Antigua and Barbuda Sales Tax (ABST)

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Antigua and Barbuda Sales Tax (ABST)

• Presentation on draft ABST law

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What do all these concepts mean?

• 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
• value added ? tax credit for businesses (output
  tax input tax) means tax base salary wages
  plus profits
• A consumption tax
• consumption ? passed on to consumers in price of
  each consumer transaction consumers cannot claim
  it back

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What is a Supply?

• a transaction involving at least two
  entitiesa supplier who makes a supply to a
  recipient of the supply
• the supplier does some act that(a) causes
  something to pass from supplier to recipient
  or(b) causes some benefit to arise for recipient
• the recipient receives something
  tangible/intangible OR is conferred with a
  benefite.g. sale, lease, licence, creation of
  rights or obligations
• Supplies may involve other entities (to whom the
  thing supplied is provided) but the tax
  consequences fall on the supplier and the
  recipient

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Two kinds of suppliessupplies of goods and
services

• Supplies of goods sales, leases, licences,
  options to purchase, commodity futures so long
  as they are supplies of tangible personal
  property real property
• Supplies of services any supply that isnt of
  goods is a supply of services e.g. service
  industries, IP, restrictive covenants, supplies
  of rights, lending money, etc.
• Q Does it matter whether a supply is of goods or
  services?
• A Yes particularly for place of supply rules
  export rules

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Hotels restaurants

• Restaurants supply serve food beverages this
  is a supply of goods
• Hotels supply services (serviced accommodation,
  internet access, telephone services, tours) and
  goods (food and beverages, use of yachts/diving
  equipment etc)
• Hotels often supply rights to their goods
  services in a separate transaction from the
  supply of the goods or services themselves the
  rights are taxed if the goods or services
  themselves would be taxed

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Who is required to pay ABST?

• On supplies
• Registered Suppliers collect it from recipients
  (customers) by including it in the price of
  supplies
• 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)

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How ABST works for businesses

• ABST-registered businesses claim back ABST on
  most of their business inputs (input tax) (input
  tax includes tax paid on imports and on
  goods/services acquired from other registered
  businesses).
• No input tax credits for private acquisitions,
  for purchases that relate to making exempt
  supplies, nor for cars (unless business
  supplies of cars)
• Input tax on capital acquisitions is immediately
  creditable c.f. income tax depreciation

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ABST for registered businesses

• ABST charged on supplies Output Tax
• ABST returns are submitted for each tax period
• Net tax payable OUTPUT tax INPUT tax
• Input tax that cannot be claimed back is also
  passed on to consumers (because it is part of
  cost of sales)
• Must have an ABST Invoice to claim input tax
  credit
• If ABST invoice not received until a later
  period, the input tax is deducted in the later
  period

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Global basis for calculations

• Net ABST 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 sensefor
  determining whether an acquisition relates to
  making exempt supplies or private purposes (and
  therefore is denied an input tax credit)

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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.

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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

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Who will be registered?

• To be registered you must
• be a taxable 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

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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

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To reiterate

• 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
• TRANSACTIONS are exempt not persons

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ABST Treatmenttaxable supplies and imports
60- 4515
15- 96
45- 1530
Printer
Importer
Retailer
Consumer
Cost 60 Value added 40 Sell for100 plus
ABST 15 Taxed Price 115
Cost 100 Value added 200 Sell for 300plus
ABST 45 Taxed Price 345
Cost 300 Value added 100 Sell for 400plus
ABST 60Taxed Price 460
Cost 460(includes 60 tax)
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ABST Supply to consumer is zero-ratede.g.
electricity subject to the basic charge
To customs
To IRD
9
- 18
6
3
0- 18-18
15- 96
18- 153
Printer
Importer
APUA
Consumer
Printed Invoices
Paper
Paper
Electricity
Cost 60 Value added 40 Sell for100 plus
ABST 15 Taxed Price 115
Cost 100 Value added 20 Sell for 120plus
ABST 18 Taxed Price 138
Cost 120 Value added 80 Sell for 200plus
ABST 0Taxed Price 200
Cost 200(no tax)
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ABST TreatmentSupplies zero-rated until
retailer taxede.g. macaroni sold by a registered
restaurant
To IRD
30
30- 030
300 Consumers
Wholesaler
Importer
Retailer
Macaroni Cheese
Macaroni
Macaroni
Macaroni
Cost 60 Value added 40 Sell for100
Cost 100 Value added 20 Sell for 120
Cost 120 Value added 80 Sell for 200plus
ABST 30Taxed Price 230
Cost 230(includes 30 tax)
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ABST Supply to consumer is exempt(e.g.
financial services)
To customs
To IRD
9
6
3
15- 96
18- 153
Wholesaler
Importer
Bank
Consumer
Cost 60 Value added 40 Sell for100 plus
ABST 15 Taxed Price 115
Cost 100 Value added 20 Sell for 120plus
ABST 18 Taxed Price 138
Cost 138 Value added 80 Sell for 218plus
ABST 0Taxed Price 218
Cost 218(includes 18 tax)
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ABST supply to retailer is exempte.g. financial
services
To customs
To IRD
9
6
32
32- 032
15- 96
Bank
Importer
Retailer
Consumer
Cost 60 Value added 40 Sell for100 plus
ABST 15 Taxed Price 115
Cost 115 Value added 20 Sell for 135
Cost 135 Value added 80 Sell for 215plus
ABST 32.25Taxed Price 247.25
Cost 247.25(includes 32.25 tax)
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ABST Treatmentall suppliers are under the
threshold
To customs
9
Wholesaler
Importer
Retailer
Consumer
Cost 60 Value added 40 Tax 9 Sell
for109
Cost 109 Value added 20 Sell for 129
Cost 129 Value added 80 Sell for 229
Cost 229(includes 9 tax)
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Time of supply

