Tourism Stakeholders Prepare For VAT
· Attendees at Oct 2 BHTA Meeting Briefed on VAT Basics, Readiness, and Pre-Registration
· Financial Secretary John Rolle Addresses Key Tourism Industry Concerns; Later Clarifies How VAT Pricing Can Work for Marketing Purposes
· BHTA Steps Up Readiness Activities along with Ministry of Finance and Bahamas Chamber
With the implementation of Value Added Tax less than three months away, tourism industry businesses are stepping up their readiness activities as the Bahamas Hotel and Tourism Association works closely with the Ministry of Finance and industry stakeholders to prepare businesses for the transition.
BHTA members turned out in mass for the organization’s October 2nd Membership Meeting at the British Colonial Hilton to be briefed by BHTA and Ministry of Finance officials on Value Added Tax. The session stressed important transition decisions which businesses must consider immediately as part of their readiness plans, and provided a general overview of the VAT online registration process which is scheduled to open next week.
“The meeting marked the first of a four-phase training and readiness initiative which BHTA is facilitating with the Ministry of Finance throughout The Bahamas over the coming months. Last week’s sessions will be followed up by day-long VAT workshops covering all major islands which are specifically designed for hotels and other tourism-related businesses. The sessions are scheduled to commence on Wednesday, October 15th” according to BHTA President Stuart Bowe.
The Ministry of Finance is working on the private sector training program with BHTA and the Bahamas Chamber of Commerce and Employers Confederation. The BHTA sessions are being tailored to the hotel and tourism industry and their special circumstances while the Chamber’s sessions are geared to the general business community and non-tourism sectors.
BHTA members attending last week’s session came away with a greater understanding of VAT and better prepared for the transition.
“Businesses can mitigate the impact of VAT on their operations by being prepared. BHTA is helping tourism-related businesses navigate through the process in the coming months” adds Bowe.
The October session was a primer, providing attendees with an overview. The planned detailed day-long workshops will cover 12 islands by the end of November. Scheduling details are being finalized with the Ministry of Finance and the Chamber of Commerce.
Ministry of Finance Consultant Accountant Pedro Delaney provided attendees with a clear and basic understanding of how VAT works, pointing to the required recordkeeping and accounting practices and charging and pricing considerations. He shared basic pro forma examples to illustrate how input and output VAT reconciles and show the difference in costing with the elimination of CIF and the replacement of FOB on imports affective January 1, 2015. Members were pleased to see this significant change to their import costs.
The planned daylong workshops will carefully walk attendees thru the process of pricing, offsetting, and the filing of VAT returns. Businesses will also be step thru the VAT registration process with plans being made to permit them to actually register during the training sessions.
Timothy Adderley from the Ministry of Finance also provided members with a preview of how the online VAT registration process will work and items businesses must have available beforehand in order to register beginning next week.
BHTA members were pleased to know that a number of issues of concern to the tourism industry have been addressed and hopeful that several remaining matters will be resolved shortly. The industry had concerns about assessing VAT on gross overseas sales and mandatory gratuities. Both of those matters have been addressed and VAT will only be assessed on the net revenue from overseas sales received by the business. VAT will not apply to mandatory gratuities, providing the full amount of the gratuity goes to the employees.
Financial Secretary John Rolle addressed some of the lingering issues affecting the tourism industry which are still being worked on, including how Promotion Board levies, the treatment of casino inputs, and VAT exclusive pricing are addressed. Following the meeting, Mr. Rolle clarified that hotels and other entities can advertise prices as being VAT exclusive, providing they asterisk or note in the promotions that the advertised price is subject to a 7.5% Value Added Tax. This is covered under Section 10(2) of the VAT Act.
BHTA is asking that the status quo remain for self-supply, whereby taxes are not applicable to the provision of complimentary rooms and services for goodwill and marketing support. Presently, it is proposed that VAT be applicable to the fair market value of these donated services.
The industry has also shared concerns with the Ministry of Finance and the Ministry of Tourism about the increase in the room tax portion of the VAT arrangement for Grand Bahama hotels. BHTA maintains that Grand Bahama hotels, which have been eligible to assess a 5% room tax since 2012 as part of a five-year targeted stimulus package, be permitted to continue to assess the same on the room portion of their VAT, which presently proposes to increase to 7.5%. BHTA argues that Grand Bahama hotels, like those throughout the country, will see their tax footprint widened by two-thirds as non-room services will be subject to VAT. The industry believes that while the impact of VAT on the industry’s price competitiveness has been reduced with the lowering of VAT from 15% to 7.5%, there will still be an impact with the tax footprint widening.
The industry is also seeking an equitable arrangement between foreign and domestic charter boat and dive operators. Domestic operators are disadvantaged, paying considerably higher taxes than the 4% which is supposed to be assessed against foreign operators who contribute significantly less to the local economy than the foreign operators. Presently, there is lax enforcement on the collection of the 4%. BHTA is calling for parity and equal enforcement.
At the meeting the Financial Secretary indicated the Ministry’s intention to address how VAT applies to the domestic portion of international air travel. BHTA maintains that there should be no VAT on the domestic leg of international air bookings. The Ministry of Finance is looking at adjusting this to provide the exception when the ticket is part of ‘continuous travel’, with some consideration for overnight stay in Nassau with traveling to and from the Family Islands due to flight schedules necessitating the overnight stay.
Attendees were provided with booklets addressing VAT readiness and providing samples of the VAT Registration and Return forms. BHTA Executive Vice President Suzanne Pattusch walked members through a Business Readiness Checklist and outlined milestone dates for businesses to be aware of in their planning.
Pattusch indicated that “All hands are on deck at the BHTA; we will do all that we can, working with the Ministry of Finance and other stakeholders to help prepare our industry for VAT. We encourage our members and the tourism industry to take a proactive role at this key stage of preparation. There is significant information available now online through the Ministry of Finance and BHTA’s VAT websites. The coming readiness workshops will ensure the information is presented at a more practical level while affording attendees the ability to raise concerns and ask specific questions”.
Bahamas Hotel & Tourism Association (BHTA)tax, VAT