Bahamas - Indirect Tax Guide

Nearly all domestic supplies of goods and services are taxable at the standard rate of 12 percent.
Exports, most services to non-residents and certain international services are typically zero-rated.
A supply of the assets of a business as a going concern will usually qualify for zero-rating.
Certain enumerated 'bread basket' food items, medicines and drugs are zero-rated as of 1 August 2018.
Exemptions exist for: certain medical services supplied by a public healthcare facility to a public patient; tuition and certain related fees; residential rents; supplies of real property; supplies by charities; and certain domestic financial services unless provided for a specific fee.

What are the standard or other rates (i.e. reduced rate) for VAT/GST and other indirect taxes?

VAT: 0 percent (zero-rated), and 12 percent (standard rate). Note that a standard rate of 7.5 percent was effective 1 January 2015 to 30 June 2018.
Stamp duty: 1 percent to 10 percent of the value of the instrument or transaction. Certain other transactions have a fixed amount such as 0.40 Bahamian dollars (BSD) per check or bank withdrawal.
Business license: ranges from flat fee of BSD100 to 3 percent depending on industry and total revenues.
Real property tax: rate varies according to market value of property and whether it is residential or commercial property. Broad exemptions also exist depending on the location, ownership and whether the property is developed or undeveloped.
Residential: exempt for the first BSD250,000 of property value; 0.625 percent for the next BSD250,000 of property value and 1 percent on the remaining value. Multi-unit residential dwellings (four units or less) pay BSD300 flat fee on the first BSD75,000 value and 0.625 percent on remaining value.
Commercial: (includes multi-unit residential dwellings of more than four units) 0.75 to 2.0 percent of market value.

VAT/GST registration

Who is required to register for VAT/GST and other indirect taxes?

Private individuals/legal entities/permanent establishments carrying on taxable activities from within the Bahamas with annual turnover in excess of BSD100,000.
Persons providing telecommunications services or electronic commerce for the use, enjoyment, benefit or advantage of persons within the Bahamas.

Is voluntary registration for VAT/GST and other indirect taxes possible for an overseas company (e.g. if the annual turnover is below the relevant VAT/GST and other indirect taxes registration threshold)?

No, VAT registration is not possible without a fixed place of abode in the Bahamas. If the company (branch) carries on taxable activities in the country in excess of the turnover threshold (BSD100,000), VAT registration is mandatory. An exception to the fixed place requirement is made for non-resident persons providing telecommunications services or electronic commerce. Such persons must register if selling BSD100,000 annually into the Bahamas.

Are there any simplifications that could avoid the need for an overseas company to register for VAT?

No.

Does an overseas company need to appoint a fiscal representative?

No, but the VAT comptroller has the power to declare a representative for purposes of administration or enforcement of the act.

Which forms and supporting documentation does an overseas company need to submit for VAT/GST and other indirect tax registrations?

VAT registrants must obtain a taxpayer identification number (TIN) prior to applying for a VAT registration.

Is grouping* for VAT/GST and other indirect taxes possible?

Yes, for VAT. However, grouping is not allowed between a resident and non-resident entity or between an entity that holds a Grand Bahama Port Authority license and one that does not.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

VAT: Monthly for annual turnover above BSD5 million; quarterly for annual turnover below BSD5 million; semi-annually for annual turnover below BSD400,000 (optional: must apply to the Comptroller).
Stamp duty: per transaction/instrument.
Business license: annually.
Real property: annually.

What are the exchange rate rules in your country?

Not applicable.

International Supplies of Goods and Services

Exports – Goods

How are exports of goods treated?

Zero-rated.

Exports – Services

How are exports of services treated for VAT/GST purposes?

Most services to non-residents are zero-rated unless they are in respect of real property located in The Bahamas. To be zero-rated, the benefit or advantage must be outside The Bahamas.

Imports – Goods

How are goods dealt with on importation?

VAT applies on the landed cost of goods imported into The Bahamas. Landed cost includes the property value, actual duty, processing fees, storage, insurance, freight, environmental levies and other local charges.

Imports – Services

How services brought in from abroad treated for VAT purposes?

A VAT registrant must self-report the VAT on the value of imported services.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Yes: Grand Bahama Port Authority licensees; a diplomatic mission or international organization, and eligible staff members for certain qualifying goods or services; approved charitable organizations for certain qualifying goods or services.

Are there any restrictions to the deduction of input VAT?

Yes, VAT on expenses or purchases related to VAT-exempt income may not be recovered. Personal use items such as meals and entertainment, memberships in recreational clubs, cell phones and certain motor vehicles.

Tax Points

When is VAT/GST due on a supply of goods or services?

VAT is generally due on the date of payment or date of invoice, whichever is earlier.

Invoices

Is a business required to issue tax invoices?

Yes.

Is it possible/mandatory to issue invoices electronically?

Yes.

Is it possible for the vendor to issue an invoice (i.e. is self-billing possible)?

No.

Record-Keeping Requirements

How long must records and invoices be retained?

Records must be kept for a period of five years after the end of the tax-reporting period.

Audits

Do tax audits take place on a regular basis?

Yes, at the discretion of the VAT comptroller.

Are audits done electronically in your country (e-audit)? If so, what system is in use?

No.

What penalties can arise from non-compliance?

Penalties are classified as minor, serious or very serious. Non-compliance can be subject to penalties of up to BSD150,000 and/or imprisonment.

Special Indirect tax rules

Are there any special rules for the sale of a company by one taxpayer to another where VAT is not due on the sale?

Yes, in general, the sale of shares or capital and any other company reorganization is not subject to VAT. Where a company sells its assets and liabilities (without involving a transfer of shares or capital), the sale may qualify for zero-rated status.

Are there unique specific indirect tax rules that you would not expect to find in ‘standard’ VAT jurisdictions?

Retail businesses must display prices as VAT-inclusive but show the VAT separately on their VAT sales receipts or VAT invoices.
Businesses with turnover of less than BSD1 million may use a cash method of accounting when reporting their VAT without applying for approval from the VAT comptroller. All other businesses must follow the accrual method.
Businesses must self-report VAT on taxable supplies made free of charge or for less than fair value, such as complementary meals or hotel rooms.
Startup businesses may apply to register for VAT and file VAT returns for inputs relating to construction and startup costs. However, VAT refunds are not paid until the business commences making taxable supplies.

Does a reverse charge mechanism apply for goods or services?

Yes, on all imported services.

Are there indirect tax incentives available (e.g. reduced rates, tax holidays)?

A VAT deferral mechanism is available under the Hotel Encouragement Act. This deferral allows an approved startup business to avoid paying VAT on imports by self-declaring the import VAT on their VAT returns and claiming input VAT at the same time.

Rulings

Are rulings and decisions issued by the tax authorities publicly available?

Yes, VAT rulings by the VAT Comptroller have the force of law under the VAT Act.

For further information please contact

Jane Adams
Director
KPMG in Bahamas
T: +1 242 394 9975
E: janeadams1@kpmg.com.bs

Footnotes

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).