The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE insurance industry is not waiting “idly” until the government finalises the details on how the industry will be affected by Value-Added Tax (VAT) on July 1 according to one leading insurance executive, who has told Tribune Business that the sector was positioning itself to launch its own education campaign.

Howard Knowles, chairman of the Bahamas Insurance Association (BIA), told Tribune Business that industry players met with a New Zealand consultant assigned to the industry two weeks ago. At that time he said that the consultant presented guidance notes on how VAT would be implemented. “Some of them are favourable in terms of the positions we had sought the government to adopt, some of them were not. Obviously it’s a trade off. We will get some of the things we wanted and some of the things we wanted we still haven’t got. We haven’t had any feedback directly from the government since then,” said Mr Knowles.

All insurance products will be exempt from VAT until July 1, 2015, after which life insurance, annuity insurance and savings plans will remain exempt. Underwriting and reinsurance services relating to these services will similarly be exempt, along with any associated broker or agent fees. However, the services of an insurance actuary or adjuster are subject to VAT.

Non-life insurance services, including property, health and casualty insurance will be subject to the standard 7.5 per cent VAT rate after July 1. Insurance services supplied to persons or businesses outside The Bahamas are normally zero-rated. The government implemented VAT at a rate of 7.5 per cent on January 1, 2015. Although insurance companies will not charge the tax on premiums before July, they must effectively eat the cost of VAT-able services in the meantime.

“Obviously VAT is looming,” Mr Knowles said. “July 1 is the target date. One of the things they had done is delayed the implementation of VAT because we were sort of a late entrant into the VAT net. Initially we were supposed to be exempt and then they changed their mind after they met with the people from New Zealand who told them the net needed to be wider.

“Sort of as a concession to us they delayed our participation in VAT and I think the idea was so that we could obviously be ready. I’m sure that part of the readiness was getting the methodology , the guidance notes and all of that in place. As an industry we are going to undertake to do our part to try and get the message out as well.

“We’re just waiting on the next step. We’re waiting but we’re not waiting idly. We are sort of positioning ourselves to take the next step which is to do an education campaign. Consumers need to know what they will be facing come July 1.”