NASSAU, BAHAMAS — Yacht charters to The Bahamas have experienced a 40-percent decline year-over-year, a US yacht charter operator has estimated, arguing that the 10 percent Value-Added Tax (VAT) imposed on foreign-owned yacht charter contracts is crippling their operations.

"Yachts bring visitors to all the islands around the Bahamas where tourism is not readily accessible due to inadequate infrastructure," Captain Antonio Pazauelos Archdale told Eyewitness News.

"The yacht charter segment fills a significant gap in the economy and supports islands where alternative economic impacts are scarce, such as Staniel Cay and Black Point. Black Point is experiencing an emerging growth phase, largely attributed to yacht traffic. Many of these yachts depend on chartering to offset their operational costs. Yachts rarely generate profits. I incur operational costs of $2 million annually. If I can offset 40 percent of that, I consider it successful."

He continued: "Chartering helps mitigate ownership expenses. On average, most yachts aim to charter for 10 to 12 weeks a year. Currently, with a 14 percent VAT, the burden falls on the yachts, as neither brokers nor clients are paying it. The financial offset does not make sense. I'm facing a scenario where I'll lose 10 percent of my revenue due to this tax, as I won't secure any charters, potentially leading to the owner deciding to sell the boat."

The Government's decision to impose a 10 percent VAT on foreign-owned yacht charter contracts in the 2022-2023 Budget effectively increased the sector's tax rate from 4 percent to 14 percent when factoring in the existing Port Department fee.

Archdale emphasized: "It's easy to observe bustling marinas in December, but examining the period between July and September provides a realistic view of the industry's struggles. We're experiencing a decline in charter bookings. The market is down by at least 40 percent year over year. The Bahamas holds a unique position due to its exceptional natural beauty, proximity to the US, and abundance of places to explore.

"I'm not advocating for the elimination of the tax; rather, I'm calling for fair taxation. Naturally, the Bahamas deserves a share of revenue, but a 14 percent tax rate is crippling us. Chartering is on the brink of becoming financially unviable. The operational costs of the boat outweigh the potential offsets."

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