The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Ministry of Finance’s top official yesterday said it had moved swiftly to “pre-empt” erroneous social media claims that VAT is being charged on Dorian claims payouts.

Marlon Johnson, acting financial secretary, told Tribune Business that the ministry wanted to clarify the situation even though it had received “no concrete examples” of insurance companies imposing the 12 percent levy on claims settlements.

“We have been made aware of social media rumours where people are alleging they have been advised VAT is charged on insurance claims and wanted to clarify that,” Mr Johnson said.

“It’s started to take legs and circulate, and we wanted to pre-empt and make sure people understand what the rules are for VAT treatment of insurance claims.”

Given that Dorian-related insurance claims are projected to total more than $500m, and be key to financing rebuilding and restoration in Abaco and Grand Bahama, the Ministry of Finance and its agencies have moved quickly to prevent any disruption to this process.

The Department of Inland Revenue, in a statement issued yesterday, said: “VAT is not charged on insurance claims. The Government of The Bahamas is only in receipt of VAT on insurance policies at the time premiums are paid on taxable policies.

“The government does not, under any circumstance, demand a net VAT payment on claims settled between insurance companies and policyholders.”

Mr Johnson, meanwhile, confirmed that the government and Bahamian property and casualty insurers had settled their dispute over the payment of VAT refunds on insurance claims.

“We have come to a resolution,” he told Tribune Business. “We’re finalising the paperwork, as we came to a meeting of minds and understanding on both sides that works for everyone.

“Whatever the situation was as it related to insurance payments we did manage to clear it up; how we treat it prior to a certain date and how we treat it after a certain date. We did come to a settlement on it.”

The quarrel stemmed from whether Bahamian property and casualty underwriters could recover VAT on all or only some claims that were settled on a cash basis.

While the insurance industry felt it had achieved “a clear understanding” with the former Christie administration that VAT was recoverable on all such claims, its successor adopted the position that this was only the case where the insured client was a VAT registrant - meaning a business with a turnover greater than $100,000 per annum.

As a result, Bahamian property and casualty insurers were faced with being unable to recover “the VAT portion” of any claims paid out to residential homeowners and other non-VAT registrants.