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General Sales Tax (GST): Presentation on GST Legislation LAWYERS

General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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Page 1: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

General Sales Tax (GST):

Presentation on GST Legislation

LAWYERS

Page 2: 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?

Page 3: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

•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)

Page 4: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

•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

Page 5: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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)

Page 6: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 7: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 8: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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)

Page 9: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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)

Page 10: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 11: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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…

Page 12: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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)

Page 13: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 14: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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)

Page 15: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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)

Page 16: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 17: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 18: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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)

Page 19: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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.

Page 20: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 21: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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.

Page 22: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 23: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 24: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 25: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 26: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 27: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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

Page 28: General Sales Tax (GST): Presentation on GST Legislation LAWYERS

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?

Page 29: General Sales Tax (GST): Presentation on GST Legislation LAWYERS