Summary
Summary
The Bahamas VAT system has expanded to include accountability for e-commerce, particularly targeting digital service providers in the accommodation marketplace.
The Bahamas has in place a modern, well-developed VAT regime that aligns with the internationally recognised standards. The Bahamas VAT system expanded its scope a few years ago by introducing VAT accountability for the e-commerce sector, primarily targeting domestic and foreign e-booking/accommodation marketplaces.
The scope of taxable services within the e-commerce sector has been gradually expanded. The Bahamas VAT regime is established under the provisions of the VAT Act, the VAT Regulations, and specific VAT guidelines targeting each subsector.
The substantial growth of short-term e-booking accommodation rentals prompted the responsible authorities to regulate the e-commerce sector. Currently broad scope of digital services is under the standard VAT regime.
Bahamas VAT Compliance
Digital Service Providers
Taking into account the current VAT rules for providers of electronically supplied services, it could be concluded that, in most cases, they are responsible for VAT collection when providing these services to customers based/residing in the Bahamas.
The accountability for VAT collection rises on most of the occasions from the very first sale, when it comes to the provision of digital services by non-resident providers. Some of these providers can “leverage” the revenue threshold capped at BSD 100,000.
The VAT registration threshold(BSD 100,000) is mainly reserved for domestic persons. After registering for VAT, non-resident digital service providers are responsible for charging, collecting, and remitting VAT on a periodic basis in accordance with the general VAT rules.
Accountability for VAT collection on remote supplies of digital services applies to both B2C and B2B supplies after registration. The Revenue Authority, guided by necessity to strengthen the VAT collection for these supplies and many others, has introduced a concept of mandatory VAT withholding agents.
The VAT withholding agent(recipient of the service or other indicated person) becomes accountable for VAT for supplies indicated by the Revenue Authority. The Bahamas tax authority is responsible for notifying each person who shall act as a VAT withholding agent for the indicated supplies.
The responsibility to account for VAT, under the VAT withholding agent regime, doesn’t entirely remove the legal obligation for the original supplier to register for VAT. The foreign digital service provider could be found non-compliant with VAT requirements, even when a VAT withholding agent collects VAT on its behalf.
How to Stay Compliant
The VAT responsibilities for non-resident digital service providers (direct suppliers or platform operators) aren’t, in many jurisdictions across the globe, “simple” to recognize, understand, and follow when needed. The Bahamas VAT regime, with its general VAT rules and specific provisions for e-commerce suppliers, can be very confusing.
In some jurisdictions or regions, rules are less-complicated, and there are simplified tax reporting requirements for non-resident digital service providers; however, this isn’t the case.
If you are looking for clarity on the VAT compliance rules applicable to your specific business model in the digital economy, feel free to reach out to us. We would be happy to assist you.
Takeaway
Foreign providers of digital services that form part of the digital economy should be aware that the Bahamas VAT regime has in place different VAT regimes that coherently operate with the main goal in mind: VAT collection revenue.
Author: Aleksandar Delic
What started as the introduction of VAT accountability for e-commerce platform operators in the short-term accommodation rental sector expanded into other parts of the e-commerce subsector.
Indirect Tax Manager – E-Commerce
Frequently Asked Questions
The Bahamas VAT system has expanded its scope to include e-commerce, particularly focusing on domestic and foreign e-booking and accommodation marketplaces. This expansion has made digital services, including e-commerce services, taxable under the standard VAT regime.
The VAT registration threshold for digital service providers in the Bahamas is BSD 100,000. This threshold primarily applies to domestic providers, but non-resident providers must also collect and remit VAT once they exceed it.
Digital service providers are responsible for collecting VAT when providing services to customers in the Bahamas. Non-resident providers are accountable for VAT collection from the first sale unless they meet the revenue threshold-based exemption criteria.
VAT withholding agents are designated individuals or entities who could be held responsible for collecting VAT on behalf of foreign digital service providers. The Revenue Authority notifies the parties who must act as VAT withholding agents. However, this doesn’t fully relieve the original supplier from their VAT obligations.
No, while VAT withholding agents are responsible for collecting and remitting VAT on behalf of the digital service provider, the original supplier remains legally obligated to ensure compliance with VAT registration and reporting requirements.
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