Presented by: VAT TEAM Thursday 12 th February, 2015 The Government - - PowerPoint PPT Presentation

Ministry of Finance

The Government of The Bahamas Presented by: VAT TEAM Thursday 12th February, 2015

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

• f supply for the good or service, plus value added by the final

supplier.

Ministry of Finance

 Extensive consultation and with industry and professional

groups:

• 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

• 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:

• Failure to File a VAT Return: Very Serious
• Failure to make Payment: Very Serious
• Examples of Discretionary Penalties:
• Failure to display VAT certificate: Serious
• Failure to issue VAT Invoices and Sales Receipts: Very Serious
• 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

• f cases (one made so far on Condo Association that will be

published soon)

 Comptroller has to decide whether requests justify rulings

• r 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

• Describes the treatment of hotel bookings made prior to Sept

1st, 2014.

• Determines the time of supply of the transactions of hotel

bookings.

• Describes the treatment of hotel bookings made on or after

September 1st, 2014.

 2015-001 : VAT Free Shopping

• Describes the treatment of the sale of qualifying goods by

approved VAT Free merchants.

• Outlines the process of accounting for zero-rated transactions

to tourist.

Ministry of Finance

 2015-002 : Charities

• Describes the registration process for charities.
• Illustrates the qualifying goods and services that can be refunded.
• Defines the schedule for filing for refunds.

 2015-004 : Group Registration

• Describes the requirements entities must meet to be approved for a

VAT Group.

• Describes the process for the Comptrollers decision.
• Describes the treatment of the entities within the VAT Group for tax

purposes.

• Describes the duties of the Representative Entity in a VAT Group.
• Describes changes to the VAT Group that the Comptroller can

make.

• Describes the process in revoking VAT Group Applications.

Ministry of Finance

 2015-005 : Deferral of Import VAT

• Describes who can make an application for the deferment of

VAT on the importation of goods.

• Defines which industries are eligible for the deferment of VAT.
• Defines when an entity should account for the deferred VAT.
• Defines the security and bond requirements for the deferal of

VAT.

 2015-006: Requirements for Security

• Describes when a security is needed for VAT purposes.
• Defines how much security is needed for each case a security is

needed.

• Describes in what form a security can be made.

Ministry of Finance

 2015-007 : New Business - Input Tax Credit

• Describes when a new business files a VAT Return.
• Describes the requirements for new businesses to report to the

Comptroller.

• Describes the process of claiming input credits and what can be

claimed for a new business.

 2015-008: Promoters of Public Entertainment

• Defines when a tax payer should register for VAT for the

purposes of public entertainment.

• Defines the process for registration and filing for sporadic public

entertainment ventures.

Ministry of Finance

 2015-010 :Content of Invoices and Receipts

• Describes the content that should be included in a VAT Invoice,

Sales Receipt, Self-Supply records and imported services records.

• Describes what content of VAT invoices or receipts that can be

waived.

 2015-011 : Input Tax Credit - Passenger Vehicles

• Describes when input tax deductions can be claimed on

passenger vehicles.

 2015-012 : Flat Rate Accounting Schemes

• Defines who can register for the flat rate scheme.
• Describes what can be claimed on a flat rate scheme

application.

Ministry of Finance

 2015-013 : Menu Pricing for Dine-in Establishments

• Provides additional rules for the display of menu pricing for dine-in

restaurants and hotel restaurants.

 2015-014: Treatment of Input Tax Credits on Insurance

Services

• Describes whether input tax credits can be claimed by Insurance

Companies during the period January 1 to June 30, 2015

 2015-015: Defining Continuous Journey for International

Transport

• Defines a continuous journey in a situation where a single itinerary

includes a combination of domestic and international travels

• Determines whether a different VAT treatment should be given to

each leg of the journey.

Ministry of Finance

 2015-017: Apportionment Formula for Financial Institutions

• Describes the variables to be used by Financial Institutions to

apportion input tax deductions where both taxable and exempt supplies are made by Financial Institutions

 2015-018: Content of Credit and Debit Notes

• Describes the circumstances under which a debit and credit

note will be issued.

• Describes the content for a debit and credit note.

Ministry of Finance

• 2015-019: Additional Time for the Issuance of valid VAT invoice

and VAT Sales Receipts Financial Institutions

• Describes what should be included in a domestic financial

institution's invoice.

• Describes what can be waived from an invoice.
• Describes the time limit domestic financial institutions have to

correct IT systems.

 2015-020: Fair Market Value for Employees of Financial

Institutions

 Defines the fair market value for services provided to bank

employees.

 2015-022: Treatment of Mandatory Gratuities  Describes when VAT is not charged on Gratuity.

Ministry of Finance

 2015-024 : Treatment of Condos and HOAs

• Defines Condominium and Homeowner's Associations to offer

taxable supplies.

• Defines the accounting basis used for Condominium and

Homeowner's Associations.

• Describes what VAT should not be charged on for services

provided by Condominium and Homeowner's Associations.

Ministry of Finance

 Has been appointed (effective January 21)  Same members will serve on both Commissions  Regulations governing the VAT Commission ready to be

promulgated

 Commissions operate independent of Ministry of Finance,

VAT Comptroller and Comptroller of Customs

Ministry of Finance

 Insurance products become taxable starting on July 1 2015  Real estate sector to be soon integrated fully into VAT, with

proposed reduction in the stamp tax

 More regimented payments policy for less than monthly

filers of VAT returns to reduce revenue risks

 Scrutinize of framework for gratuity; rules to cap

exemptions

 Transition to a more lasting framework for VAT refunded

tourist shopping

Ministry of Finance

 Further “cleanup” of VAT Act and regulations for better

clarity where needed on existing policies

 No major policy inclusions to be proposed in legislation –

allow experiences to mature

 Comprehensive inventory of industry issues to be published  Continued use of mass/social media for consumer

education and consumer protection, including what to expect on inclusive pricing display

 Move towards more direct electronic communications with

VAT Registrants

 Separation between VAT registrants and TIN only

registrants

Ministry of Finance

 CRA structure is taking shape  Inland Revenue (business licence, property tax) and VAT  Other functions being transferred: stamp tax collection

(real estate and financial); first home exemption

 Single organization chart is being populated along

functional lines

 Ongoing focus on building the audit framework and

capacity

Ministry of Finance

Ministry of Finance

Contact information

VAT@bahamas.gov.bs vatcustomerservice@bahamas.gov.bs taxreform@bahamas.gov.bs www.bahamas.gov.bs/vat 225-7280 (toll free) THANK YOU for your attention!!