Why 10% VAT Costs You More Than 10%

By George · updated 2026-10-08 · worked examples checked against the Bahamas Tariff Act (schedule version 2026-2027)

VAT in The Bahamas is 10%, and most people take that to mean "add 10% to the price." That isn't how it works, and on high-duty goods the difference is big enough to affect whether something is worth buying abroad.

VAT is charged on the landed cost

The base for VAT isn't the item price. It's the landed cost: the item's value plus freight, import duty, the customs processing fee and any environmental levy. VAT is charged on the duty, the fee and the levy as well as on the goods.

So the more duty an item carries, the larger the base, and the larger VAT is as a share of what you paid the shop.

The same 10% at three duty rates

Take a $100 item and change only the duty rate:

Duty-free. The base is $100 plus $10 processing, so $110. VAT is $11.00, which is 11% of the price.
45% duty (a soundbar, games console or power drill). The base is $100 + $45 duty + $10 processing = $155. VAT is $15.50, or 15.5% of the price.
A $600 TV at 35% duty with the $5 levy. The base is $825 and VAT is $82.50, which is 13.75% of the $600 price.

The VAT rate is 10% every time. What changes is the base it's applied to.

Why quick estimates come out low

A common shortcut is "45% duty plus 10% VAT, so about 55% on top." For the $100 item above, the actual total import charges are $70.50, or 70.5%, because the processing fee is added and VAT is charged on top of both the duty and the fee.

These shortcuts all err in the same direction. Adding the percentages, or applying VAT to the price, gives a figure that's too low, which is a large part of why shipments so often cost more than people expect at the counter.

Freight is in the base too

Freight lands in the VAT base — and in the duty base. Customs assesses duty on the CIF value (cost, insurance and freight), so on that $600 TV, $120 of freight makes the dutiable value $720. Duty becomes $252 (35% of $720), the processing fee stays at its $10 minimum, the levy is $5, and VAT is 10% of $987 = $98.70. Total import charges rise from $307.50 to $365.70 — $58.20 more in charges, on top of the $120 freight itself. All in, the freight adds $178.20 to what you pay.

That's the main reason a forwarder's "$X per pound" quote understates what you'll pay. Put the freight into the calculator instead of adding it on at the end.

A quick way to estimate

For a rough figure, multiply the item price by:

1.11 for a duty-free item
1.22 at 10% duty (smartphones)
1.33 at 20% (clothing, shoes, toys)
1.50 at 35% (TVs, microwaves, vacuums)
1.61 at 45% (speakers, consoles, power tools)

The formula behind these is 1.1 × (1.01 + duty rate). The 1.01 is the processing fee and the 1.1 is VAT on everything, so the compounding is already included.

Two caveats. The multipliers assume no freight; freight raises the figure, because it's in both the duty base and the VAT base. They also assume an entry of $1,000 or more, where the processing fee is a true 1%. Below $1,000 the $10 minimum applies and the effective rate is higher. On a $100 item, add about 10 percentage points to what the multiplier gives you.

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