The Tribune

Abaco-based property management firms fear Value-Added Tax (VAT) will cost them business by driving visitors to book vacation rentals via foreign sources, thereby avoiding the tax.

This and other concerns were raised as the Bahamas Hotel and Tourist Association (BHTA) moves its VAT readiness and registration workshops into the Family Islands.

Some 100 industry participants attended workshops in Abaco and Exuma, conducted by the Ministry of Finance in conjunction with the BHTA.

The BHTA said the issue of how vacation rental homes would be treated under VAT surfaced at the Abaco workshop.

Attendees said Family Island visitors were increasingly staying in rented vacation homes. Property management firms, which presently handle several hundred homes, indicated that the existing 10 per cent hotel room tax is paid through their management arrangement.

But, with VAT to be levied on all the services provided by the property management firms, and also assessed on the rental rates, these firms fear more foreign visitors will opt to book their short-term rentals through sources outside of the Bahamas to escape paying the new tax.

The Abaco Chamber of Commerce pledged to work with property management firms to explain the problem and offer solutions ,which will be shared with the Ministry of Finance, BHTA and the Ministry of Tourism.

The BHTA said Abaco businesses, in particular, were concerned about obtaining an equitable arrangement between foreign and domestic charter boat and dive operators.

Domestic operators are disadvantaged, paying higher taxes than the 4 per cent that is supposed to be levied against foreign operators, who contribute significantly less to the Bahamian economy . The BHTA is calling for equal treatment and enforcement, as collection of the 4 per cent from charter operators is lax.

At all the training sessions held so far, hotel and restaurant operators have expressed concern about the all-inclusive pricing requirement.

While some of this has been addressed, with businesses now allowed to conduct VAT exclusive pricing for sales and advertising purposes, provided they clearly show that the advertised price does not include the tax, the outstanding concern relates to the posting of menu prices.

This requires the added expense of printing new menus, adjusting point-of-sales systems, and creates confusion for the customer when they are provided a receipt in which a mandatory gratuity is posted exclusive of VAT.

While businesses agree with the requirement that all menus and sales receipts must indicate that a 7.5 per cent VAT applies to the cost, they are arguing that the requirement can still be met with the posting of notations on all menus, similar to that which is required for advertising purposes. This shows VAT will be added to the posted price.

Concerns were also raised about several issues that the BHTA has been seeking to resolve with the Ministry of Finance.

These include how Promotion Board levies are treated; the treatment of business that is prepaid now but delivered after January 1, 2015; and maintaining the status quo for self-supply, whereby taxes are not applicable to the provision of complimentary rooms and services for goodwill and marketing support. As it presently stands, VAT will be applicable to the fair market value of these donated services.

“We are encouraged by the level of participation from the industry thus far,” said BHTA president, Stuart Bowe. “We are seeing participation by hotels of all types and sizes - bonefish lodges, attractions, marinas, tour operators, restaurants, vacation home management companies, and large scale vendors.

“The sessions are tailored to the tourism industry, and the types of questions and recommendations which are surfacing underscore the value of facilitating training directed specifically to our industry.”

During last week’s sessions in Abaco and Exuma, attendees were provided with a clear and basic understanding of how VAT works, pointing to the required recordkeeping and accounting practices, and charging and pricing considerations.

The Ministry of Finance representative carefully walked attendees through the process of pricing, offsetting and the filing of VAT returns. Businesses stepped through the VAT registration process, with some actually registering during the training sessions.

Six tourism-related VAT training sessions have been held throughout the Bahamas to-date, attracting nearly 400 attendees. Sessions this week are being conducted on Long Island and Cat Island. Tourism-related businesses wishing to attend the sessions should contact BHTA at 502-4200.