FAQ's - VAT

1. What is VAT?
VAT, or Value Added Tax, is a consumption based tax charged on most goods or services locally bought or rendered.

2. Why VAT?
VAT is a stable tax reform that must be supplied in order to create and maintain an ample revenue stream. The increase of debt is an issue that must be detained, along with the realization that past customs activities, along with the decrease in custom duties, are inadequate forms of governmental income. The staged collection process of
VAT will allow a safe and effective form of tax passage and will provide sufficient funding to future government activities as well economic and population expansions.

3. What is the rate of VAT?
The standard rate of VAT for most goods and services is 10%. Some goods and services are zero-rated, i.e. a 0% rate of VAT applies to them, and some are exempt. A list of exempt supplies can be found in the VAT Act.

4. Who pays VAT?
All consumers pay VAT. The VAT collected by businesses will be paid to the government.

1. Should I register for VAT?
You are required to register for and charge VAT under the VAT Act if your past or future 12 months of taxable activity exceeds the $100,000 threshold. Most businesses must apply within 14 days of meeting these requirements or face penalties. For more information about registration, review the VAT Guidance for Registration.

2. How do I apply for VAT registration?
You can apply online at vat.revenue.gov.bs You can also create and manage your VAT account via the address.

3. Can I register even if my business does not exceed the $100,000 threshold?
Yes, you can choose to register voluntarily. You will be required to fulfill all of the obligations of a Mandatory Registrant. Before you are approved, you will have to provide the Controller with the following evidence:

1. A fixed placed where business is conducted.
2. That the business carries on or intends to carry on a taxable activity
3. The ability to keep proper records of accounts; and
4. That you are able and willing to submit regular and reliable VAT returns.

4. Why should I register if I do not meet the threshold?
Although you do not meet the threshold, registering for VAT will place you in the position to legally charge and collect VAT as well as receive refunds on any VAT you may have encountered on the purchases of supplies for your business.

5. I have several companies. Do I have to register all of them?
Yes, you must register all the companies separately. If the companies are related to each other by way of ownership you may apply for “VAT Grouping” if desired. For example, a parent company with separate legal entities (subsidiaries) may be conducting different line of businesses that can be grouped.

6. What is VAT grouping?
VAT grouping is a privilege that must be approved by the Controller that permits a group of related entities (companies or partnerships) to apply to be treated as a single taxable person for VAT purposes. All companies must be registered separately before applying for grouping.
There are, however, some conditions that must be satisfied in order to be approved and operate as a group. For example, only companies can be grouped and they may not comprise a mix of Freeport licensees and non Freeport licensees, unless they have received or agreed to a similar VAT treatment for all inputs and outputs. Group members must also have at least 51% common ownership via other group members or a common parent company, be supported by shared operating services and qualify to declare consolidated financial statements.
Further information is available in The Bahamas General VAT Guide.

7. What happens if my application is not approved?
If your application is not approved, you will get an email notification stating the reason(s) for such within 21 days of submittal. Once the stated reason(s) is/are resolved, you can resubmit your request for consideration.

8. Can I have someone manage my VAT Account?
An employee or an appointed representative (e.g. external accountant or business advisor) may submit a registration form on your behalf and may be given delegated responsibility to manage your account or aspects of your account (e.g. file returns only).

9. Can I cancel or suspend my registration?
You can apply to cancel your VAT registration on the following conditions:

1. You have ceased conducting taxable activities.
2. Your taxable sales activity has fallen below the threshold during the twelve months preceding the request for cancellation;
3. You anticipate that the threshold will not be met in the next twelve months following the request for cancellation; and
4. A minimum of two years has elapsed since the effective date of registration.
5. For administrative purposes, the Department of Inland Revenue will use a threshold for de-registration of $80,000 per annum.

Once your request has been submitted, the Controller has 14 days to respond.

10. What is the difference between a VAT Certificate and a TIN Certificate?
A VAT Certificate is a document that allows a registrant to charge and collect VAT as well as receive refunds where the amount of input VAT has exceeded the amount of output VAT. A TIN Certificate does not allow a registrant to charge and collect VAT however they are eligible to receive refunds. TIN Certificates maybe be required by
persons or businesses that carry out business with The Government.

11. What are my responsibilities as a VAT registrant?
All VAT registrants, including voluntary registrants, must display their VAT Certificates prominently, display VAT inclusive prices at the retail level, issue valid invoices and receipts, maintain proper accounts and records, file accurate and timely VAT returns, and remit the net VAT collected (output minus input VAT) to the government within the stipulated deadlines.

12. What do I charge VAT on?
VAT is charged on all goods and services that are not zero-rated or exempt.

13. Will VAT increase my business costs?
As a VAT registrant, VAT is not a cost to your business, because you can reclaim input VAT paid on purchases made for the provision of taxable goods and services.

