Exploring the Impact of Bahamas VAT on Private Island Activities
The Bahamas has introduced a Value Added Tax (VAT) on goods and services purchased by passengers on cruise lines’ private islands. The change, which is scheduled to take effect from March 1, 2024, aims to address the competitive disadvantage faced by Bahamian-owned companies, as the private islands previously did not attract VAT. This discrepancy in taxation has been a point of contention, as it allowed cruise lines to offer lower prices compared to their Bahamian counterparts.
The Department of Inland Revenue’s guidance outlines the new VAT treatment, mandating a standard 10% VAT rate on all transactions within Bahamian territory, including private islands. This ends a a 9-year VAT exemption that will affect notable tourist destinations operated by companies like Royal Caribbean and Disney Cruise Lines, encompassing a variety of services offered on private islands, such as cabana rentals and recreational activities.
Cruise lines operating in the Bahamas must register for VAT if they own a private island or surpass $100,000 in annual taxable sales.
While the imposition of VAT is likely to increase the total price charged to customers, the government’s stance remains firm on establishing tax equity. This policy shift represents a significant development for the Bahamian tourism sector, ensuring that all entities, whether on land or at sea, contribute to the nation’s economy.
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