The tax announcement:
The Bahamas announced changes to taxation on yacht charters. Any contract signed after the 1st July 2022 is subject to the new 10% VAT in addition to the already existing 4% Bahamian tax.
Chartering in the Bahamas before the new tax announcement:
Before the tax announcement changes, the Bahamas had grown in popularity as a yacht charter destination. Over the years, it has become a place many consider to be ‘a yacht’s paradise’ with bright sandy beaches and up to 700 uninhabited islands.
VAT became a requirement for all companies conducting business in the Bahamas. Charter yachts had a long period of exemption from this enforcement.
As the islands of the Bahamas are increasingly developing their infrastructure and economy, universal tax compliance is the best way forward. This will help create a more level playing field for all charter and water-based tour and excursion operators who not only pay VAT but Business Licence fees, NIB contributions and Immigration fees that their foreign counterparts do not.
Prior to the changes in the tax announcement and after the COVID pandemic in 2020, the Bahamas recorded that the tourism sector, particularly the yachting industry, was one of the first to reopen. For the first time in 30 years, they had welcomed more yachts than their counterparts, the Caribbean. Due to the poor regulation and lack of priority over the yachting industry the Bahamas were unable to benefit from this. Having analysed the yachting industry the following year it was apparent that yachts were now going back to Antigua and the Caribbean. In order for them to keep earning from this business, the government decided to take immediate action leading them to make the tax announcement, a decision that they thought to be the best.
What it means for yachts going to the Bahamas now:
Considering the Bahamas had been a destination yachts could visit without fear of much taxation while still enjoying the benefits, some people fear this new taxation might drive them to other Caribbean countries imposing little to no tax. What differentiates the Bahamas from these other countries is not necessarily spectacular. Yachts and Charterers may prefer to go someplace where they can offset their operating costs than paying this tax in the Bahamas.
Despite there being a high chance the 10% VAT will be paid by guests, it still depends on the price of chartering a yacht in other similar locations such as the Caribbean and other close foreign counterparts. For example, finding out that the same type and sized yacht in the Bahamas is $10,000 more than that in the Caribbean, they may choose the Caribbean.