Tax Changes

A Comprehensive Overview

Below is a comprehensive list of all the tax changes in the new Budget by tax category. They include reductions in customs duties on frequently imported items, fee increases for boaters in the pleasure cruising industry and the enforcement of VAT on the vacation home rental properties. 

Duty reductions to frequently imported items (effective July 1, 2019):

  • Duty removed from musical instruments
  • Home Refrigerators of 18 cubic feet or smaller (to become duty free)
  • Home Stoves that are 30 inches wide or smaller (to become duty free) 
  • Garbage Can Liners (from 45 percent to 25 percent)
  • Fire Extinguishers (from 45 percent to free)
  • Flashlights (from 45 percent to 25 percent)
  • Pens (from 10 percent to free)
  • Pencils (from 10 percent to free)
  • Crayons (from 10 percent to free)
  • Sharpeners (from 45 percent to free)
  • School Rulers (from 10 percent to free)
  • Chart Paper (from 20 percent to free)
  • Projectors (from 45 percent to 35 percent)
  • Projector Screens (from 45 percent to 35 percent)
  • Radios (from 45 percent to 35 percent)
  • Pots/Pans (from 45 percent to 25 percent)
  • And all Household Furniture (from 45 percent to 25 percent)

Duty Concession changes include:

  • Allowing trailers for commercial fishing boats to be eligible for duty exemption.
  • Amending the Spirits and Beer Manufacture Act (Ch. 373) to reduce the minimum bushel requirement for production, to now make microbreweries eligible for import duty concessions.

Environmental Measures:

In keeping with the Government’s planned ban on plastic by January 2020 and overall environmental sustainability policy agenda, the new environmental measures include:

  • Reducing the duty on new vehicles between 1.5 liters (1500cc) and 2.0 liters (2000cc) valued at $50,000 or less from 65 percent to 45 percent.  In this context, only cars with less than 200 miles on the odometer will be considered ‘new’.  This makes smaller, more fuel efficient vehicles more affordable.
  • Harmonizing the rates on all new electric and hybrid vehicles valued up to $50,000 to 10 percent. It should be noted here that this measure will have a sunset clause of 5 years, after which this special revision will revert closer to the rates for other small size vehicles. 
  • Increasing the duty on biodegradable and compostable plastic shopping bags, from 5 percent to 45 percent; but at the same time, reducing the duty on reusable cloth shopping bags from 30 percent to 5 percent.
     

Vacation Home Rentals
Online marketplaces that advertise and facilitate vacation rentals in The Bahamas will now be required to pay VAT on their rental and related sales in The Bahamas.  

VAT Zero-Rated Utilities
The Government's provision to make utility expenses VAT zero-rated is now permanant for Light Bills under $300 and Water Bills under $50 per billing cycle. As of March 2019, over 23,500 households have benefitted from the elimination of VAT from these utilities.

Realty Transactions
The Government will amend the Stamp Tax Act, and VAT Act accordingly, to reflect that realty transactions will now attract VAT as opposed to Stamp Tax, albeit at the same 2.5 percent and 10 percent rates currently attracted for real estate transactions.

Further, to facilitate appropriate estate planning, gifts of real property to immediate family for purposes of legitimate estate planning will not attract the realty VAT tax, with the proviso that the tax will become payable if the recipient seeks to sell the property within seven years of receipt. 

Realty Transactions
The Government will amend the Stamp Tax Act, and VAT Act accordingly, to reflect that realty transactions will now attract VAT as opposed to Stamp Tax, albeit at the same 2.5 percent and 10 percent rates currently attracted for real estate transactions.

RPT Cap on Owner Occupied Residences
In the Real Property Tax Act, the Government has increased the current cap on Real Property Tax payments of those classified under “owner occupied” residences from $50,000 to $60,000 per annum so as to augment revenue capture for higher end properties. 
 

Cruising Permit Fees
Fees will  increase from $150 on boats up to 34’ and $300 on boats 35’ and over, to a set of rates based on size and length of stay ranging from $150 per 3 months to $4,000 per year. These rates will become effective January 1st 2020, so as to allow a transition period for the boating industry. 

Financial Services Sector Fees
In an effort to alleviate the notion of ring fencing, all banks—including both domestic and what used to be offshore banks—will no longer be subject to Business Licence fees. Instead, moving forward, all banks will be subject to supervisory fees and charges; those  with Bahamian dollar liabilities of over $100 million will incur a Domestic Systemically Important Institution (DSII) levy of 0.3 percent per annum on the leviable amount, which will be payable to the Central Bank of The Bahamas.

The Government is also reforming the calculation for annual supervision levies and other fees. This will allow for the better matching of costs to levies without significantly changing the charges to the individual banks subject to the levies.  Thus, with these changes, both domestic and offshore banks will be treated the same, with no preferential treatment given to the latter, while adhering to international best practices.

Export Turnover Exempt from Business Licence
The Government has adjusted the definition of "turnover" for the purpose of calculating Business Licence Tax to separate export turnover. Export turnover is revenue generated from services delivered to clients where the benefit is outside of The Bahamas. This revenue will no longer be taxed for Business Licence purposes. This streamlines the administration of export turnover, as these funds are also VAT zero-rated. 

This policy is consistent with recent legislative changes to level the playing field for Bahamians in removing preferential exemptions for non-residents. It reflects a broader policy of incentivizing the export of services across the board for all Bahamians. That includes export of services such as accounting services, legal services, information technology services, management consulting services, and of course, financial services, just to name a few.

Our Government has ushered in a new era of sound, transparent and responsible fiscal management, supplemented by a broad spectrum of critical and transformational structural reforms that will set a proper and stable foundation for sustained private sector-led economic growth and job creation."