The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The VAT Comptroller has admitted to year-long “lapses” on how the 7.5 per cent levy should be applied to foreign-bound aircraft, before delivering a ruling to spoil the private aviation industry’s New Year.

John Rolle, in a ‘mea culpa’ to close out 2015, conceded that the VAT Department and Ministry of Finance had provided “incomplete, less than accurate or less than timely communication” on VAT-related queries from the aviation industry.

Mr Rolle, in a New Year’s Eve letter to all Bahamas-based fixed base (FBO) owners and operators, admitted: “As a result, differences of interpretation on the level of zero-rating that should have applied to foreign-going aircrafts have persisted.

“We accept responsibility for these lapses, and will not insist on the reversal of 2015 zero-rated treatments which may have applied to foreign-going commercial aircrafts.”

The absence of any retroactive application is probably the sole piece of ‘good news’ for the private aviation industry.

Determined to avoid a continuation of this situation into 2016, Mr Rolle then laid out VAT’s ‘tax treatment’ as it applies to all commercial and private jet flights, including fuel sales to them.

His letter, obtained by Tribune Business, warns that “effective immediately”, only “regularly scheduled” commercial passenger, freight and courier flights will enjoy ‘zero-rated’ VAT treatment.

“This treatment also extends to the equivalent of C135 operators who can provide evidence to the VAT Comptroller and Customs Departments that they provide, on average, at least once-weekly flights to or from the Bahamas, even if limited to a specified tourism season,” Mr Rolle said.

The ‘bottom line’ from his letter is that only regular commercial passenger and freight flights will enjoy VAT ‘zero-rated’ treatment, where they will both escape imposing the 7.5 per cent levy on their customers and be able to ‘reclaim’ all VAT input payments.

And only “recognised international flights” deemed to be commercial will enjoy VAT ‘zero rating treatment on fuel and other supplies purchases in the Bahamas.

Al Wehrenberg, the FBO operator at Long Island’s Stella Maris International Airport, told Tribune Business via e-mail over the weekend that the sector had “lost the argument” with Mr Rolle and the Government.

“Happy New Year to all,” he wrote. “Unfortunately, it is not starting off well for the flying community.

“Since January 2015 when VAT was introduced, all FBOs in the Bahamas were not applying VAT to foreign aircraft fuel sales. All FBOs were following instructions received from the VAT office.

It was not until April 2015 that we were advised by the VAT Comptroller, John Rolle, that only scheduled commercial aircraft carrying passengers and/or cargo were not to be charged VAT, and that international private aircraft should be paying VAT,” Mr Wehrenberg wrote.

“ Since then, all the FBOs joined forces to challenge this claim. Many letters were sent and meetings attended, but the VAT Comptroller held his ground. One major FBO even had a legal review performed. The end result is we lost the argument.

“As such, we have no other alternative than to apply the 7.5 per cent VAT to all future fuel purchases, effective January 1, 2016. For any aircraft presently parked at the airport and refuelled prior to January 1, VAT will not be charged.”

Mr Wehrenberg’s letter drew an e-mailed response from Long Island MP, Loretta Butler-Turner, who acknowledged the “difficulties” caused whenever the Government altered policy via new or increased taxes.

She expressed optimism, though, that the current ‘low’ in global oil prices would help offset any tax/cost increases imposed on the Bahamas’ private aviation customers.

“It is unfortunate, and perhaps difficult, when taxes are raised, especially when we are trying to build our tourism numbers in Long Island particularly,” Mrs Butler-Turner wrote. “As a member of the Opposition Party and as the MP for our island l, like you, can only accept the Government’s decree.

“On the bright side, however, as l choose to be the optimist.......thank goodness that world markets have seen a drastic reduction in the cost of fuel prices. Hopefully this would help us tremendously in the overall scheme of calculating our costs.”

Mrs Butler-Turner added: “I spent a bit of time recently doing some inter-island travel. I was amazed at the number of private aircrafts, boats and yachts that l witnessed visiting some of our Bahamian Islands. I believe it is a testament to our unique beauty and geographic accessibility.

“We have so much to be proud of in Long Island. We are a natural gem. Despite our challenges there are so many more positives that we can embrace. Let’s embrace the positives and build a larger group of loyal visitors.”

Mr Rolle, meanwhile, said Taxpayer Identification Numbers (TINs) will be issued to all commercial aviation operators in January 2016, with certificates given to those eligible for zero-rated treatment.

“While this is akin to business licensing, non-Bahamas based foreign carriers will remain exempt from licensing fees and related requirements,” the VAT Comptroller said.

“This amended approach will remove all responsibility from FBOs to directly obtain the commercial designation for any of their customers.

“Once carriers have received their ‘commercial’ designations, FBOs will be permitted to provide back-dated credit for VAT charged to such customers on or after January 1, 2016, and offset any output VAT liability for such in amended return filings.”