Transcript ABST - Sales tax

Belize General Sales Tax
(GST):
Presentation on GST Legislation
What do all these concepts mean?
A broad-based, multi-stage transaction tax on value added
broad-based  charged on a wide range of goods & services
multi-stage  charged at every level of the economic chain
transaction tax  charged on each transaction
value added  tax credit for businesses (output tax – input tax)
means tax base ≈ salary & wages plus profits
A consumption tax
consumption  passed on to consumers in price of each
consumer transaction; consumers cannot claim it back
What is a Supply?
= a transaction involving at least two entities:
a supplier who makes a supply to a recipient of the supply
= the supplier does some act that:
(a) causes something to pass from supplier to recipient; or
(b) causes some benefit to arise for recipient
= the recipient receives something tangible/intangible OR is
conferred with a benefit
e.g. sale, lease, licence, creation of rights or obligations
Supplies may involve other entities (to whom the thing
supplied is provided) but the tax consequences fall on the
supplier and the recipient
Two kinds of supplies:
supplies of goods and services
Supplies of goods = sales, leases, licences, options to
purchase: so long as they are supplies of tangible personal
property & real property
Supplies of services = any supply that isn’t of goods is a
supply of services; e.g. service industries, IP, supplies of
rights,etc.
Q: Does it matter whether a supply is of goods or services?
A: Yes; particularly for place of supply rules & export rules
Hotels & restaurants
Restaurants supply & serve food & beverages: this is
a supply of goods
Hotels supply services (serviced accommodation,
internet access, telephone services, tours) and goods
(food and beverages, use of yachts/diving equipment
etc)
Hotels often supply rights to their goods & services in
a separate transaction from the supply of the
goods or services themselves: the rights are taxed if
the goods or services themselves would be taxed
Who is required to pay GST?
On supplies:

Registered Suppliers collect it from recipients
(customers) by including it in the price of supplies

Some registered persons who acquire services offshore
(“imported services”) must charge GST to themselves
On imports:

All persons importing goods into Belize (no registration
requirement for importers);
How GST works for businesses
GST-registered businesses claim back GST on
most of their business inputs (input tax)
(input tax includes tax paid on imports and on goods/services
acquired from other registered businesses).
No input tax credits for private acquisitions, for
purchases that relate to making exempt supplies,
nor for cars (unless business = supplies of cars)
Input tax on capital acquisitions is immediately
creditable .
GST for registered businesses
GST charged on supplies = Output Tax
GST returns are submitted for each tax period
Net tax payable = OUTPUT tax – INPUT tax
Input tax that cannot be claimed back is also passed
on to consumers (because it is part of cost of sales)
Must have an GST Invoice to claim input tax credit
If GST invoice not received until a later period, the input
tax is deducted in the later period
Global basis for calculations
Net GST payable is calculated for each tax period
Input tax on a particular purchase does not have to be
credited when the output tax is paid for the supply to
which it relates
Rather, the input tax incurred in a tax period is credited
against the output tax collected in that period.
Tracing is only required in a limited sense:
for determining whether an acquisition relates to making
exempt supplies or private purposes (and therefore is
denied an input tax credit)
GST for unregistered businesses
Unregistered businesses cannot charge GST on their
supplies of goods and services and cannot claim back the
input tax incurred on business inputs



No output tax and no input tax credits, therefore they are
effectively input taxed
Same as suppliers who make exempt supplies
in both cases, the value added by the unregistered or
exempt supplier is not taxed
The uncreditable input tax on acquisitions is passed on in
the prices charged to consumers
Effective rate of tax depends on proportion of price that
represents untaxed value added.
How GST works for consumers
GST operates like a retail sales tax on consumer
purchases of goods and services in Belize
Consumers:
pay GST on imports
are ‘charged’ 10% GST when they buy goods or services
from registered businesses
effectively pay partial GST on purchases from
unregistered businesses
services will go down more than goods because they will
now be able to claim input credits.
Who will be registered?
To be registered you must:

be a taxable person (includes partnerships, trusts, and
unincorporated entities)

be carrying on a taxable activity (wider than business)

have an annual turnover ≥ the registration threshold
A person with more than one taxable activity will only need to
be registered once: persons are registered, not activities.
Some things are not counted in measuring the threshold:
exempt supplies, other non-taxable supplies, sales of capital
assets, closure of a business… …
Documentation requirements
A registered person will be required to:

issue GST invoices for taxable supplies to
other registered persons

issue sales receipts showing GST paid on
taxable supplies to unregistered persons

advertise prices GST-inclusive, stating how
much GST is included
display GST registration certificate at places of
business

