Earlier in 2015 the Ministry of Finance and Department of Inland Revenue issued guidance stating that as from 1 January 2016 zero-rated VAT treatment is only applicable to regularly scheduled passenger, freight, and courier services. All other flights performed by operators will be subject to a 7.5% VAT charge.
Zero-rating will include the equivalent of C135 operators who can provide evidence to the VAT Comptroller and Customs Departments that they provide, on average, at least once-weekly flights to or from the Bahamas, even if limited to a specific tourist season.
In order to identify which operators will be eligible for zero-rated treatment on relevant services the Department of Inland Revenue will be issuing Tax Identification Numbers (TINs) to all commercial operators and will provide certificates on a case-by-case basis to Fixed Bound Operators (FBOs). An expedited process has been put in place to process these applications during January 2016.
While this is akin to business licensing, non-Bahamas based foreign carriers will remain exempt from licensing fees and related requirements. This amended approach will remove all responsibility from FBOs to directly obtain the commercial designation for any of their customers.
For audit purposes, FBOs will be required to issue VAT invoices (which must cite the TIN) to recognized scheduled carriers, and maintain a copy of each certificate of eligibility for zero-rating in their business records. Once carriers have received their “commercial” designations, FBOs will be permitted to provide back-dated credit for VAT charged to such customers on or after 1 January 2016, and offset any output VAT liability for such in amended VAT return filings.
With regards to the sale of fuel to aircrafts at the time of departure, the policy remains unaltered. Zero-rated supplies will continue only in respect of those recognized international flights categorized as commercially scheduled.
For more information please contact us.