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General Sales Tax (GST):
Presentation on GST Legislation
LAWYERS
1. Is a Broad-Based, Multi-Stage Tax on Value Added
Broad–based: charged on a wide range of goods
and services
Multi-stage: charged at every level of the economic chain
Value added: is a tax on the mark up on goods and services supplied by one business to another or to the final consumer
WHAT IS GST?WHAT IS GST?
•A transaction tax on supplies
Charged on each and every transaction involving the supply of goods or services, including business to business and business to consumer transactions
•A consumption tax
Passed on to consumers in price of each consumer transaction
WHAT IS GST (cont)
•RATES - STANDARD RATE IS 10%
- ZERO RATE (0%)
•THRESHOLD $75,000.00 PER ANNUM
•PRICES CHARGED TO BE GST INCLUSIVE
•EXEMPT AND ZERO RATED GOODS OR SERVICES
MAIN FEATURES OF GST
Basic concepts
taxable transactions: taxable supplies of goods or services taxable imports
taxable activities
taxable persons; registration requirements
place of supply (in Belize)
time of supply (when to pay)
zero-rated (0%) & exemptions (not taxable)
Taxable supplies
must be a supply
made in the course of the furtherance of the business
in Belize
by a taxable person(registered or required to be registered)
not exempt
Supplier goods or services to Recipient(action) (thing supplied) (receipt)
= any transaction involving at least two parties:a supplier makes a supply to a recipient of the supply
= the supplier does something to:(a) cause something to pass from supplier to recipient; or(b) cause some benefit to arise for recipient
= the recipient receives/acquires the thing supplied
Supplies may involve other entitiese.g. the supplier contracts with the recipient to provide something to a third party but the tax consequences fall on the supplier and the recipient
Supplies of goods and services
Supplies of goods: goods = tangible property (real or personal); not only sales – includes leases, licences, options to purchase.
Supplies of services: everything else, e.g. service industries (including lawyers & accountants), IP, supplies of rights, etc
The distinction is particularly relevant for the jurisdictional rules (place of supply & exports)
Taxable activity (broader than business)
any activity carried out on a regular or continuous basis & involving the supply of goods or services
includes business, trade, manufacture, profession or vocation
licensing of copyright, leasing of property
includes non-profit activities (because aim is to tax consumption)
one-off activities carried out with a profit-making intent (e.g. acquire property to develop & sell)
Taxable activity (broader than business)
Doesn’t include:
hobbies & private activities
employment (employee is your value added)
acting as director of a company (except where engaged to do so through a business, e.g. where lawyer or accountant engaged to act as Director)
government activities of supplying services to the public
Taxable persons
Person includes non-legal persons such as partnerships, trusts, and unincorporated entities
must be registered if an annual turnover ≥ threshold ($75,000 p.a.)
persons are registered, not activities:if person has >1 taxable activity, all will count towards threshold, only one registration
Exclude from turnover your exempt supplies, other non-taxable supplies, sales of capital assets…
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
special rules for rights and options (including vouchers and phone cards)
Some supplies are not taxed
zero-rated (0%) & exemption (no tax)
difference lies in the input tax credit entitlements
no credits for exempt supplies
therefore the supplies are “input taxed”
undeductible input tax passed on in the price of exempt supplies is hidden from consumers
Zero-rated supplies by accountants and lawyers
Most common will be exported services
supply to a non-resident who is outside Belize when supply is made
services physically performed outside Belize
patent attorney services for rights to be used outside Belize
Not zero-rated if billed to a non-resident but provided to a local person (e.g. global services contracts)
Imports
any import by any person registration not required
aim is to tax value of consumption in Belize taxed charged on:customs value + customs duty & other import taxes + freight & insurance
close links between GST on imports and customs duties: collection (by Comptroller) administration (under customs laws); time & place of payment (when & where the duty is paid)
Net basis for payments
Output tax = GST paid on supplies(not tax paid on imports)
Input tax = GST included in price of acquisitions plus GST paid on imports
Net amount paid to DGST in each tax period =
total output tax – total input tax for the period
Adjustments for bad debts, changes to transactions (cancellations, variations, volume discounts, etc), and changes in use of assets also factor in to the calculation of the net amount payable
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
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)
Input tax credits for businesses
Registered businesses can reclaim the GST incurred on most business inputs (purchases & imports)
No input tax credits for: private acquisitions acquisitions that relate to making exempt supplies cars (unless business = supplies of cars) entertainment
Input tax on capital acquisitions is immediately creditable.
Apportionment (partial exemption)
Input tax apportionment formula where inputs relate to more than one type of supply
First: allocate inputs that are wholly related to one type of supply or other
Then: everything else is deductible based on
the on the formula: A * B/C
A = input tax not directly allocatedB = value of taxable suppliesC = value of all supplies
GST for unregistered businesses
Unregistered businesses, end consumers, and persons making exempt supplies are all treated the same way
No output tax and no input tax credits effectively input taxed
Exempt suppliers and small businesses add value that isn’t tax (end consumers can also add value that isn’t taxed, e.g. cakes & jams sold at a school fair, hobby proceeds)
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.
GST 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
GST ≈ a retail sales tax on consumer purchases of goods and services in Belize
Wholesaler
Importer
Retailer
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: $120Value added:
$80Sell for: $200plus GST: $20
Taxed Price: $220
Cost: $220(includes $20
tax)
GST Treatment:taxable supplies and imports
$6
$10- 6$4
$4
$12- 10
$2
$20- 12
$8
$2 $8
To customsTo
DGST
$4 $2 $8+ + + = $20$6
Wholesaler
Importer Retailer
Consumer
Cost: $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. beans sold by a registered restaurant
$20- 0
$20
$20
To DGST
$20 = $20
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)
$6
$10- 6$4
$4
$12-
10$2
$2
To customs
To DGST
$4
$2
+ + = $12
$6
Wholesaler
Importer Retailer
Consumer
Cost: $60Value added:
$40Sell for:$106
Cost: $106Value added:
$20Sell for: $126
Cost: $126Value added:
$80Sell for: $206
Cost: $226(includes $6
tax)
GST Treatment:all suppliers are under the threshold
$6
To customs= $6$6
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
get ready to print invoices and documents
be prepared for submitting GST returns
What do you need to do? Cont’d
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 your record-keeping systems up to the task?
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