Bahamas to End Tax-Free Status for Cruise Line Private Islands Starting March 2024

In a significant policy shift, the Bahamas government is set to revoke the tax-free privileges that many cruise lines have enjoyed for their private islands in the region. This move, effective from March 1, 2024, aims to create a more equitable business environment within the country. The Tribune, a local news outlet, first reported this development after reviewing a document from the Bahamas Department of Inland Revenue, which was later confirmed by government officials.

The upcoming change will see a standard 10 percent tax applied to goods and services on these islands, aligning them with the broader tax framework of the Bahamas. This adjustment impacts several popular destinations, including Royal Caribbean’s Perfect Day at Coco Cay, Mediterranean Shipping Company’s Ocean Cay, Disney Cruise Line’s Castaway Cay and Lighthouse Point, and Holland America’s Half Moon Cay.

The financial implications of this tax adjustment are not yet clear, as the Bahamian government does not have access to sales records from these private islands. Nonetheless, Simon Wilson, the Bahamian Minister of Finance, elucidated the rationale behind the decision. He noted that the original exemption was based on a misunderstanding of the nature of commercial activities on these islands, which were thought to be extensions of the cruise packages. However, it has become evident that these activities constitute separate commercial transactions, often directly competing with local Bahamian businesses.

Wilson highlighted the significant growth in commercial operations on these islands over the years, with activities now directly competing with those offered by local enterprises. This situation has prompted the government to ensure that all commercial activities, including those by cruise lines, are subject to Value Added Tax (VAT) and Business License fees, promoting fair competition across all sectors.

This policy revision marks a pivotal moment for the Bahamian economy and its tourism sector, as it seeks to balance the benefits of hosting cruise line private islands with the need to support and protect local businesses and their contributions to the economy.