Cruise Line's Private Islands in Bahamas To Lose Tax-Free Status

The nine-year tax-free status enjoyed by many cruise lines with private islands in the Bahamas is about to end.

The changes are slated to take effect on March 1 and are aimed at leveling the playing field, according to a report in The Tribune.

The publication broke the news based on a Bahamas Department of Inland Revenue document it had obtained and later confirmed with local officials.

Under the plans outlined in the document, in just a few weeks the tax treatment for goods and services provided to the millions of tourists who visit private islands in the Bahamas maintained by cruise ships will change. Moving forward, transactions on the island will be taxed the standard local rate of 10 percent.

Royal Caribbean's Perfect Day at Coco Cay (Photo via Lauren Bowman)

A variety of well-known islands used by cruise lines will be swept up in the new tax including: Royal Caribbean’s Perfect Day destination at Coco Cay, Mediterranean Shipping Company’s Ocean Cay, Disney Cruise Line’s Castaway Cay and Lighthouse Point, and Holland America’s Half Moon Cay.

It’s unclear how much revenue will result from the new 10 percent tax roll-out, Bahamian Minister of Finance, Simon Wilson told The Tribune. Local officials do not have access to any previous records detailing how much is being bought and sold on the private islands.

However, Wilson did offer an explanation about why the tax is now being implemented, after years of tax-free status for the islands.

“When we implemented VAT originally we were under the impression given to us by the cruise lines that any commercial activity on the private islands was an extension of the package purchased [by passengers] on ship - they were indistinguishable. That’s not the case. It’s a different commercial experience,” he said.

Wilson also said the commercial activity taking place on the islands has increased tremendously over the years. And during that time, the transactions taking place have also diversified and often compete with Bahamas-based businesses for excursions.

“We cannot exempt commercial activity. Why should the cruise lines be allowed to rent a chair on the beach and pay no VAT while the Bahamian has to pay VAT and Business Licence?” Wilson said.

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