Ministry of Finance Presented by: VAT TEAM Thursday 12 th February, 2015 The Government of The Bahamas
Ministry of Finance (Implementation Issues & Resolutions, suggested treatments / VAT Rules & Regulations)
Recap the Basics Some Developments & Early Impressions Compliance Issues More on VAT Guidance Notes VAT Rules & Rulings Appeals Tribunal Issues and Challenges Progression to CRA Conclusion
Ministry of Finance VAT success depends on the actions of consumers and businesses each acting in their own interest Business pay VAT to government on a net basis: credit is taken for VAT paid on inputs before payment is made to government for VAT collected in output or supplies. Refunds from government arise if output VAT is not sufficient to provide for the allowed input credits. For most VAT registered businesses in the Bahamas approximately 100 percent of input VAT will be allowed as credits There is direct VAT cost for non-registered business making exempt supplies that is reflected in their prices. Even for exempt supplies price paid by consumer factors the full or accumulated amount of VAT paid throughout the chain of supply for the good or service, plus value added by the final supplier.
Ministry of Finance Extensive consultation and with industry and professional groups: o BCCEC/CRT, BHTA (hotels, Marina Operators, Tourist Shops), Cruise industry, Ground Tour operators, Bar Assoc, Medical Assoc, Retail Grocers, Manufacturers and Light Industries, BFSB, Clearing Banks, Insurers, BICA, Shipping companies and custom brokers, trade unions, BMDA, Building Contractors, Broadcasters, Vet, BACO, churches, schools, civic groups Modification of Framework towards simplification; lower rate; fewer exemptions Development of VAT rules, less onerous transition arrangements
Ministry of Finance Note: Modelling of VAT revenue based on compliance rates which start at registration. Registration exceeded forecast; revenue base is strengthen Response has been stronger for large and very large businesses Voluntary registration is stronger than would have been anticipated * Notable impacts: professional services and real estate * More regularized business licensees * Growing corp of very small businesses that must be catered to
Ministry of Finance Very high degree of consumer vigilance Large registrants are driving the voluntary compliance (example: health care and insurance) Minimum requirement of for a TIN for to do business with Government or to facilitate commercial importations (customs policy) brought more smaller business into the VAT accounting system
Ministry of Finance Field visits to businesses to offer support Investigation of consumer complaints Pricing issues, invoices & receipts, verification of VAT registrants Pre-audit activities Early Compliance Issues Investigated Non-registrants charging VAT Incorrect rate of VAT of charged Non-issuance of VAT Receipts/Invoices Invalid receipts and Invoices Non-display of VAT registration certificate Non-display of VAT inclusive Prices Duplicate charge of VAT Estimation of prices
Ministry of Finance Warning letters Fines have been recorded against taxpayers accounts (late registration) Infractions were recorded in taxpayers accounts o Will help inform determination of severity of future penalties Ongoing educating to provide clarity
Ministry of Finance Additional and revised Guidance Notes have been issued based on interactions some sectors International Financial Services: Matters related to non- resident and zero-rating International Cruise Sector: Focused guidance to distinguish between VAT treatment of activities on private islands versus onboard supplies of goods and services Insurance Sector: Intensive consultation on expanded guidance and transitional arrangements for the period Jan- June (examples: tax point for supply of services; input credits for claims settled before July 2015) Diplomatic Missions: Refund process and category of expenditures qualifying; reciprocity provisions
Ministry of Finance Administrative Penalties Penalties are categorized into: Minor ($25K); Serious ($75K); Very Serious ($150K) Some are automatic others are manually entered Note: Imposition of criminal fines and penalties would rely on prosecutions through the courts Examples of Automatic Penalties: o Failure to File a VAT Return: Very Serious o Failure to make Payment: Very Serious o Examples of Discretionary Penalties: o Failure to display VAT certificate: Serious o Failure to issue VAT Invoices and Sales Receipts: Very Serious o Failure to keep reliable accounting records: Very Serious
Ministry of Finance The VAT Comptroller is responsible for the exercise of all powers and discharge of all functions and duties of the Value Added Tax Department pursuant to the VAT Act. Comptroller can make a determination on whether or not a person is a taxable person or a transaction is a taxable transaction. Comptroller can issue VAT Rules prescribing the form and content of all applications, warning notices, returns, and other documents required for use under the VAT Act. Comptroller can withdraw or amend the decision, determination, or notice made or issued by a VAT Officer or VAT Comptroller . See Section 13 of VAT Act for Function and Powers of the Comptroller.
Ministry of Finance Rulings address specific matters posed to the VAT Comptroller by taxpayers; they have to be published VAT Department has been asked to issue rulings on number of cases (one made so far on Condo Association that will be published soon) Comptroller has to decide whether requests justify rulings or merely seek an interpretation
Ministry of Finance Initial process is concluded and the compilation of 20 rules is being Gazetted Rules cover administrative policies and provide further clarification and qualification; provide a path in some cases for issues that can be later migrated to the Regulations and Act
Ministry of Finance 2014-001: Transitional Rule - Hotel Booking o Describes the treatment of hotel bookings made prior to Sept 1st, 2014. o Determines the time of supply of the transactions of hotel bookings. o Describes the treatment of hotel bookings made on or after September 1st, 2014. 2015-001 : VAT Free Shopping o Describes the treatment of the sale of qualifying goods by approved VAT Free merchants. o Outlines the process of accounting for zero-rated transactions to tourist.
Ministry of Finance 2015-002 : Charities o Describes the registration process for charities. o Illustrates the qualifying goods and services that can be refunded. o Defines the schedule for filing for refunds. 2015-004 : Group Registration o Describes the requirements entities must meet to be approved for a VAT Group. o Describes the process for the Comptrollers decision. o Describes the treatment of the entities within the VAT Group for tax purposes. o Describes the duties of the Representative Entity in a VAT Group. o Describes changes to the VAT Group that the Comptroller can make. o Describes the process in revoking VAT Group Applications.
Ministry of Finance 2015-005 : Deferral of Import VAT o Describes who can make an application for the deferment of VAT on the importation of goods. o Defines which industries are eligible for the deferment of VAT. o Defines when an entity should account for the deferred VAT. o Defines the security and bond requirements for the deferal of VAT. 2015-006: Requirements for Security o Describes when a security is needed for VAT purposes. o Defines how much security is needed for each case a security is needed. o Describes in what form a security can be made.
Ministry of Finance 2015-007 : New Business - Input Tax Credit o Describes when a new business files a VAT Return. o Describes the requirements for new businesses to report to the Comptroller. o Describes the process of claiming input credits and what can be claimed for a new business. 2015-008: Promoters of Public Entertainment o Defines when a tax payer should register for VAT for the purposes of public entertainment. o Defines the process for registration and filing for sporadic public entertainment ventures.
Ministry of Finance 2015-010 :Content of Invoices and Receipts o Describes the content that should be included in a VAT Invoice, Sales Receipt, Self-Supply records and imported services records. o Describes what content of VAT invoices or receipts that can be waived. 2015-011 : Input Tax Credit - Passenger Vehicles o Describes when input tax deductions can be claimed on passenger vehicles. 2015-012 : Flat Rate Accounting Schemes o Defines who can register for the flat rate scheme. o Describes what can be claimed on a flat rate scheme application.
Recommend
More recommend
