Antigua and Barbuda Sales Tax (ABST): Presentation to Chamber of Commerce & Employers’ Federation

What is the proposed ABST? What does it mean to call ABST a consumption tax and 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  on value added  tax credit for businesses (output tax – input tax) means tax base ≈ salary & wages plus profits  on consumption  passed on to consumers in price of each consumer transaction

Terminology: “Supply” … … a very broad concept = a transaction involving at least two entities: the supplier & the recipient of the supply = any transaction if a recipient receives something tangible/intangible, or is conferred with a benefit, because something passes from supplier to recipient, or because action of supplier causes benefit to arise for recipient e.g. sale, lease, licence, creation of rights or obligations can also involve other entities (someone to whom the thing supplied is provided) but the tax consequences fall on the supplier and the recipient

Two kinds of supplies: supplies of goods and services Goods = tangible personal property & real property Supplies of goods = sales, leases, licences, options to purchase, commodity futures Supplies of services = any supply that isn’t a supply of goods is a supply of services Services includes service industries, supplies of rights, IP, restrictive covenants, undertakings to do or not do something, issue/transfer of shares, units in unit trust, etc.

Who is required to pay ABST? On supplies: Suppliers - but they collect it from recipients (customers) by including it in the price of supplies Only registered suppliers pay ABST on supplies of goods or services in Antigua and Barbuda 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);

How ABST works for businesses ABST is not intended as a tax on businesses. ABST-registered businesses can usually claim back ABST on their business inputs (i.e. tax charged on imports or on goods and services acquired from other registered businesses in Antigua and Barbuda). ABST incurred on inputs is called INPUT TAX. Input tax on capital acquisitions is immediately creditable – c.f. income tax depreciation

ABST for registered businesses Registered persons ‘charge’ ABST to consumers by including it in their prices ABST charged on supplies is called OUTPUT TAX Input tax incurred on purchases is offset against output tax on sales Input tax that cannot be claimed back is also passed on to consumers (because it is part of cost of sales)

ABST for registered businesses ABST returns are submitted for each tax period Net tax payable = OUTPUT tax – INPUT tax Must have an ABST Invoice to claim input tax credit Returns and net payments due 28 days after the end of the tax period Some suppliers will have a net refund (those making zero-rated supplies)  6 month carry forward; then payable after 90 days  exporters – no carry forward; refunds payable after 90 days

Global basis for calculations Net ABST payable is calculated on a global basis for each tax period Input tax on a particular purchase is not credited against the output tax for the supply it contributes to 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)

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.

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

Who will be registered? To be registered you must:  be a 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… …

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

Understanding ABST 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

Zero-rated supplies Exports of goods & services (because consumed outside Antigua and Barbuda) Supplies of going concerns The Government proposes to include some provisions to zero-rate basic needs e.g. the basic basket of goods and the basic charge for electricity and water.

Exempt supplies Financial services Sale and rent of residential property The Government proposes to include some provisions to exempt basic needs, e.g. education, public health services, dental and nursing services, funeral & related services, charitable activities, etc.

Exemptions and Zero-ratings Transactions are exempt, not persons e.g. financial supplies are exempt, not financial suppliers or institutions  a sale of shares is exempt, no matter who the supplier is  insurance is exempt, even if not supplied by an insurance company  loans etc. are exempt

Printer Importer RetailerConsumer Cost: $60 Value added: $40 Sell for:$100 plus ABST: $15 Taxed Price: $115 Cost: $100 Value added: $200 Sell for: $300 plus ABST: $45 Taxed Price: $345 Cost: $300 Value added: $100 Sell for: $400 plus ABST: $60 Taxed Price: $460 Cost: $460 (includes $60 tax) ABST Treatment: taxable supplies and imports $ $6 $ $30 $ $15 To customs $9 Paper $6 To IRD Paper $30 Advertising Material $15 Goods $6$30$ =$60 $9

Printer Importer APUAConsumer Cost: $60 Value added: $40 Sell for:$100 plus ABST: $15 Taxed Price: $115 Cost: $100 Value added: $20 Sell for: $120 plus ABST: $18 Taxed Price: $138 Cost: $120 Value added: $80 Sell for: $200 plus ABST: $0 Taxed Price: $200 Cost: $200 (no tax) ABST: S upply to consumer is zero-rated e.g. electricity subject to the basic charge $9 $ $6 $6 $ $3 $ $18 $3 - $18 To customsTo IRD $6$3- $ =$0 $9 Paper Electricity Paper Printed Invoices

Wholesaler Importer Retailer 300 Consumers Cost: $60 Value added: $40 Sell for:$100 Cost: $100 Value added: $20 Sell for: $120 Cost: $120 Value added: $80 Sell for: $200 plus ABST: $30 Taxed Price: $230 Cost: $230 (includes $30 tax) ABST Treatment: S upplies zero-rated until retailer taxed e.g. macaroni sold by a registered restaurant $ $30 $30 To IRD $30 = Macaroni Cheese

Wholesaler Importer RetailerConsumer Cost: $60 Value added: $40 Sell for:$100 plus ABST: $15 Taxed Price: $115 Cost: $100 Value added: $20 Sell for: $120 plus ABST: $18 Taxed Price: $138 Cost: $138 Value added: $80 Sell for: $218 plus ABST: $0 Taxed Price: $218 Cost: $218 (includes $18 tax) ABST: Supply to consumer is exempt (e.g. financial services) $9 $ $6 $6 $ $3 $3 To customs To IRD $6$3 + + = $18 $9

Bank Importer RetailerConsumer Cost: $60 Value added: $40 Sell for:$100 plus ABST: $15 Taxed Price: $115 Cost: $115 Value added: $20 Sell for: $135 Cost: $135 Value added: $80 Sell for: $215 plus ABST: $32.25 Taxed Price: $ Cost: $ (includes $32.25 tax) ABST: supply to retailer is exempt e.g. financial services $9 $ $6 $6 $ $32 $32 To customs To IRD $4$ = $9

Wholesaler Importer RetailerConsumer Cost: $60 Value added: $40 Tax: $9 Sell for:$109 Cost: $109 Value added: $20 Sell for: $129 Cost: $129 Value added: $80 Sell for: $229 Cost: $229 (includes $9 tax) ABST Treatment: all suppliers are under the threshold $9 To customs =$9

Structure of the Act Basic provision – definitions then application of the law Administrative provisions Schedules (zero-ratings & exemptions) Regulations – to cover transitional issues