In a nod to the concerns of the business community over the adjustment of prices on goods held for sale prior to January 1, 2015 - when the value-added tax (VAT) will be introduced - the government on Tuesday released the complete details of the transitional bonded warehouse system.
The system is designed to allow VAT-registered businesses to take advantage of the reduction in customs duties that take effect on January 1, 2015. It will be managed by the Customs Department and may require qualifying importers to post a financial bond.
With the bond in place, during the months of November and December these VAT registrants will be allowed to import items targeted for duty savings without having to pay the taxes up front. Businesses will have to report on sales of inventories made before December 31 and pay duty on sold items at the current rates that are in effect. Bonded items, which remain in inventory after December 31, will benefit from the lower rates taking effect on January 1, 2015. Remaining stocks will also be subject to VAT. Merchants have until February 28, 2015 to pay both the duty and VAT.
The Customs Department has established rigid accounting procedures for the virtual warehouses. Firms will have to use BICA (Bahamas Institute of Chartered Accountants)-licensed external accounts to certify changes in their stocks. The inventories will also be subject to random inspections by customs officials.
A spokesperson for the Ministry of Finance acknowledged that "the two-month period for qualifying stocks is less than what most businesses would want", but added that the managed timeframe is intended to contain customs' administrative costs and minimize risks for fraudulent loss of government revenues, while still allowing consumers to benefit early on from the duty reductions.
The deadline for applications to the Customs Department to participate in the system has been pushed back from September 30, 2014 to October 15, 2014. Guardian Business reported that U.K. VAT consultant Dean Wootten thought the original deadline too tight, and last week said he expected it to be pushed back.
Nonetheless, given that the government's Central Revenue Agency - which will administer both VAT and business licenses - is not yet fully functional, as Financial Secretary John Rolle has admitted, it is unclear how the government intends for businesses to become VAT registrants by October 15, 2014.

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