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6 July 2018

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The Bahamas Publishes Updated VAT Guidance Including on Transition for Rate Increase

The Bahamas Department of Inland Revenue has published new VAT guides reflecting the increase in the VAT rate from 7.5% to 12.0% and other VAT changes effective 1 July as provided for in the 2018/19 Budget. One of the key guides regarding the increased rate is VAT Guidance on Transitional Arrangements. The guide includes that:

  • For contracts for the provision of goods or services entered into before the transition date (1 July) that have not been performed before that date, the supply is subject to the increased rate, with the supplier responsible for making the adjustment, recovering the increased amount, and accounting for the adjustment in the first return submitted following the adjustment;
  • For contracts entered into before the transition date which have not been performed before that date and the supply is now entitled to an exemption or zero-rating, the supplier is responsible for refunding the appropriate amount and adjusting the VAT return accordingly; and
  • Where part of a supply is made before the transition date and part of the supply is made after, the supplier should charge and collect VAT based on the relevant proportion of the supply pre and post 1 July 2018.

The guide also covers special provisions for certain industries. This includes that:

  • For construction contractors, if a contract is in process, no VAT adjustment is required as long as the contract is entered into and commenced by 31 July 2018 and the contract is completed by 28 February 2019;
  • For developers, transactions involving the sale or purchase of real property are exempt from VAT as of 1 July 2018, although such transactions are now subject to stamp tax;
  • For retailers, all items subject to VAT must be charged at the increased rate from 1 July, but certain transitional measures may be taken up to 31 August 2018, such as keeping unchanged price tags while clearly displaying signs indicating that price tags may be pre-July prices and any adjustments will happen at the register;
  • For hotels and resorts, the 7.5% rate may continue to apply up to 30 September 2018, subject to certain conditions, including that a booking is made and invoiced by 30 September 2018 in relation to stays completed by 30 June 2019, while bookings made by 31 July 2018 may be subject to the 7.5% VAT rate regardless of when the service is expected to be rendered (if booking is changed, 12% VAT will apply); and
  • For insurance premiums, all existing policies for a period through 30 June 2019 will remain subject to the 7.5% rate, while any new contracts entered into on or after 1 July 2018 are subject to the 12.0% rate or are exempt in the case of insurance premiums on owner-occupied dwellings, as well as premiums on life Insurance, annuities, or saving products.

The other updated guidance includes the General VAT Guide and VAT Guidance on the Cash Accounting and Flat Rate Schemes.

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