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BCCEC Workshop

BCCEC Workshop. September 2014. Outline. VAT concepts Business and Consumer Education Issues related to transition and registration The Way Forward. Beyond the philosophical…. Understand what is involved Understand our obligations and options

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BCCEC Workshop

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  1. BCCECWorkshop September 2014 Ministry of Finance

  2. Outline • VAT concepts • Business and Consumer Education • Issues related to transition and registration • The Way Forward Ministry of Finance

  3. Beyond the philosophical… • Understand what is involved • Understand our obligations and options • Understand how to protect our interests as business • Understand how to protect our interests as consumers Ministry of Finance

  4. VAT Highlights • VAT will be charged at 7.5% • VAT will be paid starting January 1 2015 Ministry of Finance

  5. Expectations/Implementation Process • The VAT Act has been gazetted • Sections to facilitate registration are being brought into force ahead of January 1st • Key implementation strategies are in place • Government agencies are being trained and prepared to collect the revenue; Education taskforce is being announced • Education process is increasing for the entire Bahamas: every consumer must be reached. Ministry of Finance

  6. The mechanics and concepts. Ministry of Finance

  7. What is VAT? The value added tax or VAT is the extra amount that would be added to the price of goods and services that you buy. It would be charged as a percentage, share or fraction of the price of the goods or services. VAT would be collected from you by businesses and passed along to the government. TheCustoms Department would also charge VATon items that you buy abroad. Ministry of Finance

  8. How does the money get to the Government? • Some of the VAT is collected from businesses ahead of time, before the sale is made. • The balance is collected after the sale is made, and the customer has paid at the register. • Businesses will report sales and handover the VAT to the Government on a regular basis. Ministry of Finance

  9. Inside the business… • You are the collections agent for the Government. You collect VAT on sales. • What you owe the Government depends on the level of your sales. • You handover (output) VAT to Government. But first you deduct from your receipts all payments of VAT on your operations. • You never pay more than you collect! Ministry of Finance

  10. Inside the business • Suppose VAT on electricity expenses is 30%, and VAT on sales is 7.5%? • You owe the 7.5% collected on sales, after deducting all VAT on expenses. • Suppose VAT on electricity expenses is 50%, and VAT on sales is 0%? • You owe 0% of sales. The Government MUST give you a refund, so that net payments reconcile to zero. Ministry of Finance

  11. Inside the business • As a business you will reimburse yourself before you make the residual payment of VAT to the government • If your collections of VAT are not sufficient to cover your reimbursements, the government MUST give you a direct refund • If your collections are more than sufficient to cover your reimbursements, you pay the difference to the government. Ministry of Finance

  12. Inside the business The VAT Registrant • VAT is not an expense. • If you treat VAT as an expense, you will overprice your products and services. • Your competitors will benefit at your business expense. Ministry of Finance

  13. Business Sense… • Document all VAT payments – your “input taxes”. • Know your suppliers. Only your suppliers can give you proper “VAT Invoices” that justify your reimbursement or “VAT credits”. • Only “VAT Registrants” can issue VAT Invoices. Ministry of Finance

  14. Public Education Focus • What businesses/or VAT registrants need to know • what rights and obligations they have in relation to the legal framework • What the consumer needs to know • Social safety net support • How will the government identify and reach those who need more assistance Ministry of Finance

  15. The Consumer Who would be able to charge me VAT? • Only registered businesses would be able to charge VAT. • It would be illegal fornon-registered business to charge VAT, even if it werean item on which a VAT registrant would be able to charge VAT. Ministry of Finance

  16. The Consumer • On what items would I have to pay VAT? • Most goods and services... • On what items would I not have to pay VAT? • Examples: Interest on bank loans, selected insurance products, international travel, some medical care • How will I know what I should be paying? • The price you see will always include VAT • No surprise or added cost at the cash register • How would I know how much VAT I paid? • VAT paid would always have to be shown separately on your receipt Ministry of Finance

  17. Consumer • How would I be protected? What are my rights? • Business would have to issue receipts, that show their tax ID numbers • Receipts would have to show which items are subject to VAT and which ones, if any, are exempt • Businesses would have to display their VAT registration certificates Ministry of Finance

  18. What Should I expect? • Many price changes will be advertised before January 1st. • You may still see old prices on some items in January. • Businesses may need extra time to remove old price tags, but they will announce the new prices ahead of time. • Some leniency will be exercised in allowing businesses to complete display pricing. • Consumer education will address. Ministry of Finance

  19. How can I manage my bill? Being smart is not being deprived!!! • Find ways to reduce the amount of electricity, water and other utilities used. Start now. • Shop around and compare prices. • Reduce wastage of perishable food items. Ministry of Finance

  20. Social Protection • As needed, the government will increase spending on areas that directly benefit the poor • Reform of assistance programs will coincide with the introduction of VAT • Improved systems will target those who need direct help from the government Ministry of Finance

  21. What Businesses Need to Know • Assemble documentation for registration • Customs Transition • Understand price setting • Become familiar with VAT return forms Ministry of Finance

  22. Preparing for registration • Have handy: banking coordinates, curent business license certificate, NIB number, company registration certificates, Grand Bahama Port Authority Licensee information • Know: sales profile, classification of business activity Ministry of Finance

  23. Getting to know the VAT Return Form • Most businesses on most returns will need to supply no more than three items • Total sales (inclusive of VAT) • Local purchases -- VAT paid • Imported supplies -- VAT paid Most often a small business using the flat rate scheme will only need to supply the first piece of information and recall what capital expenditures were made. Ministry of Finance

  24. Transitioning to 2015 • Understand how to treat existing contacts; how to deal with billing and deliveries after January 1st. • Know how to enroll in Custom Department’s transitional bonded warehousing arrangements for inventories subject to January 1st duty reduction. Ministry of Finance

  25. Preparing for price change • Business should make any adjustments needed to base prices before January. • Add the 7.5% VAT. • Use tags and other means to advertise VAT inclusive prices before January 1st. • You will have flexibility to display receipt prices on inclusive or exclusive basis, but receipt must show the total amount of VAT paid. Ministry of Finance

  26. Business Education • VAT Guides and Guidance Notes. All posted on website : www.bahamas.gov.bs/VAT • Will see revisions, expansion and clarification • Will become basis of VAT Rules • Workshops and Seminars • Planned in connection with registration drive • Close coordination with BICA, BHTA, Chamber/Chamber Coalition, and other industry groups • Business education Ministry of Finance

  27. Business Education • Private Sector Education Task Force – A nine-month assignment. • Be advocates for businesses and consumers • Participate in outreach to business community • Sponsor public information campaign Ministry of Finance

  28. Next Steps Almost Immediate • Mass distribution of guidelines and brochures • Update of VAT Guides: Priorities • General Guide – stressing record keeping • Transitional Provision – pricing display • Hotel Sector • Grand Bahama Port Authority (consumable goods and bond requirements) • Group Registration Ministry of Finance

  29. Next Steps • Ongoing • Continued Family Island Visits • Getting the Government’s systems ready • Business education • Start of registration Ministry of Finance

  30. Comments/Questions taxreform@bahamas.gov.bs Ministry of Finance

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