concerned about losing a competitive advantage.\u00a0 It is relatively certain, however, that services provide to overseas clients would be zero rated since such services are being exported.\u00a0 This means that trust and fund administrators, and attorneys will be zero rated.\u00a0 While banks, as deposit taking institutions are supplying services within the Bahamas and therefore, may therefore be treated as exempt, rather than zero rated.\u00a0 The decision is not yet final, but the Minister of Finance is confident that the impact on the financial services industry will be minimal.<\/p>\n
The significance of the introduction of this VAT should not be understated.\u00a0 Income tax free countries where the financial services industry enjoyed a brisk business for many years are losing the advantage they once held.\u00a0 With the imposition of back breaking withholding tax penalties and the weakening of secrecy laws, these countries now must become more creative and adjust to economic realities.\u00a0 Nevertheless, the Bahamas should continue to grow and maintain its place as a leading offshore jurisdiction.<\/p>\n","protected":false},"excerpt":{"rendered":"
Effective July 1, 2014, a Value Added Tax (VAT) is being introduced in the Bahamas.\u00a0 The VAT will offset reductions in import duty rates and will provide a path to accession to the World Trade Organization and potentially new regional trade agreements.\u00a0 The new VAT rate will be 15% on goods and services.\u00a0 Currently over … Continue reading Introduction of VAT in the Bahamas<\/span>