The Modern VAT

1
The Modern VAT

• Changing the face of taxation in
• St.Vincent and the Grenadines

2
The Modern VAT

• Presentation Layout
• Section 1 Introduction and Features of VAT
• Section 2 VAT for Businesses
  -
  registered and unregistered
• Section 3 VAT for the Final Consumer
• Conclusion

3
VAT Implementation Unit

• Mission Statement
• The Vat Implementation Unit exists to
  administer the Value Added Tax in St. Vincent and
  the Grenadines with a high degree of efficiency,
  integrity and fairness, thereby minimizing the
  compliance costs to businesses, while collecting
  revenues to facilitate economic growth and
  development.

4
VAT Implementation Unit

• Vision Statement
• The VAT Implementation Unit seeks to broaden
  the tax base, providing neutrality, equity and
  fairness in the current tax system for the
  development of St. Vincent and the Grenadines.

5
CHRONOLOGY OF VAT

• 1948 - France, at manufacturing level
• 1967 - Brazil, at all levels
• 1970/80s - It spread to 63 countries
• Presently more than 136 countries worldwide have
  the VAT system.

6
VAT Presence In The Caribbean

• In operation
• Haiti(1982),
• Dominican Republic (1983),
• Trinidad Tobago (1990), Jamaica(1991),
• Barbados (1997)
• Belize (2006)
• Dominica (2006)
• Guyana (2007)
• Antigua and Barbuda (2007)
• Being introduced
• St. Vincent and the Grenadines
• Being re-introduced
• Grenada

7
VAT Today Around The World

• Annual VAT revenues are more than US18 trillion.
• VAT accounts for 25 of annual tax revenue.
• VAT has replaced wholesale retail sales taxes
  and other indirect taxes.
• Rates vary Denmark (25) Panama(5)

8
TAXES REPLACED BY VAT

• Consumption tax
• Hotel tax
• Stamp duty on receipts (cash bills)
• Telecommunication surcharge
• Entertainment tax

9
Features of VAT

• BROAD-BASED charged on a wide range of goods
  services.
• MULTI-STAGE charged at all levels in the economy
  (not just retail).
• TRANSACTION TAX charged on every supply of goods
  services, including B2B, B2C, transactions
  with Govt.

10
Features of VATContinued

• CONSUMPTION TAX VAT is expected to be passed on
  to the consumers in the price of goods and
  services.
• DOMESTIC CONSUMPTION TAX imports are taxed
  exports are not taxed.

11
WHAT IS VAT?

• A tax imposed (charged) on
• -The value of imports
• -The value added or mark up on goods and
  services supplied by
• one business to another
• Business to the final consumers.

12
VAT CONCEPTS

• REGISTRATION THRESHOLD This is the minimum
  annual sales figure, which will determine
  whether or not a business will be registered and
  required to charge and collect VAT. In ST Vincent
  and the Grenadines the threshold is 120,000 per
  year.
• INPUT TAX The VAT registered businesses will pay
  on
• the value of imports and
• the value of goods and services acquired from
  other registered businesses in SVG
• OUTPUT TAX The VAT a registered business will
  charge customers on goods and services supplied.

13
VAT CONCEPTSContinued

• PAYMENT DUE The difference between the output
  and input VAT payable at the end of the tax
  period ( one month).
• STANDARD RATE This is the rate applied to
  taxable sales or supplies except those that are
  zero-rated.
• The standard rate is 15 percent.

14
VAT CONCEPTSContinued

• ZERO-RATED SUPPLIES
• - No VAT is charged (i.e. 0 percent).
• - Registered businesses can claim for
  VAT Paid on inputs.
• EXEMPT SUPPLIES
• - No VAT is charged.
• - Registered businesses cannot claim
  VAT paid on inputs.

15
VAT CONCEPTSContinued

• INVOICE CREDIT METHOD A registered business
  issues a VAT INVOICE to another registered
  business when a sale occurs.
• THIS SYSTEM PROVIDES THE EVIDENCE REQUIRED TO
  CLAIM INPUT TAX CREDIT.

