The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian hotel industry will “continue to pursue” the Value-Added Tax (VAT) treatment of complimentary rooms, as it has yet to achieve its “preferred position” despite the Government giving ground.

The Ministry of Finance, in updated guidance notes released yesterday, said complimentary rooms would not be subject to the 7.5 per cent VAT rate only when they were “contributions to recognised charities”.

While this represents a slight shift in the Government’s position, it falls short of the stance advocated by the Bahamas Hotel and Tourism Association (BHTA), which wants all complimentary rooms - and associated room nights - to be VAT free.

Robert Sands, Baha Mar’s senior vice-president of government and external affairs, yesterday said complimentary rooms offered by the Bahamian hotel industry had been tax-free “since time immemorial”.

Such rooms are often provided, free-of-charge, to boost resort - and industry - sales and marketing efforts, often accommodating visiting journalists, plus tour operators and travel agents - all of whom the Bahamas is either seeking to attract business form, or boost its reputation via positive publicity.

Levying VAT on these rooms could thus negatively impact these efforts, plus increase hotels’ already-high operating costs.

“We believe there is still an opportunity, because that is not our preferred position,” Mr Sands told Tribune Business of the latest ‘guidance notes’ released by the Ministry’s VAT Department.

“This type of room we are talking about is an investment for sales and marketing. These, since time immemorial, have been considered not taxable.

“We’re going to pursue that particular issue. They’re [the Government] moving in the right direction, but we will continue to address this.”

Complimentary rooms, and their VAT treatment, were one of seven key concerns raised by the hotel/tourism industry in relation to the new tax regime set to be imposed from January 1, 2015.

Mr Sands told Tribune Business that just three-four “remain outstanding”, with the Government already having agreed not to levy VAT on gross overseas sales or on top of the mandatory 15 per cent gratuity.

The Government has also dropped plans to levy 7.5 per VAT on goods and services supplied internally within hotels, particularly meals and rooms provided to staff members.

“The supply of free meals to staff will not be treated as a taxable supply; therefore, no tax is chargeable,” the Ministry of Finance’s revised guidance notes said.

“Also, where a staff member is required to stay on property in connection with his/her duty and a room is provided, no tax is chargeable.”

This mirrors the position urged by the BHTA in an August 11 presentation. Of the VAT guidance notes then in existence, it said: “This appears to obligate the hotel to charge itself VAT on all employee meals, drinks, complimentary services (familiarisation tours), in-house entertaining, employees staying in-house over hurricanes - a straight 7.5 per cent increase on all these expense lines.”

Mr Sands, meanwhile, told Tribune Business that the hotel sector and wider tourism industry had been “encouraged” by the progress made to-date in talks with the Ministry of Finance.

“We have come a long way in our negotiations, but still have some way to go,” he said. “The dialogue has been fruitful, honest and open, and we’ve seen some positive results.

“We are heading in the right direction. We feel these additional concessions will augur well to ensuring we have a tourism industry that is competitive and generating revenues in the economy’s interest going forward.

“We’re going to continue to pursue these outstanding issues. We don’t think the door is closed. We will continue to pursue them.”

The revised guidelines also reduce the time required to claim a VAT refund 
“from three months in which the credits arise” to carrying the tax forward “one period”. Hotels will then have to apply for a refund of “any excesses”.

“We’re very much aware of that,” Mr Sands added. “We’re not happy with the timeframe, but hopefully the debits and credits will balance on a month-to-month. A shorter timeframe, within 30 days, would have been better.”