The Bahamas to Impose Tax on Private Islands Utilized by Cruise Lines

Reports indicate that the Bahamas intends to impose a 10% charge on goods and services offered by cruise lines on their private islands.

As per The Tribune, the Bahamian government intends to implement a new charge on March 1, ending a nine-year exemption for private islands from the Bahamas' value-added tax (VAT). Simon Wilson, the Ministry of Finance's financial secretary, explained to The Tribune that this VAT aligns private island activities with the taxation level of Bahamians selling goods and services to travelers elsewhere.

The Bahamas hosts the majority of cruise lines' private destinations, including Royal Caribbean's Perfect Day at CocoCay, Norwegian Cruise Line's Great Stirrup Cay, Disney Cruise Line's Castaway Cay, MSC Cruises' Ocean Cay, Princess Cruises' Princess Cays, and Carnival Cruise Line's Celebration Key.

The rapid implementation may prompt cruise lines to initially absorb a significant portion of the tax increase, given the industry's historically high booking rate. Norwegian Cruise Line Holdings, for instance, reported a record-high booking rate of 60% to 65% of 2024 itineraries in November. Anthony Hamawy, president of Cruise.com, suggests that this tax could impact travel advisors if cruise lines raise noncommissionable fees (NCFs) to offset the tax. He anticipates that eventually, cruise lines will pass the increased costs to consumers through price hikes, potentially resulting in a pay cut for many.

This decision follows the Bahamas government's recent increase in cruise passenger tax and introduction of additional tourism-related taxes in January.