Antigua and Barbuda Sales Tax (ABST): Presentation to Chamber of Commerce & Employers’ Federation

Antigua and Barbuda Sales Tax (ABST):

Presentation to Chamber of

Commerce & Employers’

Federation

What is the proposed ABST?

What does it mean to call ABST a consumption tax and 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

on value added tax credit for businesses (output tax – input tax) means tax base ≈ salary & wages plus profits

on consumption passed on to consumers in price of each consumer transaction

Terminology: “Supply” … … a very broad concept

= a transaction involving at least two entities: the supplier & the recipient of the supply

= any transaction if a recipient receives something tangible/intangible, or is conferred with a benefit, because something passes from supplier to recipient, or because action of supplier causes benefit to arise for recipient

e.g. sale, lease, licence, creation of rights or obligations

can also involve other entities (someone 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

Goods = tangible personal property & real property

Supplies of goods = sales, leases, licences, options

to purchase, commodity futures

Supplies of services = any supply that isn’t a supply

of goods is a supply of services

Services includes service industries, supplies of

rights, IP, restrictive covenants, undertakings to do

or not do something, issue/transfer of shares, units

in unit trust, etc.

Who is required to pay ABST?

On supplies:

Suppliers - but they collect it from recipients (customers) by including it in the price of supplies

Only registered suppliers pay ABST on supplies of goods or services in Antigua and Barbuda

Some registered persons who acquire services offshore (“imported services”) must charge ABST to themselves

On imports:

All persons importing goods into Antigua and Barbuda (no registration requirement for importers);

How ABST works for businesses

ABST is not intended as a tax on businesses.

ABST-registered businesses can usually claim back ABST on their business inputs(i.e. tax charged on imports or on goods and services acquired from other registered businesses in Antigua and Barbuda).

ABST incurred on inputs is called INPUT TAX.

Input tax on capital acquisitions is immediately creditable – c.f. income tax depreciation

ABST for registered businesses

Registered persons ‘charge’ ABST to consumers by including it in their prices

ABST charged on supplies is called OUTPUT TAX

Input tax incurred on purchases is offset against output tax on sales

Input tax that cannot be claimed back is also passed on to consumers (because it is part of cost of sales)

ABST for registered businesses

ABST returns are submitted for each tax period

Net tax payable = OUTPUT tax – INPUT tax

Must have an ABST Invoice to claim input tax credit

Returns and net payments due 28 days after the end of the tax period

Some suppliers will have a net refund (those making zero-rated supplies) 6 month carry forward; then payable after 90 days exporters – no carry forward; refunds payable after

90 days

Global basis for calculations

Net ABST payable is calculated on a global basis for each tax period

Input tax on a particular purchase is not credited against the output tax for the supply it contributes to

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)

ABST for unregistered businesses

Unregistered businesses cannot charge ABST 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 ABST works for consumers

ABST operates like a retail sales tax on consumer purchases of goods and services in Antigua and Barbuda

Consumers:

pay ABST on imports

are ‘charged’ 15% ABST when they buy goods or services from registered businesses

effectively pay partial ABST on purchases from unregistered businesses

prices will not go up by 15% because other taxes are being removed – services will go up more than goods; some prices will go down

Who will be registered?

To be registered you must:

be a 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 ABST invoices for taxable supplies

to other registered persons issue sales receipts showing ABST paid on

taxable supplies to unregistered persons advertise prices ABST-inclusive, stating

how much ABST is included display ABST registration certificate at

places of business

Understanding ABST Understanding ABST

TAXABLE supplies: ABST payable; input tax credits allowed

ZERO-RATED taxable supplies: no ABST payable; input tax credits

allowed

EXEMPT supplies: no ABST payable; no input tax credits

Zero-rated supplies

Exports of goods & services (because consumed outside Antigua and Barbuda)

Supplies of going concerns

The Government proposes to include some provisions to zero-rate basic needse.g. the basic basket of goods and the basic charge for electricity and water.

Exempt supplies

o Financial services

o Sale and rent of residential property

The Government proposes to include

some provisions to exempt basic needs,e.g. education, public health services, dental

and nursing services, funeral & related

services, charitable activities, etc.

Exemptions and Zero-ratings

Transactions are exempt, not persons

e.g. financial supplies are exempt, not financial suppliers or institutions

a sale of shares is exempt, no matter who the supplier is

insurance is exempt, even if not supplied by an insurance company

loans etc. are exempt

PrinterImporter

Retailer

Consumer

Cost: $60Value added: $40

Sell for:$100plus ABST: $15

Taxed Price: $115


Sell for: $300plus ABST: $45

Taxed Price: $345

Cost: $300Value added:

$100Sell for: $400

plus ABST: $60Taxed Price:

$460

Cost: $460(includes $60

tax)

ABST Treatment:taxable supplies and imports

$15- 9$6

$45- 15$30

$60- 45$15

To customs

$9

Paper

$6

To IRD

Paper

$30

Advertising Material

$15

Goods

$6 $30 $15+ + + = $60$9

PrinterImporter

APUA Consumer



Taxed Price: $115


$20Sell for: $120


$138



Taxed Price: $200

Cost: $200(no tax)

ABST: Supply to consumer is zero-ratede.g. electricity subject to the basic charge

$9

$15- 9$6

$6

$18- 15

$3

$ 0- 18

-$18

$3 - $18

To customs To IRD

$6 $3 - $18+ + + = $0$9

Paper Electricity

Paper Printed Invoices

Wholesaler

Importer Retailer

300 Consumer

sCost: $60Value added: $40

Sell for:$100


$20Sell for: $120


$80Sell for: $200


$230


tax)

ABST Treatment:Supplies zero-rated until retailer taxede.g. macaroni sold by a registered restaurant

$30- 0

$30

$30

To IRD

$30 = $30

Macaroni

Macaroni

Macaroni

MacaroniCheese

Wholesaler

Importer Retailer

Consumer



Taxed Price: $115



Taxed Price: $138



Taxed Price: $218


tax)

ABST: Supply to consumer is exempt(e.g. financial services)

$9

$15- 9$6

$6

$18-

15$3

$3

To customs

To IRD

$6 $3+ + = $18$9

BankImporter

Retailer

Consumer



Taxed Price: $115


$20Sell for: $135


Sell for: $215plus ABST: $32.25

Taxed Price: $247.25

Cost: $247.25(includes $32.25

tax)

ABST: supply to retailer is exempte.g. financial services

$9

$15- 9$6

$6

$32- 0

$32

$32

To customs To IRD

$4 $32+ + + = $32$9

Wholesaler

Importer Retailer

Consumer


$40Tax: $9

Sell for:$109


$20Sell for: $129


$80Sell for: $229


tax)

ABST Treatment:all suppliers are under the threshold

$9

To customs= $9$9

Structure of the Act

Basic provision – definitions then

application of the law

Administrative provisions

Schedules (zero-ratings & exemptions)

Regulations – to cover transitional

issues

Documents

Antigua and Barbuda Sales Tax (ABST): Presentation to Chamber of Commerce & Employers’ Federation