VAT Information

Introduction

Documentation for VAT is critical for the timely and accurate filing of VAT returns.

 What is a VAT invoice?

An invoice is a document issued to notify an obligation to make a payment.

A VAT invoice should not be confused with an ordinary invoice.

A VAT invoice is a document that a VAT registered business is required to issue to another registered supplier under the VAT law.

As a registered supplier, you must issue a VAT invoice when you make a taxable supply to a registered person. However if the cost of the supply does not exceed $50.00, a sales receipt maybe issued.

Additionally, a VAT invoice must contain certain specific information.

What information must a VAT invoice contain? 

To comply with the law, a VAT Invoice must contain the following information:

         ·  the words ‘Value Added Tax Invoice’ or ‘VAT Invoice’ prominently displayed

·  the name, address and taxpayer identification number of  the supplier

 · the name, address and TIN of the Recipient

·  the serial number of the VAT Invoice

· the date on which the VAT invoice is issued since this will determine the time of supply and thus may affect your calculation of output VAT when accounting for VAT.

· a description of the goods or services suplied, including the quantity, volume or period, as  applicable

· the date on which the supply was made

· the consideration/payment for the supply

· the amount of VAT charged.

If there are any special circumstances that may make it impossible or undesirable to show this information, you must seek the advice from the Comptroller of

Inland Revenue before you produce any VAT invoice that does not comply with the law.

 Sales Receipt

 A registered supplier who makes a taxable supply to a recipient who is not registered should issue a sales receipt and not a VAT Invoice which must contain the following  information:

·The words “VALUE ADDED TAX RECEIPT”, “VAT SALES RECEIPT", prominently displayed;

· The name, address and TIN of the supplier;

· The date on which the sales receipt is issued;

· A description of the goods or services supplied, including the quantity, volume, or period, as applicable, and if necessary to identify the  supply, the date on which the supply was made;

· The total consideration for the supply (including VAT); and

· The amount of VAT charged.

VAT Credit Note

Except as the Comptroller may otherwise allow, where the Act requires a taxable person to issue a VAT credit note, the credit note shall contain the following particulars:

· The words “Value Added Tax Credit Note” or VAT Credit Note” in a prominent place;

· The name, address and TIN of the supplier;

· The name, address and TIN of the recipient;

· The individualized serial number of the credit note and the date on which the credit note was issued;

· The reason for the issue of the credit note and sufficient information to identify the taxable supply to which it relates;

· The consideration for the supply shown on the original VAT Invoice, and, if it has changed, the correct amount of the consideration for the supply; and

The effect of the VAT adjustment event on the VAT payable, shown by specifying:

i. The amount of VAT previously payable in relation to the supply, as shown on the original VAT Invoice or, if relevant, as shown on the most recent VAT debit or credit note issued in relation to the supply;

ii. The correct amount of VAT payable in relation to the supply following the VAT adjustment event that gave rise to the requirement to issue the credit note; and

iii. The difference between those two amounts, shown as a credit.

Each leaflet covers just one topic. Other leaflets you may find useful include:

IR101 What is VAT?

IR102 Should I be registered for VAT?

IR103 How to register for VAT?

IR104 Basic Supply Rules

IR104A - Special Supply Rules

IR106 Keeping VAT Records & Accounts

IR107 Accounting for VAT

IR108 Penalties and Offences under the VAT Law

-                     VAT and the Consumer

VAT and the Consumer

Introduction

As part of the program of the Government to simplify and rationalize the tax system in Grenada, the Value Added Tax (VAT) was introduced in Grenada on  February 1st 2010.

The VAT replaced the General Consumption Tax, Airline Ticket Tax and Motor Vehicle Purchase Tax.

The essential purpose of introducing the tax was to have a tax system that is fairer, more  effective and efficient, and easier to administer. The VAT has fulfilled these objectives in Grenada and more than 120 countries worldwide   including: St . Vincent, Dominica,   Barbados and Trinidad & Tobago.

This brochure is intended to provide consumers with the highlights of how the VAT system  operates in Grenada.