14. Do I include VAT in the displayed prices of goods?
Yes: at the retail level. All retail price displays must include VAT. You must also clearly display a sign that states that your prices are subject to VAT. Restaurants with dine-in table service, however, may publish menus with the VAT exclusive price and the amount of VAT shown separately. Please refer to the VAT Guidance for Retail and Wholesale Sectorsfor more information.

15. How do consumers know that I can charge VAT?
Consumers know that your business can charge VAT once you have a VAT Registration Certificate displayed at your business premises and are able to display a verifiable TIN on VAT receipts. Consumers can also view the VAT registry on the department’s website www.inlandrevenue.finance.gov.bs/VATRegistrantsList or call the Helpdesk Hotline at
225-7280 (toll free) to inquire as to whether a particular business is registered for VAT.

16. What is a VAT Sales Receipt?
The VAT receipt provides evidence of the unique identity of the seller and of the amount of tax charged on the goods or services. It is given by a VAT registrant supplier to a recipient who is not registered for VAT, indicating that a sale was made or service rendered. The business’ name, address, TIN and the total amount of VAT must be clearly shown on the receipt. Prices of each item on the receipt may be VAT inclusive or exclusive.

17. What is a VAT invoice?
A VAT invoice is issued by a VAT registered supplier to a VAT registered recipient indicating that a taxable supply has been made and that the tax has been charged on the value of the goods or services supplied. In addition to the information supplied on a tax receipt it must also include the TIN and name of the recipient. It is the principal evidence that supports a registrant recipient’s claim for deduction of input tax. VAT invoices may also be given to taxpayers who may qualify for a VAT refund such as Embassies, Charities and International Organizations.

18. How do I account for VAT?
You should integrate all record keeping for VAT into your accounting systems. For less computerized systems it is recommended that you use worksheets or ledgers to record daily sales and purchases, the amount of tax you charged and the amount of tax you have been charged. Maintaining a running total of this information in each period will help you complete your tax return. For details on how to account for VAT, review the VAT Guidance on Accounting for VAT.

19. Do I need to keep records on VAT transactions?
Yes, as a VAT registrant, you are required to keep all records and accounts of VAT paid on purchases and VAT collected from sales for a period of five years. These records should be kept in English and made available to the Department of Inland Revenue on demand.

20. What is a VAT return?
The VAT return is a form that is completed and submitted online at vat.revenue.gov.bs at regular intervals.Click here to create and manage your online VAT account. The form requires you to enter the total VAT inclusive amount of sales or supplies you made within the specific period, the amount of VAT you collected from your customers (output tax) will automatically be calculated and the amount of VAT you paid on your purchases (input tax); during the period. Ultimately, the return will calculate the net amount you must pay to the Government or the amount of excess credit which may be used as an input tax deduction in the next tax period.

21. How do I complete and submit my VAT return?
All VAT returns are completed and submitted online at https://vat.revenue.gov.bs. Detailed instructions on filing returns are found in the VAT Guidance on Completing a VAT Return.

22. When do I submit my VAT return?
As at January 1, 2017 VAT returns must be filed online within 21 days of the end of each tax period. Your VAT period depends on your annual turnover:

1. a. If it exceeds $5 million, your VAT period is monthly.
2. b. If it is less than $5 million, your VAT period can be quarterly, though you can request to file monthly by sending a letter to the Controller.

23. When do I pay VAT to the government?
You are required to pay any VAT at least the same frequency as filing of your VAT return.

24. How do I pay VAT?
VAT is paid through your commercial bank. Your bank will explain the steps you must take to send payments to Government. You can also make payments online through your online tax account at vat.revenue.gov.bs by using a debit or credit card.

25. Can I receive an extension to file and pay VAT due?
You can apply to the Controller using the online system for an extension to file a VAT return; however there will be no extension to pay any amounts due. In other words, even if the Controller grants an extension to submit the VAT return, you are still expected to make payment of the VAT, if any amounts are due for the period in question. Once an extension is approved, any late filing penalty will be waived, however interest and late payment penalty will be applied if no payment is received.

26. Can I get a refund of the VAT paid?
A VAT registrant can claim a VAT credit (input VAT) for all VAT paid that can be allocated to the provision of a taxable good or service. Monthly filers are required to carry forward any excesses for one additional tax period before applying for a refund. Quarterly filers can apply for the excess in the tax period in which the credit arose. Any taxpayer whose zero rated supplies exceeds 50% of the total supplies in any tax period can also apply
for a refund in the period in which this occurs. Application for refunds must be in excess of $500.00. The application for the refund may be subject to an audit review.

27. What happens if I am not a VAT Registrant?
If you are a non VAT Registrant, you are not eligible to charge and collect VAT on those goods or services that are subject to VAT nor are you eligible to issue a tax receipt or invoice. You can increase your prices to absorb VAT costs.

28. What if I do business with the Government?
If you are a business owner that does business with the government you will need a Tax Compliance Certificate. This will ensure that you are compliant with your tax obligations to the government. You may apply for a Tax Compliance Certificate through your online tax account at vat.revenue.gov.bs

1. Who can charge me VAT?
Only businesses that are registered for VAT can charge. They must prominently display their VAT Registration Certificate at their place of business. To verify if a business can charge you VAT, you can also check the VAT registry here.

