Monday, June 2, 2014
Monday, June 2, 2014
The Bahamas is to introduce a value-added tax regime with a 7.5 percent headline rate from January 1, 2015, according to the territory’s latest Budget for 2014/15, released on May 28, 2014. As well as delaying implementation for three months until January 1, 2015, the rate is halved from earlier proposals for a 15 percent headline rate, and the regime will include fewer exemptions.
After taking on advice from international experts, The Bahamas will instead adopt a simpler regime featuring a single rate with only exports to be zero rated. Fewer exemptions are to be allowed, and a list of such is to be released by the Government shortly.
Input was received from the International Development Bank, the International Monetary Fund, a private sector company commissioned to provide a report on VAT impacts, and the advice of two New Zealand VAT experts. The Government agreed with the recommendations that the economy is too fragile to sustain the 15 percent headline rate previously proposed. In addition, taking on advice from the New Zealand experts, it has agreed that providing numerous exemptions would be an ineffective method of administering tax relief for those on low incomes, and that social transfers would be a more effective way of providing tax relief.
According to the Government, a three-month extension will allow for more time to educate taxpayers about the changes and for businesses to prepare. It said that authorities were ready to implement the regime from October 1, 2014, but that it had decided to accept advice that it should be deferred.
Other salient announcements in the Budget included that The Bahamas will require businesses to display VAT-inclusive prices, after previously proposing that VAT would not be included in selling prices. The Government has also announced that it will introduce a cash accounting special scheme for small businesses, and will seek to simplify procedures for obtaining tax credits against bad debts, and to streamline the VAT refund process generally.