Bahamas to introduce 15% VAT - but financial services to be exempt

The Bahamas is to introduce VAT in its 2014 budget.  From 1 July 2014 the government will impose a 15% sales tax to offset reductions in hotel occupancy tax and import duty as a result of the country joining the World Trade Organization.

The Bahamas is facing an increasing budget deficit, a stagnant economy and high unemployment.  In addition to the imposition of VAT, the country’s finance minister plans to cut government spending by 10% and introduce a range of austerity measures. 

A broad range of goods and services will be subject to the new tax, which is described as a consolidation of the country’s finances, but there will be some exemptions, including for the provision of financial services.

The changes are expected to affect around 3,800 local businesses which will have to file VAT returns and pay the tax they collect from customers on a monthly basis, based on the proposed threshold for the VAT regime of $50,000.