VAT Exemption on Unprepared Foods
Effective 1 April 2026 unprepared foods will be exempt from VAT. Note, however, that the exemption is only applicable to food items sold unprepared in The Bahamas by a food store or imported by a food store to be sold unprepared in The Bahamas. Therefore, the importation of unprepared foods by individuals or other entities that are not VAT registrants continues to be subject to VAT at the standard rate of 10%.
The list of food items is extensive and is outlined in a new Part III of the Second Schedule to the Value Added Tax Act (Ch. 370A). The VAT exemption is applicable to all food items that were previously subject to VAT at the reduced rate of 5%.
What does this mean for the public?
Consumers will no longer pay VAT on unprepared foods purchased from food stores and pharmacies in The Bahamas. However, consumers will continue to pay VAT on the importation of unprepared foods into The Bahamas.
What does this mean for food stores?
Food stores and pharmacies will need to update their systems to ensure that VAT is not charged on the sale of unprepared foods. In addition, food stores and pharmacies will no longer pay VAT on the local purchase of unprepared foods or the importation of food items that will be sold unprepared in The Bahamas.
Affected registrants will, however, no longer be able to claim input tax deduction (i.e. VAT credits) on VAT paid on purchases, overheads and other expenses that are directly allocable to the supply of unprepared foods. Additionally, where inputs are used for both exempt food items and taxable supplies, the input VAT deduction allowable will need to be apportioned.
Extension of 5% VAT reduced-rated non-food items to all persons
Commencing 1 April 2026, the 5% VAT reduced rate on essential non-food items will be extended to all VAT registrants. The 5% rate was previously restricted to food stores and pharmacies. The importation into The Bahamas of essential non-food items by all persons will also be subject to VAT at the reduced rate of 5%.
The list of essential non-food items includes baby and adult diapers, feminine hygiene products, medications, and medical supplies.
These changes are made pursuant to the Value Added Tax (Amendment) Act, 2026.
AUTHOR
The information above is provided for the general interest of our readers but is not intended to constitute legal advice. Clients and the general public are encouraged to seek specific advice on matters of concern. This article can in no way serve as a substitute in such cases.
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