What is VAT?

VAT is the acronym for Value Added Tax which is levied on all forms of consumer spending—both goods and services

The tax is computed on the value of imports and the Value Added (or mark-up) that one business charges   another, or the final consumer, when a good or   service is provided.

What is the rate of VAT?

VAT is charged at the rate of 15% on most goods and services other than hotel accommodation and dive   operations which are charged at 10%. Some goods and services are also charged at the rate of 0%.

How  VAT affects you?

· Price of some goods  increased, decreased or remain the same Prices of services, which are not exempt  increased.

· Relief Measures:-

             Partial Zero Rate on the following:

                                                        · Electricity

Who charges and collects the VAT?

Businesses with annual taxable supplies in excess of $120,000 that are registered for  VAT.  

List of Zero-Rated Supplies

· Wheat Flour

· Brown, white rice & broken rice imported in bulk for repackaging

· Milk (Fresh milk, condensed, powder, evaporated)

· Cane sugar

· Infant preparation (milk-based)

· Pipe-borne water supplied by NAWASA for residential purposes

· Fuel (gasoline, diesel, cooking gas, kerosene)

· Postage stamps

· A supply of textbooks as prescribed by the regulations

· A supply of electricity by GRENLEC provided for residential purposes, for the first 99kilowatt hours.

It is important to note that not all  businesses areregistered for VAT. Those businesses that are registered for VAT mustdisplay their VAT Registration Certificate in a  conspicuous place in their premises.  If you are in doubt as to whether you should be paying VAT, you should verify that the vendor is registered for VAT and is displaying his/her VAT certificate at the place of  business. If this cannot be proven, you should refrain from paying the VAT and report the incident to the Inland RevenueDivision.

NB: you must receive a sales receipt or VAT invoice, which would display the price of the goods and the VAT paid  separately.

Is VAT added at check-out or is it included in the price on the shelf?

The VAT Act requires that prices quoted or advertised must always be VAT-inclusive. This means that the prices you see on the shelves or on the products or prices quoted for services is the price you are required to pay.

The impact of VAT on prices

One of the many concerns which came out of the consultations held with the general public on the VAT is the issue of price control. Some consumers feel the need for  Government to control the prices of goods and services in order to ensure that they are not taken advantage of.

However, Grenada operates in a free-market economy and, in such economies, Government would not dictate to business owners what their prices should be, except in the case of price-control goods. Goods which are not subject to price controlled regulations the prices charged are dependant on a number of factors, one of which is the mark-up which includes the cost of any labour to further manufacture the goods and other overhead expenses to run the  business.

The onus is therefore on you as a consumer to be informed regarding matters such as these. Having done this, you will then be in a stronger position to make informed decisions on where to purchase the necessary goods and services you may require.

 With the implementation of VAT, a system was introduced whereby VAT registered businesses are allowed to claim a refund for the VAT they have paid in operating their businesses. This deduction system eliminates the cascading effect that the taxes replaced by VAT had on prices.

Accounting for VAT received

Government relies on registered businesses to collect the VAT from its customers and remit it to Inland Revenue Division. This is referred to as a “self-assessment system”. The VAT Actempowers the Comptroller of Inland Revenue   Division to carry out audits of taxpayer records to ensure full compliance.

What is good about VAT?

· Provides opportunity to pay less taxes by managing your consumption pattern

· Is fair—everyone pays

· Has a  standard rate across the board

· Enhances Government’s ability to provide

      improved public services (health, infrastructure etc.)

This leaflet is designed as part of our new series of leaflets, written in plain language, to explain various aspects of the tax system.

Each leaflet covers just one topic. Other leaflets you may find useful include:

IR102 Should I be registered for VAT?

IR103 How to register for VAT

IR104 Keeping records for VAT

IR105 VAT invoices

IR 107 Accounting for VAT

PENALTIES AND OFFENCES under the VAT Law

Introduction

Many tax penalties are substantial and can dramatically increase a tax bill. Penalties can be assessed for a variety of reasons. Some are due to taxpayer’s failure to pay   attention to tax details. Other penalties are incurred due to the overstatement of deductions, the failure to report   before the due date, and or missing or inaccurate information. Taxpayers may also be penalized for intentional acts of fraud.  This brochure would provide a guide to avoid interest and penalties.

