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- November 14, 2022
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If you are considering a yacht charter vacation in the Bahamas, you will need to consider a new cost in your budget. The Bahamas’ government has recently introduced a new tax on pleasure boat chartering.
From 1 July 2022, any signed pleasure boat charter contract is subject to the new 10% VAT rate. The new taxation applies to all foreign-flagged charter yachts.
Bahamas tax increase: what prompted the government to make this decision?
The economy of the Bahamas is based mainly on the tourism industry. In this area, most of the proceeds come from the maritime sector, which generally attracts wealthy individuals with a high income and above-average spending power.
According to various exponents, the government’s decision to introduce a new tax meets the need to redistribute the proceeds deriving from these activities among the population and local workers, trying to prevent, as far as possible, most of the profits going almost entirely to foreign companies.
Secondly, the taxation change is seen as a way to standardize and create a level playing field with local tour operators and excursion operators, who have always paid VAT, as well as commercial license fees and immigration taxes, which foreign brokers are instead not required to pay.
Finally, the introduction of a tax on yacht rental is also positively evaluated in the environmental sphere as compensation for the use of the marine environment and the immense natural resources that this country makes available to its visitors.
The Bahamas Ministry of Finance believes that this tax is entirely rational and will not negatively affect the number of yachts visiting more than 700 islands annually. In support of this thesis, the VAT rates imposed by other states, such as Greece (24%) and Spain (22%), are indicated, focusing on how this type of tax does not affect their yachting market.
How did it work before? How much was the VAT on yacht charters before July 2022 in the Bahamas?
The yacht charter sector has long enjoyed an exemption from this tax, and until now, it was only subject to a 4% tax for the port department.
This made chartering in the Bahamas very easy and highly affordable for boaters from all over the world who could enjoy the golden, sun-kissed beaches of hundreds of uninhabited islands and atolls without the overload of taxes.
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What are the sector operators’ main fears?
The response of the parties involved in the provision was not long in coming, expressing all their perplexities primarily related to the lack of timeliness with which the rule was applied, considering the efforts that the entire Bahamas region has made to attract more boat tourists consistently.
However, operators’ greatest fears are linked to competition from the neighboring Caribbean.
Many yacht charter brokers could decide to move their yacht fleets to the neighboring waters of Antigua or the rest of the Caribbean, which historically impose very low or even non-existent taxation.
With taxation currently in force, the cost of renting a yacht of the same type and size in the Bahamas may cost several thousand dollars more than in other Caribbean islands.
In this case, the Bahamas will find themselves fighting against the competition with the only weapon left at their disposal, namely the scenic and natural beauties of which they are very rich.
What are the substantial changes for yacht charter customers?
It is almost transparent that the cost increase for charter brokers will turn into an increase in spending for customers, who will suffer more than three times the taxation compared to a few months ago.
In practice, 10% of VAT will be added to the already known 4%, reaching 14%.
Geographically speaking, it will most likely be Miami-based private yacht owners and charters who visit the Bahamas frequently to be instead most affected by this new tax rate.
However, the Bahamas are and remain one of the most beautiful and desired cruising areas in the world, offering a paradise of untouched nature, palm-fringed white beaches, historic villages, and secluded spots ideal for relaxation.