The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Value-Added Tax (VAT) registration process has been slowed because many businesses did not realise they had to be current with other taxes to complete this process, Tribune Business was told yesterday.

Edison Sumner, a VAT Education Task Force co-chair, said another reason for the slower-than-expected take-up was that many professionals, such as doctors, attorneys and accountants, were for the first time having to obtain Business Licences.

“It would be having some effect on the pace of registration, because many businesses did not realise these were requirements they have to fulfill before filing for VAT registration,” Mr Sumner told Tribune Business.

Companies have to be current with their Business Licence fees, real property taxes and National Insurance Board (NIB) contributions before they can complete the VAT registration process and obtain a Taxpayer Identification Number (TIN).

Many businesses were caught unaware by these requirements, and Mr Sumner said the Government had now put in place systems and payment plans to help bring them into compliance on their other taxes.

“What’s going to happen is that those businesses will not be able to process any VAT registration until those outstanding liabilities are brought current, and this might be contributing to the pace of getting registration done,” Mr Sumner told Tribune Business.

“The other thing is the professionals - the attorneys, accountants and physicians - are now required to obtain Business Licences to register for VAT.”

These professionals have previously operated under the licences issued to them by their self-regulating professions.

Mr Sumner said their first Business Licence fees would be based on 1 per cent of their gross revenues from the previous 12 months.

Meanwhile, John Rolle, the Ministry of Financial’s financial secretary, told Tribune Business that the Government would be “very closely monitoring” the pace of VAT registration this week as its November 30 deadline to complete the process for the estimated 4,500 mandatory registrants looms.

“We’re seeing some pick up, but we’re expecting this week to see more of a response,” he added., “I know that we have more than 1,000 entities that are signed up to the online system, and in various stages in terms of that process. This week, we’re expecting to see a stronger response.”

Asked whether the Government remained confident that it will complete mandatory VAT registration by November 30, Mr Rolle said: “I don’t think that in any country you can say you are 100 per cent there, but our focus is really a top down approach.”

The VAT Unit thus continues to concentrate on the big businesses that will be its largest collectors, and remitters, of the new tax.

Mr Rolle said the Government was seeing “a very encouraging trend” when it came to registration by its largest VAT collectors, adding: “We are seeing these companies coming forward, and we know some of them are still preparing themselves for registration.”

Like Mr Sumner, Mr Rolle said VAT registrants did not have to pay off 100 per cent of their other tax arrears in one lump sum, but could enter into satisfactory payment plans with government agencies.

And he agreed that “first-time businesses”, and professionals obtaining a Business Licence for the first time, were cases that the Government and private sector were having to work through in relation to the VAT process.

“I know that because of the VAT system we are going to see a move of more businesses into the system because, being in the VAT network, it’s simply a very important aspect of business operations,” Mr Rolle told Tribune Business.

The Government, meanwhile, said Bahamian hotels could now start to include VAT in their reservations and bookings for 2015.

From January 2015, all stays in hotels, and holiday rental properties, will be subject to VAT instead of the 10 per cent room tax.

“We have worked with BHTA to grandfather hotel packages secured before September to remain subject to the occupancy tax that was paid with the reservation. As properties complete their VAT registration they are also permitted to advertise and book the VAT for 2015 stays,” the Ministry of Finance said.

It added that this was a practice VAT registrants can immediately adopt, in order to minimize VAT-related adjustments when guests check out from properties in 2015.

The Government also moved to emphasise that financial services products and professional services supplied to international, non-resident clients will be treated as exports and ‘zero-rated’ for VAT purposes.

Non-residents are persons and corporate vehicles that are located wholly outside the Bahamas, as well as companies and individuals (foreign property owners) who have physical operations in the Bahamas but are recognised as non-residents under the Exchange Control Regulations.

The second category includes most Bahamas-licensed banks and trust companies, external insurers and mutual fund administrators, along with products and vehicles including trusts, IBCs, and investment funds.

“While Bahamian registered companies and vehicles number in the tens of thousands, only a very limited few who maintain their own locally-staffed operations are required to register for VAT,” the Ministry of Finance said.