• When do you account for ABST 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 ABST
  periodically

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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 to receive supplies
  (relevant to hotels)

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Zero-ratings for restaurants

• basic foods are zero-rated, but restaurant food
  is not
• ABST is more like a retail sales tax for
  restaurants because many inputs will not be taxed
  (therefore no input tax to claim back)
• not entirely because rent of premises will be
  taxed, power water will be taxed, equipment,
  cutlery crockery etc all taxed therefore input
  tax credits for these

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Zero-ratings for hotels

• as for restaurants, basic foods are zero-rated,
  but restaurant food is not
• not likely to be any zero-ratings for hotels the
  services and goods they provide are consumed here
  and are therefore taxable
• this is the case even when they are sold via
  transactions with related or unrelated
  non-resident management companies and travel
  agents/tour operators

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Exempt c.f. taxable supplies

• Sale and rent of residential property are exempt
• Need for provisions to distinguish hotel or
  holiday accommodation from rent of private homes
  as principal residencee.g. need to distinguish
  condominium hotels from normal residential
  condominiums
• Current draft adapted from existing rules
  comments on those definitions welcomed
• Regulations will deal with things like time
  shares (esp. where rented out by central manager)

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Sales to non-residents

• Many supplies of goods or services to offshore
  recipients are zero-rated exports
• This doesnt apply to supplies of rights or
  options (including vouchers) if the goods and
  services will ultimately be consumed in Antigua
  and Barbuda
• Differences between approaches around the world
  relate only to the VALUE on which VAT/GST/ABST is
  charged
• all agree that there should be a local tax burden
• question is whether value added by non-resident
  suppliers should be taxed locally

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Foreign Travel Agent
Rights
Rights
Management Company
Tourist (while overseas)
Travels to A B
Overseas
Antigua Barbuda
Tourist (in AB)
Rights
Local Hotel
Services goods
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How are these rights taxed?

• Not treated as an export even though supplied to
  a non-resident (because the end consumption is in
  Antigua and Barbuda)
• Tax must be applied to the transactions
• Some countries require the non-resident suppliers
  to register and pay tax on each transaction
  (ensures the full consumption price paid by the
  tourist is taxed)
• More commonly, the non-residents are left out of
  the tax regime
• If the parties are related, market valuation
  rules apply

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How are these rights taxed?

• If the non-residents are not included, how much
  tax is collected?
• One option is that the local hotel must pay ABST
  on the sale to the management company based on
  the value that will be charged to the tourist
• Alternatively, this may only be required if all
  the suppliers are related parties if the
  non-residents are unrelated entities, the local
  hotel can be taxed only on what it charges to the
  first overseas supplier
• The foreign tour operators/travel agents margin
  is taxed where they are located.

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ABST draft approach

• There is nothing currently specified
• Current intention is to include provisions
  dealing with this in the regulations
• Current leaning towards taxing on outgoing value
  except where overseas suppliers are related to
  local hotels
• Not considered feasible to require non-residents
  to tax in order to try to capture the full value

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Structure of the Act

• Basic provisions first definitions then
  application of the law
• Administrative provisions
• Schedules (zero-ratings exemptions)
• Regulations to cover transitional issues

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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 ABST is charged on
  the right kinds of supplies
• work out how your prices should change subtract
  taxes saved and then add ABST
• get ready to print invoices and documents
• be prepared for submitting ABST returns

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What do you need to do?

• ensure there are appropriate links to your
  accounting systems to separate ABST from your
  income costs
• systems to capture input tax credit entitlements
  to ensure you hold ABST invoices and to
  determine connection between inputs and any
  exempt or private outputs
• will your customers be registered?
• will your suppliers be registered?
• are you record-keeping systems up to the task?