What is VAT?
VAT or Value Added Tax system is a tax on consumption. VAT is an indirect tax charged on imports and on the added value to goods and services, supplied by one business to another or to a final consumer. VAT is designed to ensure that consumer spending is taxed evenly and fairly.
VAT is not a tax on the seller for it is the buyer who pays the tax.
VAT will not be an additional tax, but a replacement for some existing indirect taxes. It will be a broad-based, comprehensive and simplified system of taxation on transactions.
What is the present rate of Consumption Tax in the Federation?
Consumption tax is charged on all imported goods and selected services at an average rate of 22.5%.
What is the VAT rate in St. Kitts and Nevis?
This decision has not been finalized as yet. However, it would be less than the present average rate of Consumption tax, which is 22.5%.
What taxes will VAT possibly replace?
Hotel & Restaurant Tax
Cable TV Tax
Vehicle Rental Levy
Telecommunications (IDD calls) Levy
Insurance Premium Tax
Gaming Machine Tax
Public Entertainment Tax
How will VAT affect Prices?
The price of goods and services will increase, decrease or remain the same. The Tax Reform team will provide further information of possible price changes, during its consultation sessions.
Are there any benefits from changing to a VAT system?
Yes. VAT will improve, simplify and modernize our tax system. VAT is a fairer system because everyone contributes at the same rate and the treatment is the same regardless of the consumer.
A VAT will compensate for the shift in our economy from goods based to service oriented. VAT will also provide relief for businesses that are registered, as they will be able to set off the VAT they have paid on purchases, against the VAT they have charged on sales. Only the difference is paid to the government.
Again, VAT is not a new tax, but a replacement tax.
Who can charge VAT?
Only persons registered for VAT can charge and collect VAT. A list of registered businesses would be made public.
What are the requirements for VAT registration?
All businesses generating taxable sales above a certain threshold will be required to register for VAT. The threshold will be determined after consultations with stakeholders.
How does a consumer know that a business is registered?
Any business or person that is VAT registered must display their VAT registration certificate on their premises, where it can be easily seen by all. If the business or person cannot show the consumer the VAT Certificate, the consumer should not pay the VAT and report the business to the Inland Revenue Department.
Is VAT charged on all domestic products?
No. Under a VAT system not all goods and services will be charged. Goods and services will be classified into three main categories, namely: Taxable; Zero rated and Exempt.
What are taxable goods and services?
Taxable goods and services – Consumers will be charged a VAT at the established rate. A VAT-registered business will charge VAT on the sale of taxable goods and services and pay VAT on its purchases.
What are Zero-rated goods and services?
Zero-rated goods and services – A final consumer will pay VAT at a rate of zero percent. Essentially, this means the consumer pays no tax on the item. A VAT-registered business will be able to claim a credit for any VAT paid on inputs.
What are exempt goods and services?
Exempt goods and services – No VAT is charged to the consumer. Unlike the zero rated goods the VAT-registered business is not entitled to claim any input tax credit, on purchases.
Businesses supplying goods and services will pay the VAT to the government at the end of each monthly tax period. Final consumers will pay the VAT only when taxable goods and services are purchased.
Should a consumer be given a receipt each time a purchase is made from a registered business?
A receipt should be issued by the registered person for every purchase. If the consumer is not given a receipt, one should be requested. Persons registered for VAT should also be given a proper tax invoice for every purchase from a registered supplier.
Would VAT be charged on all Imports?
No.VAT would be charged on only some imports. It must be noted, that some imports would be exempted and others would be zero-rated.