Local small businesses suffering due to yacht tax

Local small businesses suffering due to yacht tax

NASSAU, BAHAMAS — Bahamian small businesses servicing the charter yacht industry are hoping government will reconsider last year’s imposition of Value Added Tax, which they say is driving international vessels away from Bahamian marinas and causing harm to their livelihoods. 

The charter yacht industry is often seen as an ultra-elite luxury sector that is very lucrative for yacht owners and marina operators. However, a plethora of small businesses also benefit from vessels that use The Bahamas as a base for charter operations. Local electricians, craftsmen, repairmen, cleaners, upholsterers caterers and grocery stores – among many others – have done very well in recent years as the industry has seen significant growth. 

With the imposition of Value-Added Tax (VAT) on foreign-owned yachts last year however, these local businessmen say their customers are being driven away from The Bahamas and towards other regional destinations with lower fees and taxes.

“We have noticed a fall-off in business from charter yachts since the new tax came in,” said Nevron Harris of Slims Upholstery. “Before, we used to get three or four jobs a month but now it’s much less. Some months, we get no jobs at all from the industry, as the yachts are going to other destinations where it is cheaper to operate.”

On July 1, 2022, Inland Revenue imposed a new VAT rate of 10 percent, requiring all foreign-flagged charter yachts to pay this rate on the value of their charter contracts. Marina operators estimated a near-20 percent decline in yacht traffic over the crucial Christmas period, blaming the downturn on The Bahamas’ loss of competitivity with other destinations in The Caribbean. 

Another Bahamian whose company supplies cleaning services to yachts, but who did not wish to be named, said: “There has been a sharp decline in services to the yachting industry since the introduction of these new taxes. A few of our regular clients who had been stationed here told us that they have moved to jurisdictions with sun, sand sea and lower fees. It is our prayer that this is addressed so we and other vendors who provide services and employment can return to those good old days.”

The downturn is taking place against the backdrop of a hugely successful first-ever installment of the Bahamas Charter Yacht Show, held in February, which attracted more than 40 vessels – easily topping the leading regional shows on its first attempt. Marina operators and service providers say the show’s success demonstrated the huge potential for the country to become the epicenter of the Caribbean charter yachting world, creating hundreds of new jobs across a number of service industries, were VAT to be removed and the price of entry made attractive for yacht owners once again.

However if the status quo remains, it is feared that the situation will only deteriorate further. “I was told by some of the captains that actually did come again this year, that they are also planning to go elsewhere in the future.” Mr Harris said.