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 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, 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 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 needse.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

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)

+ + = $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)

= $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)

+ = $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)

+ + = $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)

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

Antigua and Barbuda Sales Tax (ABST):