16
VALUE ADDED TAX (VAT)FOR BUSINESSES
17
Who Will Be Registered?

• To be registered you must
• Be a taxable person (includes sole traders,
  companies, partnerships, trusts, and
  unincorporated entities).
• Be carrying on a taxable activity .
• Have an annual turnover the registration
  threshold.
• A person with gt one taxable activity only has one
  registration (persons are registered, not
  activities).
• Registration thresholds will be measured on the
  basis of annual sales i.e. taxable supplies.

18
VAT Treatmenttaxable supplies and imports
30- 1812
VAT on output 9 VAT on input -
3VAT payable 6
18- 99
Printer
Importer
Retailer
Consumer
CIFIDCSC 20 Mark up 40 Sell for60 plus
VAT 9 VAT-Inc price 69
Cost 120 Mark up 80 Sell for 200plus VAT
30VAT-Inc Price 230
Cost 60 Mark up 60 Sell for 120plus VAT
18 VAT-Inc Price 138
Cost 200 VAT30 VAT-Inc Price230
19
Comparative Analysis

• 
  Current System
  
  VAT System
• 
  
  
  
  
• CIF Value
  100
  
  100
• Add Import duty (20 of CIF)
  20
  20
• Sub total
  120
  
  120
• Customs Service Charge(4 of CIF)
  4
  4
• Sub Total
  124 Sub
  Total 124
• Consumption tax (20 of 120)
  VAT on Imports (15 of 124)
• (CIF Import duty)
  24 -Input tax
  credit 18.6
• Cost of the Product when leaving Customs
  148
  
• Mark up (50 of 148)
  74 Mark up (50 of 124)
  62
• Selling price
  222
  
  186
• 
  VAT
  on Sale (15 of 186)
• 
  
  -Output tax
  28
• 
  
  Selling Price (18628) 214
• 
  
  VAT payable to Govt

20
Documentation Requirements

• A registered person will be required to
• Issue VAT invoices showing VAT paid for taxable
  supplies to other registered persons.
• Issue Sales receipts showing VAT paid on taxable
  supplies to unregistered persons.
• Advertise prices VAT-inclusive, stating how much
  VAT is included.
• Display VAT registration certificate at places
• of business.

21
PURCHASE BOOK

• DATE
• SUPPLIER
• INVOICE NUMBER
• AMOUNT
• VAT

22
SALES BOOK

• DATE
• SELLER
• ITEMS
• SALES INVOICE NUMBER
• TRANSACTION CONTENT
• AMOUNT
• VAT

23
Invoicing Requirements

• IDENTIFICATION NUMBER FOR VAT REGISTERED
  TAXPAYERS
• DATE OF SUPPLY
• SUPPLIERS NAME,ADDRESS TAX IDENTIFICATION
  NUMBER (TIN)
• DESCRIPTION OF THE GOODS OR SERVICES SUPPLIED
• CUSTOMERS NAME,ADDRESS TAX IDENTIFICATION
  NUMBER (TIN)
• THE VALUE RATE OF TAX FOR EACH SUPPLY
• TOTAL TAX EXCLUSIVE AMOUNT
• THE RATE OF ANY CASH DISCOUNT
• THE AMOUNT OF TAX PAYABLE

24
2586

Serial No.
Date _______________________

Printers Name and TIN



Date of printing


Invoice batch from 2,000 to 4,000


Original to
buyer

First copy to tax control (to be kept by
purchaser)

does not entitle holder to a tax credit


Second copy to seller

does not entitle holder o a tax credit
25
WHAT BUSINESSES NEED TO DO

• Identify whether your business will exceed the
  threshold.
• If yes, will your supplies be taxable, exempt,
  zero-rated, out-of-scope, or a combination.
• Implement systems to ensure VAT is charged on the
  right kinds of supplies.
• Get ready to print invoices and documents.
• Be prepared to submit VAT returns and pay VAT.

26
WHAT BUSINESSES NEED TO DO Continued

• Ensure appropriate links in your accounting
  systems to separate VAT from income expenses.
• Develop systems to capture input tax credit
  entitlements.
• Ensure you hold VAT invoices and to determine if
  inputs are private, or relate to making exempt
  outputs.
• Determine whether your customers will be
  registered.
• Determine whether your suppliers will be
  registered.
• Determine whether your record-keeping systems are
  up to the task.

