The Turks and Caicos Government published its much anticipated White Paper, which outlines the agreed policy decisions on how VAT will be implemented in the Territory, today, Mon 2 July 2012.
The key VAT policy decisions includes:
- The effective rate of VAT to be charged in the Turks and Caicos Islands will be 11% – which is the second lowest rate in the Caribbean region, after Haiti, and is the same level as Accommodation Tax currently charged in the TCI.
- The VAT registration threshold for businesses not already registered for Accommodation Tax will be set at a turnover of $200,000 in annual gross sales, which is the highest threshold in the Caribbean (Antigua and Barbuda are the next highest at $110,000). This figure was determined on the planned number of registrants, values of imports, business license information and employee earnings data. It is anticipated that there will be 400 VAT registered businesses in the TCI at the $200,000 registration level, when VAT begins next year.
- The VAT registration threshold for businesses already registered for Accommodation Tax will be set at a lower threshold of $50,000 to mitigate against any loss of tax revenue from businesses with turnovers between $50,000 and $200,000. Hotels and restaurants with turnovers below $50,000 will no longer be required to include taxes in their charges to their customers; however they will pay VAT on their imports and other inputs, which registered businesses can offset against their output VAT.
- There will be a deliberately large range of VAT exempt supplies, which are those goods and services that will not be directly subject to VAT. These have been chosen to protect consumers against price increases on essential goods and services. VAT exempt goods will include: basic food items including rice, flour, sugar, milk and eggs, chicken, fish and meat, fresh fruit and vegetables. In addition, infant supplies, personal hygiene products, hurricanes shutters, cement, steel, fuel, property leases and rents; property sales where stamp duty is applied, medical services, transportation, religious services and printed materials.
- There will also be a range of zero rated supplies, which are goods and services that will be taxable, but at a VAT rate of zero per cent, allowing a VAT registrant to claim input tax credit on inputs used in making the zero rated supplies, including the supply of water, electricity and exports.
- Import duties will be generally reduced by between 10% and 15% to offset the effect of VAT being included in the cost of imports and VAT on imports will be calculated on the fully landed cost, including CIF (carriage, insurance and freight), Customs Processing Fee (6%) and import duty. Import duty and CPF will continue to be calculated on the FOB value of imports.
- All accommodation units in resorts/condominiums will be required to join the resorts/condominiums rental pools and only rentals through the rental pool arrangements will be permitted. Only the rental pool business will be required to register for VAT, not the individual accommodation units.
- Strata fees allocated to owners of resorts/condominiums accommodation units will not be subject to VAT, as these represent a sharing of costs that are already subject to VAT, within a Strata company arrangement formed on behalf of the owners for cost sharing purposes.
“Following the anticipated passing of the VAT Bill into law, the VAT implementation team will continue to explain to the business community their rights and obligations arising from the changes and operational procedures of VAT, and the resulting consequences of non-compliance,” said TCIG Chief Financial Officer, Hugh McGarel-Groves.
“Staff in Customs and Revenue Control Unit are being trained now in VAT operations covering areas such as taxpayer registration, calculation of VAT and processing of returns.
“The VAT Implementation Team will shortly begin to work with the first group of VAT registrants and through regular meetings, training sessions and advisory visits, ensure a smooth transition in April next year.”