To reiterate:
TAXABLE supplies:
 GST
payable; input tax credits allowed
ZERO-RATED taxable supplies:
 no
GST payable; input tax credits allowed
EXEMPT supplies:
 no
GST payable; no input tax credits
TRANSACTIONS are exempt; not persons
GST Treatment:
Supplies zero-rated until retailer taxed
e.g. rice sold by a registered restaurant
To
GSTD
=
$30
$20
$20
$20
-0
$20
Wholesaler
Importer
Rice
Cost: $60
Value added: $40
Sell for:$100
Rice
Cost: $100
Value added: $20
Sell for: $120
Rice
Restaur
ant
Rice &
Cost: $120 Beans
Value added: $80
Sell for: $200
plus GST: $20
Taxed Price: $220
300
Consumers
Cost: $220
(includes $20 tax)
GST: Supply to consumer is exempt
(e.g. financial services)
To customs
$6
$9
To GSTD
+
$4
$6
$10
-6
$4
+
=
$2
$3
$12
$12
- 10
$2
Importer
Wholesaler
Cost: $60
Value added: $40
Sell for:$100
plus GST: $10
Taxed Price: $110
Cost: $100
Value added: $20
Sell for: $120
plus GST: $12
Taxed Price: $132
Bank
Cost: $132
Value added: $80
Sell for: $212
plus GST: $0
Taxed Price: $212
Consumer
Cost: $212
(includes $12 tax)
Time of supply
When do you account for GST output & input tax?
If time of supply is in the current tax period
Time of supply is earlier of
(a) when invoice issued
(b) when all or part of the price is paid
Related parties – time of supply is earlier of above or
time when goods are delivered or services are provided
Supplies that span periods (leases, licenses etc) – each
part treated as a separate supply  therefore pay
periodically and pay GST periodically
Place of supply
Goods: place where goods are when supplied
Services: most are where supplier has place
of business; some are where supply
effectively used or enjoyed
Zero-ratings for restaurants
basic foods are zero-rated, but restaurant food is not
GST is more like a retail sales tax for restaurants
because many inputs will not be taxed (therefore no
input tax to claim back)
not entirely because rent of premises will be taxed,
power will be taxed, equipment, cutlery & crockery
etc all taxed therefore input tax credits for these
Zero-ratings for hotels
as for restaurants, basic foods are zero-rated, but
restaurant food is not
not likely to be any zero-ratings for hotels: the
services and goods they provide are consumed here
and are therefore taxable
this is the case even when they are sold via
transactions with related or unrelated non-resident
management companies and travel agents/tour
operators
Sales to non-residents
Many supplies of goods or services to offshore
recipients are zero-rated exports
This doesn’t apply to supplies of rights or options
(including vouchers) if the goods and services will
ultimately be consumed in Belize
Differences between approaches around the world
relate only to the VALUE on which GST is charged

all agree that there should be a local tax burden

question is whether value added by non-resident
suppliers should be taxed locally
Foreign Travel
Agent
Rights
Management
Company
Rights
Tourist
(while overseas)
Travels to Belize
Overseas
Belize
Tourist (in Belize)
Rights
Local Hotel
Services & goods
How are these rights taxed?
Not treated as an export even though supplied to a
non-resident (because the end consumption is in Belize)
Tax must be applied to the transactions
Some countries require the non-resident suppliers to
register and pay tax on each transaction (ensures the
full consumption price paid by the tourist is taxed)
More commonly, the non-residents are left out of the
tax regime
If the parties are related, market valuation rules apply
How are these rights taxed?
If the non-residents are not included, how much tax
is collected?
One option is that the local hotel must pay GST on
the sale to the management company based on the
value that will be charged to the tourist
Alternatively, this may only be required if all the
suppliers are related parties: if the non-residents are
unrelated entities, the local hotel can be taxed only
on what it charges to the first overseas supplier
The foreign tour operator’s/travel agent’s margin is
taxed where they are located.
What do you need to do?
identify whether you will exceed the threshold
if yes: will your supplies be taxable, exempt, zerorated, out-of-scope, or a combination
implement systems to ensure GST is charged on the
right kinds of supplies
work out how your prices should change: subtract
taxes saved and then add GST
get ready to print invoices and documents
be prepared for submitting GST returns
What do you need to do?
ensure there are appropriate links to your accounting
systems to separate GST from your income & costs
systems to capture input tax credit entitlements – to
ensure you hold GST invoices and to determine
connection between inputs and any exempt or private
outputs
will your customers be registered?
will your suppliers be registered?
are you record-keeping systems up to the task?