Time is beginning to wind down on the exemption period for value added tax (VAT) on insurance services, and the Ministry of Finance yesterday released a VAT guidance note for the insurance industry.
The note is a detailed document that states the VAT comptroller's position on the administration and enforcement of the law relating to insurance. It was prepared after intensive consultation and workshops with the insurance sector, the ministry said in a statement announcing the release of the document.
Guardian Business understands that consumers are already starting to call in and ask insurance agents if they can cancel their policies and start a new one before July 1 in the hopes of avoiding paying VAT.
"The guidelines provide for policies in place before July 1st to be grandfathered, but if you cancel or change your policy between now and then (or before your policy's normal expiry date), you will lose the 'grandfather treatment' and will be subject to VAT partially or perhaps completely," one agent said. "If your home policy runs from November 15, 2014 to November 15, 2015, and you decide to cancel it now (April 25, 2015), then your policy contract will be subject to VAT for the portion starting July 1st. If you leave your policy alone, it will be 'grandfathered' and not subject to VAT until November 15, 2015, which is the original expiry period."
The note states that all insurance services supplied in or from The Bahamas from January 1 to June 30, 2015 to a resident are exempt supplies. In this context, the "resident" is always assumed to be receiving coverage for a local risk. Meanwhile, insurance services, other than life insurance, annuities and savings products, supplied in or from The Bahamas from July 1 to a resident are taxable supplies.
The comptroller has confirmed that insurance services comprising life insurance, annuities and savings products will remain exempt supplies after June 30.
Those insurance services supplied to a non-resident from January 1, 2015 are zero-rated supplies, however, unless the insurance is in respect of property located or registered in The Bahamas. Insurance services for such property are exempt supplies from January 1 to June 30, 2015, and taxable supplies from July 1, 2015.
Provided that the benefit accrues outside The Bahamas, professional services comprising insurance services supplied to a non-resident from January 1, 2015 by an insurance adjuster, assessor, agent or other business carrying on the business of insurance other than as a registered company are zero-rated supplies.
The VAT Department notes that the public can view the insurance industry guidance note as well as other sector guides on the government's website at www.bahamas.gov.bs/VAT.
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