27
VAT for Unregistered Businesses

• UNREGISTERED BUSINESSES
• cannot charge VAT on supplies (Output Tax)
• cannot claim VAT paid on purchases or imports
  (Input Tax)
• However, unregistered business inputs will be
  taxed
• Same as suppliers who make exempt supplies
• In both cases, the value added by the
  unregistered or exempt supplier is not taxed.
• Uncredited input tax will normally be passed on
  in the prices charged to consumers.

28
MODEL VAT RETURN FORM

• General Information
•  1. Name of Business
  2. Tax Return No. 
• 
  
  
• 
  3. Return Period
  Y M D
  
• 4. Business Address
  5. Telephone no.
• 
  Fax no.
  
•  
• B. OUTPUT TAX
• Total Supplies made including VAT
  _______________6
• Zero rated and exempt supplies
  _______________7
• Supplies of guest accommodation
  _______________8
• Standard rated supplies
  _______________9
• VAT on supplies of guest accommodation
  _______________10
• VAT on Standard rated supplies
  _______________11
• VAT on special Transactions
  _______________12
• 
  Total Output Tax (101112) B
  _____________

29
MODEL VAT REGISTRATION FORM
30
VALUE ADDED TAX (VAT) FOR THE FINAL CONSUMER
31
VALUE ADDED TAX (VAT) FOR THE FINAL CONSUMER

• VAT operates similar to a retail sales tax on
  consumer purchases of goods and services in
  St.Vincent and the Grenadines. The standard rate
  is 15 percent.

32
Consumers will not pay VAT on goods and services
that are

• Zero-rated Items (VAT is charged _at_ 0)
• basic foods such as non-packaged white rice,
  cane sugar, flour, milk,
• chicken back, neck and wings and turkey
  neck and wings etc)
• some minimum kilowatts of electricity consumption
  (200 units)
• baby formulae
• computers
• exercise books
• newspapers and
• LPG (cooking gas)
• Exempt Supplies (No VAT is charged)
• 
  
• water supplied by CWSA
• financial services
• education services
• daycare services
• Insurance services

33
Consumers Should

• See the VAT registration certificate clearly
  displayed at business places.
• Know that prices displayed should include VAT.
• Collect sales receipt from businesses.
• Make sure that sales receipt has total VAT paid.

34
What Consumers Will Know

• Consumers would have a better understanding of
  the taxation system as a result of the VAT. That
  is, they would now know what is the VAT rate in
  SVG.
• Under the present system, consumers have no idea
  about the rates of the Consumption tax that they
  are paying currently.
• Consumers would be more knowledgeable about their
  consumption patterns and spending habits.
• Consumers would be in a better position to
  identify any person who will try to capitalize on
  the VAT system.

35
Consumers Should Expect

• That Prices should not change significantly in
  the economy.
• Prices of some goods and services will go down,
  up, or remain the same.
• There should not be any inflation with the
  introduction of VAT.
• Prices of those services that were not subjected
  to consumption taxes will go up slightly with the
  introduction of VAT.

36
Advantages of the VAT System to Producers and
Consumers

• The tax base will be broadened to include most
  goods and services.
• In general, neither goods nor services will be
  taxed twice.
• (i.e. no cascading)
• The invoice credit method would allow businesses
  to claim for taxes paid on inputs or purchases
  relating to the business activity.
• Our exports will be competitive on the foreign
  market.
• The VAT will help to simplify the current
  taxation system.

37
POINTS TO REMEMBER ABOUT VAT

• VAT is not a new tax, it is a replacement tax.
• The VAT rate is 15 percent.
• The Consumption tax is now 20 percent on
  average.
• Registered businesses can claim back for VAT paid
  on their purchases or imports.
• Consumers will know who is authorised to charge
  and collect VAT.
• Everyone will pay VAT.

38
Conclusion

• BE THE LABOR OF GREAT OR SMALL
• DO IT WELL OR NOT AT ALL!!!
• AND REMEMBER THAT
• VAT IS FOR YOU
• VAT IS FOR ME
• VAT IS FOR EVERYBODY
• LETS WORK TOGETHER TO MAKE SVG VAT-READY.