Step One:

Ask yourself,

What are your obligations under the VAT?

· Show the VAT-inclusive prices of goods and services· Issue Sales receipts/VAT Invoices to each consumer.

· Display your VAT Registration Certificate in aprominent place in your business.

· Keep accurate records.

· File your returns and pay by the 20th of each month, or the next working day if the 20th falls on a weekend or holiday.

Step two:

What are the consequences for not adhering to your obligations?

A person who fails to pay the VAT payable to theComptroller, or refuses to adhere to any of the registration requirements has committed an offence and is deemed liable.

The following gives you detail information of the offences that can be committed as per the VAT Act:

· Failure to apply for registration

 A person who is required to be  registered, but fails to apply for registration within the required time, is liable to a fixed penalty of  five thousand dollars($5000.)

or summary conviction to a fine not exceeding ten thousand dollars ($10,000.) or a period of imprisonment notexceeding two years.

· Failure to display VAT Registration Certificate

 A person who fails to display his/her Registration Certificate, or a certified copy issued by the Comptroller, is considered to have  committed an offence and would be charged a fixed penalty of two thousand and five hundred dollars ($2,500.) or on summary conviction to a fine notexceeding five thousand ($5,000.) or imprisonment for a period not exceeding 18 months.

· Failure to notify of changes affecting registration or to apply for cancellation of registration

 A person who fails to notify the Comptroller of changes affecting registration, can be charged a fixed penalty of two thousand five hundred dollars($2,500) or on summary conviction to a fine not exceeding five thousand dollars ($5,000.) or a term of imprisonment not exceeding  eighteen months.

· Failure to comply with requirements after cancellation of registration

 If a person fails to comply with the requirements after  cancellation of registration, he is considered to have committed an offence and would be liable to a fixed penalty of $5000 or on summary conviction to a fine not exceeding ten  thousand dollars ($10,000.) or a term of  imprisonment not exceeding two years.

· Making a supply in relation to Public Entertainment without applying for registration

If a promoter of public entertainment, or a licensee or  proprietor of a place of public entertainment, fail to apply for registration prior to the commencement of their  activities, they are liable to a fixed penalty of  ten thousand dollars ($10,000.) or summary conviction to a fine not exceeding twenty thousand dollars ($20,000.) or imprisonment to a term not exceeding three years.

· Failure to comply with notice for recovery of VAT

A  person who fails to comply with a notice issued in relation to an amount of VAT payable under the VAT Act can be charged a fixed penalty of two thousand  five hundred dollars ($2,500.) or on summary conviction of a fine not exceeding thirty thousand dollars($30,000.) or a term of  imprisonment not exceeding three years.

· Failure to keep records

A person who fails to maintain the relevant  records as required in the VAT Act, can be charged a fixed penalty of two thousand  five hundred dollars ($2,500) or on summary  conviction to a fine not exceeding five thousand dollars ($5,000.) or a term of imprisonment not  exceeding eighteen months.

· Failure to comply with notice to give information

 A person who fails to comply with a notice issued by the Comptroller to provide the relevant information within a specified time would be charged a fixed penalty of five thousand dollars ($5,000.) or on summary conviction to a fine not exceeding ten thousand dollars or a term ofimprisonment not exceeding two years.

· Non-compliance with VAT Inclusive price quotation requirements

A person who contravenes the requirements under the VAT Act, in relation to the advertising or quotation  of prices for taxable supplies, is liable to a fixed penalty of  five thousand dollars ($5,000.) or on summary conviction  to a fine not exceeding ten thousand dollars ($10,000) or a term of  imprisonment not exceeding eighteen months.

· Failure to pay security

A person who is required to pay security under the VAT Act, and do not do so by the specified day, contravenes the Act and has committed an offence  and is liable to a fixed penalty of five thousand ($5,000.) or on summary conviction to a fine not exceeding ten thousand dollars ($10,000.) or a term of imprisonment not exceeding two years.

