belize general sales tax (gst): presentation on gst legislation
TRANSCRIPT
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 benefite.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
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.
GST operates like a retail sales tax on consumer purchases of goods and services in Belize
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
Wholesaler
Importer Restaurant
300 Consumer
sCost: $60Value added: $40
Sell for:$100
Cost: $100Value added:
$20Sell for: $120
Cost: $120Value added:
$80Sell for: $200plus GST: $20
Taxed Price: $220
Cost: $220(includes $20
tax)
GST Treatment:Supplies zero-rated until retailer taxede.g. rice sold by a registered restaurant
$20- 0
$20
$30
To GSTD$20 = $20
Rice Rice Rice Rice &Beans
Wholesaler
Importer Bank Consumer
Cost: $60Value added: $40
Sell for:$100plus GST: $10
Taxed Price: $110
Cost: $100Value added: $20
Sell for: $120plus GST: $12
Taxed Price: $132
Cost: $132Value added: $80
Sell for: $212plus GST: $0Taxed Price:
$212
Cost: $212(includes $12
tax)
GST: Supply to consumer is exempt(e.g. financial services)
$9
$10- 6$4
$6
$12-
10$2
$3
To customs
To GSTD
$4 $2+ + = $12$6
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
Management Company
Local Hotel
Foreign Travel Agent
Tourist (while overseas)
Belize
Overseas
Rights
Rights Rights
Tourist (in Belize)
Services & goods
Travels to Belize
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, zero-rated, 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?