Wednesday, June 5, 2019
The Bahamas announced a number of significant reforms in its 2019/20 Budget, released on May 29, 2019, including a new tax on banks, which will replace annual fees, and new VAT obligations on online marketplaces and the removal of VAT on exported services.
The Budget announces that all banks will no longer be subject to business licence fees. Instead, moving forward, all banks will be subject to supervisory fees and charges, and those with Bahamian dollar liabilities of over USD100m will incur a Domestic Systemically Important Institution (DSII) levy of 0.3 percent per year, which will be payable to the Central Bank of The Bahamas. The Government released no further details on the regime but said the new structure will result in a marginal increase in fees and tax from banks.
The Budget further announced that all online marketplaces that advertise and facilitate vacation rentals in The Bahamas will now be required to pay VAT on their rental and related sales to consumers in The Bahamas.
Further, the Government is proposing that exported services – accounting services, legal services, information technology services, management consulting services, and financial services, etc. – are no longer subject to VAT, to create opportunities for local services providers.
The tax burden on real-estate transactions will increase marginally. Through changes to the Real Property Tax Act, the Government will increase the current cap on Real Property Tax payments of those classified under "owner occupied" residences from USD50,000 to USD60,000 per year.
In addition, the Government intends to amend the Stamp Tax Act and VAT Act to bring realty transactions under the charge to VAT, as opposed to stamp tax, at the same rates as under the stamp tax: 2.5 percent or 10 percent. 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 purchase.
Meanwhile, the Government has announced trade tariff relief for a number of household appliances and stationary.
Finally, the Government has announced reforms to the vehicle tax regime, the introduction of a new, single tax commission to oversee all taxation appeals, and a proposal to allow businesses greater flexibility on the date on which they may apply for, and pay for business licenses.