Written by Paige McCartney, The Nassau Guardian, December 23rd, 2022
Businesses were cautioned yesterday to ensure their systems are ready for the switch to ten percent value-added tax (VAT) next week.
The Bahamas Chamber of Commerce and Employers Confederation (BCCEC) and the Department of Inland Revenue held a VAT reduction information seminar yesterday to clarify some of the changes to the business community.
Parliament passed the VAT Amendment Bill, 2021 last month, mandating January 1 as the start for the new ten percent charge.
Although businesses are being given a 90-day grace period to relabel and update product pricing, the Ministry of Finance stressed yesterday that no business should charge 12 percent after January 1.
“To charge VAT at a rate higher than the rate in the law is akin to charging VAT without authorization. The penalties are very severe,” Financial Secretary Simon Wilson said.
“So obviously there are fines I think up to $500,000, you could lose your business license, your ability to operate. The penalties are there. That’s akin to stealing. So we take that to be a very, very serious breach. The rate is the rate that has to be adhered to.”
Asked by a business owner whether systems should be updated on January 1, or whether the 90-day grace period allows for more time for businesses to get ready, Acting Comptroller of the Department of Inland Revenue Shunda Strachan said, “Your systems should be in place, the grace period was really only for pricing. But your systems should be in place, I would think that you want that in place.”
Wilson added, “The 90-day grace period is only to allow businesses that have to individually price goods on the shelf, a period to change prices because they are on a VAT-inclusive basis for most businesses.”
Another business owner asked whether the government would in the future consider allowing for the labeling of prices on items without the VAT price included, similar to the United States and Canada, so as to avoid the “significant” cost associated with changing labels associated with VAT rate changes.
Wilson said, “Well, the US has sales tax, which is a lot different from VAT. The policy decision that was made when VAT was implemented, with the support of the business community, was that we would go to a VAT-inclusive model. I don’t know that that has changed in the last six years, to move to a VAT-exclusive model. But VAT inclusive was the best way to deal with VAT on the retail level for consumers.”
Another issue raised was invoices that were paid in full in 2021, with services continuing into 2022 – for example in the case of construction or building services. In that instance, the Ministry of Finance stated that businesses would have to charge 12 percent VAT for the services rendered in 2021 and ten percent on all completed work in 2022.
“So that’s work in progress. You have two different things happening here, number one, VAT is paid on the actual revenue earned for the work actually done,” Financial Secretary Simon Wilson said.
“So on December 31, you make an assessment of the work that has been done and VAT on that would be 12 percent up to December 31. And then any work done after January 1 will be assessed at ten percent. You must do your own internal calculations to determine which percentage must be returned to the customer of the VAT that you collect, which would be in essence overpayment. And this covers all construction services the same way.”
Wilson said in other instances businesses and companies have the options of either refunding excess payments or offering credits to clients.
The Department of Inland Revenue also noted that the VAT flat rate will now be 6.5 percent. The flat rate is the rate businesses making $400,00 or less in revenue pay to the comptroller when they are filing VAT returns.
Read the article here: https://thenassauguardian.com/businesses-urged-to-have-systems-ready-for-vat-switch-to-10/