2025 VAT Reforms
The Bahamas implemented significant VAT reforms on staged commencement dates across 2025 and 2026. CoralLedger Comply fully supports these changes.
Key Changes
Four VAT Categories
The Bahamas now operates a four-category VAT system: Standard (10%), Reduced (5%), Zero-Rated (0%), and Exempt.
| Rate | Application |
|---|---|
| 10% Standard | Default rate for most goods and services |
| 5% Reduced | Hygiene products and medications at licensed food stores (narrow scope) |
| 0% Zero-Rated | Exports, international transport, and Third Schedule unprepared food sold by retailers that do not qualify as licensed food stores |
| Exempt | Unprepared food at licensed food stores (from April 1, 2026), financial services, residential rent, education, healthcare |
From April 1, 2026, unprepared food at licensed food stores moved to Exempt status. See April 2026 Food Exemption Transition below.
Construction VAT Restrictions
Value Added Tax Act, 2014, s. 50 restricts input-VAT recovery on major construction projects.
What the rule does:
- Under s. 50(1A), input VAT on a major construction project is prohibited from being claimed where the project meets a qualifying limb — the principal limb being a project cost strictly greater than $1,000,000. Other qualifying limbs include substantial renovation and waterfront works (docks, marinas, and similar).
- Under s. 50(1B), an ordinary-course-supplier carve-out applies, and the Comptroller may prescribe further exceptions.
How Comply Helps:
- Track project values against the $1M threshold (strictly greater than $1,000,000)
- Apply the s. 50(1A) restriction and the s. 50(1B) carve-out from a single source of truth
- Generate compliance reports for construction projects
Access the Construction VAT dashboard at Compliance > Construction VAT.
Refund Eligibility (50% Rule)
New requirements for VAT refund claims:
The Rule: To claim a VAT refund, at least 50% of your taxable supplies must be zero-rated.
How It Works:
- Calculate total zero-rated supplies
- Calculate total taxable supplies
- If zero-rated >= 50% of taxable, you can claim refunds
- If below 50%, excess input VAT carries forward
Comply Features:
- Real-time eligibility tracking
- Period-by-period analysis
- Threshold monitoring
- Refund calculation assistance
Access at Compliance > Refund Eligibility.
Food Store Qualification (April 1, 2025)
Licensed food stores have specific VAT treatment:
Requirements:
- Valid food store license
- Proper product categorization
- Accurate record-keeping
Qualify at:
- Navigate to Admin > Vendor Qualification
- Upload license documentation
- Maintain qualification status
April 2026 Food Exemption Transition
Effective April 1, 2026, unprepared food at licensed food stores moved to VAT Exempt status. This is distinct from both the 5% reduced rate and zero-rating.
What Changed:
- Unprepared food (bread, rice, flour, fresh produce, etc.) is no longer taxable at 5% — it is now Exempt
- The 5% reduced rate now applies only to the narrow category of hygiene products and medications at licensed food stores
- Exempt supplies carry no input tax credit for the supplier, unlike zero-rated supplies
Seller-Axis Clarification: The same Third Schedule items are Zero-Rated when sold by retailers that do not qualify as licensed food stores, but Exempt when sold by licensed food stores from April 1, 2026. The category turns on seller qualification, not on a different item list.
Exempt vs Zero-Rated — Why It Matters:
| Exempt | Zero-Rated | |
|---|---|---|
| VAT charged to customer | No | No |
| Supplier claims input tax credits | No | Yes |
| Triggers apportionment | Yes | No |
Because no input tax credit is available on exempt supplies, food stores that now sell a mix of exempt (unprepared food) and taxable goods must perform input VAT apportionment to determine the recoverable portion of their input tax.
Impact on Apportionment:
- If your business sells both Exempt and taxable supplies, you must calculate what proportion of input VAT is attributable to taxable activities
- Only the taxable-activity proportion is recoverable
- CoralLedger Comply tracks exempt vs taxable supply ratios and assists with apportionment calculations at Compliance > Apportionment
Comply Features:
- Date-based reclassification of unprepared food transactions dated on or after April 1, 2026
- Apportionment ratio calculation and monitoring
- Alerts when exempt supply proportion increases your non-recoverable input VAT exposure
Bad Debt Relief
Claim relief on bad debts you have written off in your accounts (VAT Act s. 53(3)). See the Bad Debt Relief page for the full workflow.
Eligibility:
- The debt is written off in your books — the event that makes relief available under s. 53(3)
- VAT was originally paid to the government on the supply
- Reasonable collection efforts were made
- No payment has been received against the unpaid amount
Comply surfaces debts more than 12 months outstanding as candidates to review — a prompt, not the statutory trigger.
How to Claim:
- Go to Compliance > Bad Debt
- Review eligible debts
- Calculate relief amount
- Include in your next return
By Statute References
Compliance Dashboards
CoralLedger Comply includes dedicated dashboards for each 2025 reform:
| Dashboard | Location | Purpose |
|---|---|---|
| Construction VAT | Compliance > Construction VAT | $1M threshold tracking |
| Refund Eligibility | Compliance > Refund Eligibility | 50% rule monitoring |
| Bad Debt Relief | Compliance > Bad Debt | Write-off relief tracking |
| Tax Savings | Compliance > Tax Savings | Recovery opportunities |
| Apportionment | Compliance > Apportionment | Exempt vs taxable supply ratio and input VAT recovery |
Staying Compliant
Best Practices
- Update your categories - Ensure transactions use correct 2025 rates
- Track construction projects - Monitor against the $1M threshold
- Review refund eligibility - Check monthly if you have significant zero-rated sales
- Document bad debts - Maintain proper records for relief claims
- Monitor apportionment - If you sell unprepared food (Exempt from April 2026), review your input VAT apportionment ratio each period
Important Dates
- April 1, 2025 - Food store qualification rules effective
- July 1, 2025 - Four-category VAT framework fully effective
- September 1, 2025 - 5% reduced rate narrows to hygiene products and medications at licensed food stores
- April 1, 2026 - Unprepared food at licensed food stores moves to VAT Exempt; 5% rate narrows to hygiene/medication only (see Rate Transition Handling)
Need Help?
The 2025 reforms are complex. Contact us for assistance:
- Email: hello@digitalcarib.com
- Phone: Schedule a consultation