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A White Paper on Taxation Reform was tabled in Parliament on Wednesday 13 February 2013. Within the proposed package of tax reforms, the Government of The Bahamas (“the Government”) has proposed that a value added tax (“VAT”) be introduced, as of 1 July 2014, at a rate of 15%.
A VAT is a form of consumption tax. Like a sales tax, only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.
The proposed VAT will be applied to every supply of goods or services made in The Bahamas in the course of a taxable activity carried on by a VAT registrant.
A supply of goods includes a sale of goods or a grant of the use or right to use goods, while a supply of services means anything which is not a supply of goods or money.
The supply of goods and services occurs upon the happening of any of the following events:
Entities that are VAT registered (“registrants”) will be obligated to calculate VAT on certain goods and/or services that they supply and must pay the requisite VAT into the Government’s budget.
It is proposed by the Government that the VAT registration threshold for entities be set at an annual turnover at or above $50,000. It is estimated that such a threshold would result in a registrant population of some 3,798 firms in The Bahamas, accounting for fully 98.6% of total turnover in the Bahamian economy.
Reduction of Taxes
To capitalize on the introduction of a VAT, the Government proposes to eliminate current means of taxation:-
Accounting and Records
The proposed VAT legislation will require registrants to issue an invoice for every taxable supply made to another VAT registrant.
A VAT invoice will not be permitted to be issued to an unregistered person; instead a sales receipt must be issued stating clearly the amount of VAT charged.
Registrants will be required to produce information that will enable the Ministry of Finance or any authorized person to determine a registrant’s liabilities and obligations, or the amount of refund to which a person is entitled.
To address concerns that a VAT may adversely affect the distribution of income, the Government has proposed that the following sectors be exempted from imposition of VAT:
For more information concerning the impact and effect of a VAT tax on your sector, please contact John K F Delaney QC at firstname.lastname@example.org.
© Delaney Partners. Published March 09 2013