According to Seatrade, the move by The Bahamas to impose a 10% VAT (Value Added Tax) on the goods and services provided by cruise lines on their private islands has shocked the industry.
Until recently, the Bahamian government allowed goods and services on private islands of cruise lines to be exempt from VAT.
The Bahamian government plans to impose the 10% VAT on goods and services provided by cruise lines on their private islands starting from 01MAR, 2024.
Seatrade Cruise News reports that this announcement was not communicated to the cruise lines but was discovered in a draft document. The cruise lines will initially have to bear the cost increase before passing it on to passengers, resulting in a significant price hike for goods and services on private islands.
Carnival, MSC, and Royal Caribbean all have small private islands where they stop as part of an itinerary. Several private islands would be impacted, like Royal Caribbean's Perfect Day at CocoCay, Norwegian's Great Stirrup Cay, Disney Cruise Line's Castaway Cay, and others.
According to The Tribune, Finance Ministry Secretary Simon Wilson has stated that the upcoming changes, set to take effect in four weeks, are aimed at creating a "taxation level playing field" between Bahamian providers who service cruise line guests at other destinations and the cruise lines' private island activities. As per Wilson, it is difficult to estimate the amount of revenue that may be generated from the changes since the government does not have access to the cruise lines' commercial records.
The items that will attract VAT include food and beverages, recreational activities, equipment rental, spa services, cabana rental, and shore excursions, Seatrade reported. This will also include goods brought off the ship for use or consumption on private islands, such as food that is already included in the cruise ticket price.
Cruise lines are expected to continue sending ships to these destinations, given their significant investment and high ratings among passengers. However, it is possible that the new VAT policy may impact the cruise lines' Nassau calls in the future.
