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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?

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antigua and barbuda sales tax abst

Antigua and Barbuda Sales Tax (ABST):

Presentation to Chamber of Commerce & Employers’ Federation

what is the proposed abst
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
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
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
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
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
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 businesses8
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
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
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
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
Who will be registered?
  • To be registered you must:
    • be a person (includes partnerships, trusts, andunincorporated 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
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
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
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 needse.g. the basic basket of goods and the basic charge for electricity and water.
exempt supplies
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
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
slide18

To customs

To IRD

$9

$6

$30

$15

+

+

=

$60

$9

$6

+

$30

$15

Paper

Advertising Material

Paper

Goods

ABST Treatment:taxable supplies and imports

$60- 45$15

$15- 9$6

$45- 15$30

Printer

Retailer

Consumer

Importer

Cost: $60

Value added: $40

Sell for:$100

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)

slide19

+

+

=

$0

$9

$6

+

$3

- $18

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- 9$6

$18- 15$3

Printer

APUA

Consumer

Importer

Printed Invoices

Paper

Paper

Electricity

Cost: $60

Value added: $40

Sell for:$100

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)

slide20

=

$30

$30

ABST Treatment:Supplies zero-rated until retailer taxede.g. macaroni sold by a registered restaurant

To IRD

$30

$30- 0$30

300 Consumers

Wholesaler

Retailer

Importer

Macaroni

Cheese

Macaroni

Macaroni

Macaroni

Cost: $60

Value added: $40

Sell for:$100

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)

slide21

+

=

$18

$9

$6

+

$3

ABST: Supply to consumer is exempt(e.g. financial services)

To customs

To IRD

$9

$6

$3

$15- 9$6

$18- 15$3

Wholesaler

Retailer

Consumer

Importer

Cost: $60

Value added: $40

Sell for:$100

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)

slide22

+

+

=

$32

$9

$4

+

$32

ABST: supply to retailer is exempte.g. financial services

To IRD

To customs

$9

$6

$32

$32- 0$32

$15- 9$6

Bank

Retailer

Consumer

Importer

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: $215plus ABST: $32.25Taxed Price: $247.25

Cost: $247.25(includes $32.25 tax)

slide23

=

$9

$9

ABST Treatment:all suppliers are under the threshold

To customs

$9

Wholesaler

Retailer

Consumer

Importer

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)

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