·     Failure to provide VAT documentation

A person who fails to issue a VAT invoice, VAT credit note, Vat debit note or sales receipt would be liable to a fixed penalty of $500.00

 Additional to the fixed penalties there are other offences that would be liable to prosecution such as:

· False Documentation or Tax Identification Number (TIN)

if a person use a false TIN or a TIN that does not apply to the person, issue a false VAT invoice, VAT credit note, VAT debit note, or sales receipt.

· Providing False or misleading information

· Make an understatement of tax payable or improper claim for refund.

· VAT evasion and Fraud

Step three:

Ask yourself!

 · Do I know what Is a fixed penalty notice?

A fixed penalty notice means a notice in the form set out under the Schedule in the VAT Act, offering the opportunity to discharge of any liability to conviction of the offence to which the notice relates, bypayments.

· Do I know what offences that would attract a fixed  penalty and what is liable to Prosecution.

As a registered business owner,  develop a plan to avoid all  penalties and offences under the VAT Act.

This leaflet is part of our new series of leaflets, written in plain language, to explain various aspects of the tax system.

Each leaflet covers just one topic. Other leaflets you may find useful include:

IR101 What is VAT?

IR102 Should I be registered for VAT?

IR 103 How should I register for VAT

IR104  Basic Supply Rules

104a   Special Supply Rules

IR105  VAT Documentation

IR106 Keeping VAT records and Accounts

IR 107  Reporting for VAT

Information for Businesses

As a Business Owner, what are my tax obligations?

All persons who own or operate a business large or small are required to register their business with the Inland Revenue Department by law under Section 65A of Income Tax Act, Section 3A of the Annual Stamp Tax Act and 57 of the General Consumption Tax Act.

When Registering a business with the Inland Revenue Department you are reminded of the following:

· Individual enterprises and partnerships must present a Registration of Business Name Certificate, from the Supreme Court Registry. 

· Partnerships are required to present documents from the Registry showing proof of partnership accompanied by the business Name Certificate.

· For companies, the certificate of incorporation along with the Articles of    Incorporation and the Memorandum of Association are required.

Additionally the Inland Revenue Department registration forms should be duly completed and signed by the owner of the business.

The registration process takes at least two days.

As a business owner you are also reminded of  the consequences for not registering yourbusiness:

· Taxes will be payable to the Inland Revenue Department  for the years the business was in operation up to a maximum of six (6) years.

· Concessions will not be granted by the Grenada Industrial Development Corporation.

· Inconvenience at customs when attempting to clear goods.

Am I liable to pay taxes to the Inland Revenue? 

After registering your business with the Inland Revenue Department, as a business owner you are obligated to pay, Corporate Income Tax/Personal Income Tax , Annual Stamp Tax , Value Added Tax and Excise Tax, where applicable .

If you are a promoter of Public Entertainment, you will be liable to pay Withholding Tax whenever an artiste is brought into the country for the purpose of performing, or for general business persons, whenever a non-resident is employed at your firm.

What is Annual Stamp Tax?

This is a Tax on gross receipts replacing stamp on bills and is charged for annually based on the gross receipts for the previous year. E.g. the Tax for 2009 is based on the gross receipts for 2008.

The percentage rate to be used in calculating the Stamp Tax shall be:

1. 0.25% in respect of business with gross receipts over $30,000. per annum but not exceeding $100,000. per annum.

2. 0.5% in respect of business with gross receipts exceeding $100,000. per annum.

NB: businesses with gross receipts less than $30,000. would be required to pay a minimum tax of $100.00

Income Tax

Income Tax - Act No. 36 of 1994. It  is a tax levied on the financial income of people, corporations, or other legal entities.

Who Pays the tax?

Every Company (excluding those with concessions), sole proprietor, professional and employees earning in excess of $60,000. per annum, are required to pay Income Tax.

On What?????

Income Tax is chargeable on net profit as it relates to companies and all other types of businesses. In the case of sole proprietorships there is a $60,000 on which no tax has to be paid.

