VAT bill reaches House

Amendments to the Value-Added Tax (VAT) Act were tabled in the House of Assembly yesterday, that would allow for the reduction of VAT from 12 percent to 10 percent and minimize the number of exemptions and zero-rated items under the principal act.

The Value-Added Tax (Amendment) (No.2) Bill, 2021 is scheduled to come into force on January 1, 2022. It removes the zero-rated application from several items known as breadbasket items, including butter, margarine, bread, mayonnaise, mustard, grits, cheese, corned beef, canned fish, soups and broths, fresh milk, evaporated milk, condensed milk, rice, flour, tomato paste, cooking oil, baby formula and baby food, powder detergent, soaps, sanitary napkins and tampons, napkins, and napkin liners for infants.

Additionally, it removes the zero-rated application from medicines and medicinal drugs, the majority of which already attracted VAT.

VAT was introduced at 7.5 percent in 2015 with very limited exemptions.

The Minnis administration increased VAT to 12 percent in 2018 as it attempted to close the deficit gap.

Prime Minister Philip Brave Davis vowed earlier this year to reduce VAT if the Progressive Liberal Party (PLP) won the general election.

“Clause 5 of the bill seeks to amend the third schedule of the principal act by reducing the rate of tax on the portion of real property transactions above $2 million from 12 percent to 10 percent,” the bill reads.

“Clause 6 of the bill seeks to amend the principal act, the regulations and the rules by reducing the standard rate of tax from 12 percent to 10 percent wherever it appears.”

In addition, the bill also makes certain zero-rated services VAT-exempt, including services relating to the use of terminal or berthing facilities by commercial vessels and the storage of goods that have not been entered for home consumption, where the port of origin and the port of destination are not within the territory of The Bahamas; as well as the commission earned as a result of the supply of The Central Bank of The Bahamas digital service.

The importation of replaced or repaired goods will also be exempt from VAT.

The bill also seeks to add a limit on the exemption for the importation of goods by returning residents as a part of accompanied baggage to goods that fall within the resident’s duty exemption.

Additionally, the bill adds financial services to the list of zero-rated professional services when the benefit or advantage of those services are outside The Bahamas.

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