Airbnb – Transforming the Short-Term Rental Market
February 5, 2020
By Kendira Turnquest
Nassau, The Bahamas – Airbnb has emerged in The Bahamas as a viable option for short-term rentals. Many Bahamians open their homes or invest in the purchase of rental properties to accommodate guests. Airbnb has further enhanced the tourism industry with an increased number of guests using the platform to book accommodations. In 2019, The Bahamas experienced the highest number of international arrivals in its history with 7.2 million visitors. It is notable that Airbnb has met the needs of a growing number of international guests. This online platform provides an alternative to the common practice of booking a hotel room while offering a wide selection of lodgings on our various islands.
Increase in Airbnb Rentals
In January 2019, The Central Bank of The Bahamas reported a thirty-seven (37) percent increase in Airbnb rentals compared to the same period of the previous year. As of this year, the Ministry of Tourism has reported a forty (40) percent increase in vacation home rentals since signing a Memorandum of Understanding (MOU) with Airbnb in August 2017. Growth in this market is of great value to the economy. However, it has brought heightened scrutiny and a need for legislation to address the use of Airbnb.
Taxes Applicable to Airbnb
There has been contention that Airbnb must be taxed in the same manner as the hotel sector. The increased interest in Airbnb has resulted in this service being regulated through recent legislative changes to the Value Added Tax Act. Prior to enhanced laws, Airbnb operators anticipated changes in the law that will allow the government to receive revenue through taxation. The MOU between the government and Airbnb addressed the possibility of collection and remittance of applicable taxes.
In the 2019/2020 Budget Communication, the government stated their pleasure at the growth of online marketplaces such as Airbnb, VRBO and HomeAway. The Budget Communication further acknowledges that Bahamians are now able to “create a new stream of income, while adding capacity to our number one industry”. However, in efforts to “level the playing field”, short-term vacation homes will now be required to pay VAT on their rentals. The government will be taxing vacation homes at the 12% VAT rate. It is a requirement for Airbnb and similar platforms to apply to become VAT registrants with the VAT Office at the Department of Inland Revenue.
Tourism officials report that they have established a positive partnership with Airbnb to facilitate this new revenue stream. VAT will be applied for vacationers staying at vacation home rentals for a continuous period not exceeding forty-five (45) days. The requirement to pay VAT is placed on Airbnb and similar platforms. There is also an obligation on operators of Airbnb rentals to obtain a business licence to engage in property rentals.
For assistance with VAT or business licence related matters, please contact:
Erica Paine – Partner, ep@gtclaw.com
Ryan Pinder – Partner, lrp@gtclaw.com
Kendira Turnquest – Associate, krt@gtclaw.com
Jayel Gibson – Associate, jdg@gtclaw.com
Kendira Turnquest is an Associate in the firm’s Financial Services, Private Client, Trusts and Estates Practice Group.