As published on superyachtnews.com, Tuesday 16 August, 2022.
The Bahamas have introduced a new tax rate which will require all foreign-flagged charter yachts to pay an additional 10 per cent VAT. This will be enforced on all charter contracts that have been signed after the 1st of July.
According to The Tribune, Senator Michael Halkitis, Minister of economic affairs, stated that the foreign yacht charter industry had for years “enjoyed a windfall at The Bahamas’ expense” by using this country’s marine environment and natural resources to earn millions of dollars without paying its fair share to the Public Treasury.
According to research from the Association of Bahamas Marinas (ABM), which includes over 55 marinas, the yacht sector contributed 37.3 per cent or $122.135M of The Bahamas’ $327.438M total tourism revenues in 2021. The marinas generated $78.058M in combined fuel sales last year, $18.109M in electricity and $10.819M in water sales to berthed vessels.
The yacht sector in the Bahamas typically attracts ultra-high net worth individuals who tend to spend a lot of money. However, the question is how much of that money is evenly distributed amongst local workers on the various islands, and how much ends up in the pockets of businesses abroad.
This could ultimately act as a repellant for the larger end of the superyacht fleet, who could be driven to the rest of The Caribbean. However, it will most likely be the Miami-based yacht owners in the 24-50m yacht bracket, who frequently visit the Bahamas, that will be most affected by this new tax rate.
Some stakeholders have argued that the new tax rate is poorly timed given the recent strides the region has made to attract more yachts. Some recent infrastructure developments include Hurricane Hole on Paradise Island and the opening of Nassau Harbour, together with three new facilities in Abaco, Harbour Island and Eleuthera. Earlier this year Silent-Resorts and EcoIsland Development announced Club Ki’ama Bahamas, an equity club set to offer highly sustainable solar residences and fuel-efficient solar yachts. Club Ki’ama is located within the new Ki’ama Bahamas enclave on Elizabeth Island.
The Ministry of Finance in The Bahamas believe this tax is entirely rational, and will not affect the number of yachts migrating to the region. They point to VAT rates in Greece (24%) and Spain (22%) as examples of countries that are still developing charter opportunities whilst making sure the government and locals still get a slice of the pie.