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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.

RateApplication
10% StandardDefault rate for most goods and services
5% ReducedHygiene products and medications at licensed food stores (narrow scope)
0% Zero-RatedExports, international transport, and Third Schedule unprepared food sold by retailers that do not qualify as licensed food stores
ExemptUnprepared food at licensed food stores (from 1 Apr 2026), financial services, residential rent, education, healthcare
April 2026 Update

From 1 Apr 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:

  1. Calculate total zero-rated supplies
  2. Calculate total taxable supplies
  3. If zero-rated >= 50% of taxable, you can claim refunds
  4. 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 (1 Apr 2025)​

Food stores have specific VAT treatment. The operative definition is the VAT (Amendment) (No. 2) Act, 2025, s. 2(a) (in operation 1 July 2025), which defines "food store" in three limbs - a business qualifies if it meets any of the following:

  1. At least 10% of the prior year's turnover under its business licence is from the sale of unprepared food for human consumption;
  2. It is new in the year (no prior year's turnover) and at least 10% of its estimated turnover for the year is from the sale of unprepared food; or
  3. It is licensed to operate as a pharmacy (no turnover threshold applies to this limb).

The gazetted text lists the limbs as alternatives - any one qualifies. In practice, qualification also relies on proper product categorization and accurate record-keeping so the unprepared-food turnover can be evidenced.

Qualify at:

  • Navigate to Admin > Vendor Qualification
  • Upload license documentation
  • Maintain qualification status

April 2026 Food Exemption Transition​

Effective 1 Apr 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 1 Apr 2026. The category turns on seller qualification, not on a different item list.

Exempt vs Zero-Rated - Why It Matters:

ExemptZero-Rated
VAT charged to customerNoNo
Supplier claims input tax creditsNoYes
Triggers apportionmentYesNo

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 1 Apr 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:

  1. Go to Compliance > Bad Debt
  2. Review eligible debts
  3. Calculate relief amount
  4. Include in your next return

By Statute References​

Compliance Dashboards​

CoralLedger Comply includes dedicated dashboards for each 2025 reform:

DashboardLocationPurpose
Construction VATCompliance > Construction VAT$1M threshold tracking
Refund EligibilityCompliance > Refund Eligibility50% rule monitoring
Bad Debt ReliefCompliance > Bad DebtWrite-off relief tracking
Tax SavingsCompliance > Tax SavingsRecovery opportunities
ApportionmentCompliance > ApportionmentExempt vs taxable supply ratio and input VAT recovery

Staying Compliant​

Best Practices​

  1. Update your categories - Ensure transactions use correct 2025 rates
  2. Track construction projects - Monitor against the $1M threshold
  3. Review refund eligibility - Check monthly if you have significant zero-rated sales
  4. Document bad debts - Maintain proper records for relief claims
  5. Monitor apportionment - If you sell unprepared food (Exempt from April 2026), review your input VAT apportionment ratio each period

Important Dates​

  • 1 Apr 2025 - Food store qualification rules effective
  • 1 Jul 2025 - Four-category VAT framework fully effective
  • 1 Sep 2025 - 5% reduced rate narrows to hygiene products and medications at licensed food stores
  • 1 Apr 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 VAT framework, as amended through 2026, is complex. Contact us for assistance:

Next Steps​