2. Should prices displayed at retail locations be inclusive of VAT?
Yes, retailers should display VAT inclusive prices. Retailers were given until February 28th, 2015 to adjust shelf prices. During this transitional period retail prices may have reflected both inclusive or exclusive VAT pricing. Note, however, that restaurants with dine-in table service may publish menus with the VAT exclusive price and the amount of VAT shown separately. If the menus are VAT exclusive there must be a clause stating that menu prices are subject to VAT.

3. Do I need to get a receipt for my purchases?
Yes, if the supplier is a VAT registrant, you must receive a VAT sales receipt or a VAT invoice whenever you make a purchase. Prices stated on a VAT receipt can be either inclusive or exclusive of VAT, but the receipt must show the VAT percentage (10%), the total amount of VAT charged and the supplier’s name, address and TIN. If the supplier refuses to issue a VAT sales receipt, you must demand one and/or report the matter to the Department of Inland Revenue. A business not registered for VAT CANNOT charge VAT, issue VAT receipts or VAT invoices. If they do, you MUST report it immediately.

4. How do I report a business that is not complying with the regulations?
If you experience that any business is not registered but issuing VAT receipts or invoices or that a registered business is not complying with its VAT obligations of displaying the VAT Registration Certificate, charging the correct rate of VAT, issuing proper invoices and receipts, displaying VAT inclusive prices or any other obligations stated in the VAT Act or Regulations, collect the evidence and report the issue to the Department of Inland Revenue via the email taxinquiries@bahamas.gov.bs or by phone at 225-7280.

5. Who administers VAT?
The Department of Inland Revenue headed by the Controller is responsible for administering the tax. The Department of Inland Revenue also has ultimate responsibility for other revenue streams such as Business Licence, Real Property Tax, VAT Stamp Tax and First Home Owner’s Exemption.

6. How is VAT charged in terms of the importation of goods into the country?
The Customs Department is responsible for the charging and collection of VAT on the importation of goods. VAT is charged on cost, insurance and freight as well as excise taxes, environmental levies and surcharge. According to the VAT Act, VAT will be charged when goods are entered for home consumption.

7. How will VAT be calculated on my entry form?
On a Customs Department Home Entry Form, the total calculation is broken down to reflect the duty amount, the processing fee, the freight and other charges, the total landed cost and the VAT due at 12%.
For example, the value of a commercial refrigerator is $1,200. The duty amount (at 35%) is $420, the processing fee of 1% is $12, the amount of freight/other charges exclusive of VAT equals $600 and the total landed cost (including the duty, processing fees, freight and other charges) is $2,232. The VAT charged at 12% is $167.40 and the total cost equals $2,399.40. The total amount payable to Customs will be the duty added to the processing fee and the VAT at 12% ($420+$12+$167.40=$599.40)

8. Do I continue to benefit from the $600.00 annual Customs Duty Allowance?
Yes, the duty allowance benefit still applies. This allowance will also be exempt from VAT.

9. Is VAT payable on Customs Duties?
Yes. When you import goods the Customs Department will add the duty to the value of the goods and then charge VAT on this total. For example, if you purchase a good for $100 dollars in the US and the duty rate on the item is 25 percent, the duty owed will be $25. VAT will be charged on $125. If there are other charges such as the environmental levy or the Customs Processing fee, these would also subject to VAT.

10. Is VAT payable on duty free items?
Yes. Items that are exempted from duty are still subject VAT.

11. Will VAT be paid on domestic flights?
Yes, VAT is charged on domestic flights at a standard rate of 10%.

12. Will VAT be applied to international flights?
Yes. VAT will be charged at a zero rate (0%).

13. Will VAT be charged on fees associated with homeowners associations (e.g.maintenance fees)?
Yes, if they are explicit fees they will attract VAT at the standard rate of 10%. For example, a management fee on the maintenance of a pool or lawn service is considered an explicit fee.

14. As a consumer, will I get a refund of the VAT that I pay?
No, consumers do not get a refund of VAT paid. VAT is a tax that is paid by the final consumer of the good or service.

15. My younger sister and I have inherited property from our deceased aunt. We are the sole equal shareholders of a limited liability company. We wish to transfer the property to our company. Do we have to pay VAT on this transaction?
Yes. The transfer of legal interest in the property from the sisters to their company would be considered a taxable supply. Legal interests transferred between beneficial owners are subject to VAT at the standard rate as the supply is being made between two separate legal entities.

16. I own a Timeshare valued at $45,000 that I wish to sell to an interested party. Do I have to charge VAT on this transaction?
Yes. The sale of a Timeshare is subject to VAT at the standard rate whether valued less or more than $100,000.

17. I have a commercial property valued at $75,000 that I wish to rent. What would be the VAT treatment of this rental?
The lease or rental of a commercial property is subject to VAT at the standard rate of 10% regardless of the property’s value.