You are required to pay  Income Tax on:

(a) Any amount accrued by way of wages, salary, leave pay, fee (including director’ s fee), commission, bonus or gratuity in respect of employment in Grenada.

(b) Any travelling, entertainment or other allowance to the extent to which it does not represent a repayment to the employee of money wholly, exclusively and necessarily expended by him in the performance of the duties of the employment.

(c) The rental value of any quarters or residence provided by reason of the employment.

(d) The value of any other benefit or advantage received or enjoyed by the employee by reason of the employment.

(e) Any pension payable to a former employee of the dependent of a former employee by the trustees of a pension fund in respect of the employment.

(f) Any loan or advances by a controlled company to a shareholder or associate of a shareholder deemed to be employment income.

As a business owner you are also reminded of  the consequences for not registering your business:

· Taxes will be payable to the Inland Revenue Department  for the years the business was in operation up to a maximum of six (6) years.

· Concessions will not be granted by the Grenada Industrial Development Corporation.

· Inconvenience at customs when attempting to clear goods.

When is the Tax Due?

The Tax is due and payable at the end of your financial year, but deducted monthly by the employer in the case of an employee.

Where can I pay?

The tax can be paid to Inland Revenue Department, or anyDistrict Revenue Office.

Rate of Tax

Companies– thirty percent (30%) of net profit Sole Proprietorships, Professionals  and Employees thirty percent (30%) of the excess over $60,000. 

 Returns

All returns are due within ninety days after the end of the accounting period (fiscal year basis). But in the case of a company it must be accompanied by a financial statement.

NB: when submitting tax returns, please ensure that all the relevant schedules are completed and the declaration is duly signed.

 Interest

Interest of 1 1/2% per month or part thereof is charged on the unpaid balance.

Offences

Civil Penalties - You have ninety days after your accounting period in which to file your return. If you fail to furnish a return on time you shall incur a penalty of $100. or 10% of the taxes unpaid, which  ever is greater.

Criminal penalties - The law provides for criminal proceedings to be taken against persons who do not comply with the Laws.

Appeals

The same right for appeals exist for Income Tax as for Annual Stamp Tax. See Appeals under the Annual Stamp tax section page 4 

Value Added Tax

Value Added Tax (VAT) Act. No. 23 of 2009, the tax is computed on the value of imports and the value added  (mark-up) that one business charges another, or the final consumer, when a good or service is provided.

The Act came into effect on 1st February 2010. Businesses with annual taxable supplies of $120,000 and above are required to register for the VAT. Promoters of Public Entertainment, Government entities and Investors are also required to register under the Act irrespective of their annual turnover.

Withholding Tax

Withholding Tax is a separate tax from the Income Tax although the rules are contained within the Income Tax Act. Any person who makes payments to a non-resident is responsible for paying Withholding Tax.

The tax is payable on the following:

· Salaries

· Interest (except from bank deposits)

· Discounts

· Rent

· Lease premium

· License charge

· Royalty

· Management of charge

· Commissions

· Fees

· Royalties on other payments

Some of the rates on the taxes are as follows:

Corporate Income Tax

Payable at the rate of 30% of net profit

Value Added Tax

Mobile Talk & Text– 20%

Most goods  & Services– 15%

Hotel Accommodation & Dive activities– 10%

Some goods & services– 0%

Personal Income Tax

Annual Stamp Tax

Gross receipts between $0—$30,000-nil

Gross receipts between $30,000 and $100,000– 25%

Gross receipts over $100,000.-0.5%

Minimum Tax of  $100 per annum

Zero-rated and Exemptions

There are certain goods and services that are zero-rated or exempted from the Value Added Tax. They are as follows:

· Vegetables, fresh, chilled or frozen

· Agricultural tools

· Printed School books and newspapers.

· Computers

· Health services

NB: This Leaflet has been prepared by the Inland Revenue Department for providing guidance for Business owners and potential business owners.

Any additional information or clarification needed please contact the Inland Revenue Department.