Belize General Sales Tax (GST):

Presentation on GST Legislation

What do all these concepts mean?

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

value added tax credit for businesses (output tax – input tax) means tax base ≈ salary & wages plus profits

A consumption tax

consumption passed on to consumers in price of each consumer transaction; consumers cannot claim it back

What is a Supply?

= a transaction involving at least two entities:a supplier who makes a supply to a recipient of the supply

= the supplier does some act that:(a) causes something to pass from supplier to recipient; or(b) causes some benefit to arise for recipient

= the recipient receives something tangible/intangible OR is conferred with a benefite.g. sale, lease, licence, creation of rights or obligations

Supplies may involve other entities (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

Supplies of goods = sales, leases, licences, options to

purchase: so long as they are supplies of tangible

personal property & real property

Supplies of services = any supply that isn’t of goods is

a supply of services; e.g. service industries, IP, supplies

of rights,etc.

Q: Does it matter whether a supply is of goods or

services?

A: Yes; particularly for place of supply rules & export

rules

Hotels & restaurants

Restaurants supply & serve food & beverages: this is a supply of goods

Hotels supply services (serviced accommodation, internet access, telephone services, tours) and goods (food and beverages, use of yachts/diving equipment etc)

Hotels often supply rights to their goods & services in a separate transaction from the supply of the goods or services themselves: the rights are taxed if the goods or services themselves would be taxed

Who is required to pay GST?

On supplies:

Registered Suppliers collect it from recipients (customers) by including it in the price of supplies

Some registered persons who acquire services offshore (“imported services”) must charge GST to themselves

On imports:

All persons importing goods into Belize (no registration requirement for importers);

How GST works for businesses

GST-registered businesses claim back GST on most of their business inputs (input tax) (input tax includes tax paid on imports and on goods/services acquired from other registered businesses).

No input tax credits for private acquisitions, for purchases that relate to making exempt supplies, nor for cars (unless business = supplies of cars)

Input tax on capital acquisitions is immediately creditable .

GST for registered businesses

GST charged on supplies = Output Tax

GST returns are submitted for each tax period

Net tax payable = OUTPUT tax – INPUT tax

Input tax that cannot be claimed back is also passed on to consumers (because it is part of cost of sales)

Must have an GST Invoice to claim input tax credit

If GST invoice not received until a later period, the input tax is deducted in the later period

Global basis for calculations

Net GST payable is calculated for each tax period

Input tax on a particular purchase does not have to be credited when the output tax is paid for the supply to which it relates

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)

GST for unregistered businesses

Unregistered businesses cannot charge GST 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 GST works for consumers

Consumers:

pay GST on imports

are ‘charged’ 10% GST when they buy goods or services from registered businesses

effectively pay partial GST on purchases from unregistered businesses

services will go down more than goods because they will now be able to claim input credits.

GST operates like a retail sales tax on consumer purchases of goods and services in Belize

Who will be registered?

To be registered you must:

be a taxable person (includes partnerships, trusts, and unincorporated 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 GST invoices for taxable supplies

to other registered persons issue sales receipts showing GST paid on

taxable supplies to unregistered persons advertise prices GST-inclusive, stating

how much GST is included display GST registration certificate at

places of business

To reiterate:

TAXABLE supplies: GST payable; input tax credits allowed

ZERO-RATED taxable supplies: no GST payable; input tax credits

allowed

EXEMPT supplies: no GST payable; no input tax credits

TRANSACTIONS are exempt; not persons

Wholesaler

Importer Restaurant

300 Consumer

sCost: $60Value added: $40

Sell for:$100

Cost: $100Value added:

$20Sell for: $120

Cost: $120Value added:

$80Sell for: $200plus GST: $20

Taxed Price: $220

Cost: $220(includes $20

tax)

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

$20- 0

$20

$30

To GSTD$20 = $20

Rice Rice Rice Rice &Beans

Wholesaler

Importer Bank Consumer

Cost: $60Value added: $40

Sell for:$100plus GST: $10

Taxed Price: $110

Cost: $100Value added: $20

Sell for: $120plus GST: $12

Taxed Price: $132

Cost: $132Value added: $80

Sell for: $212plus GST: $0Taxed Price:

$212

Cost: $212(includes $12

tax)

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

$9

$10- 6$4

$6

$12-

10$2

$3

To customs

To GSTD

$4 $2+ + = $12$6

Time of supply

When do you account for GST output & input tax?

If time of supply is in the current tax period

Time of supply is earlier of(a) when invoice issued(b) when all or part of the price is paid

Related parties – time of supply is earlier of above or time when goods are delivered or services are provided

Supplies that span periods (leases, licenses etc) – each part treated as a separate supply therefore pay periodically and pay GST periodically

Place of supply

Goods: place where goods are when supplied

Services: most are where supplier has place of business; some are where supply effectively used or enjoyed

Zero-ratings for restaurants

basic foods are zero-rated, but restaurant food is not

GST is more like a retail sales tax for restaurants because many inputs will not be taxed (therefore no input tax to claim back)

not entirely because rent of premises will be taxed, power will be taxed, equipment, cutlery & crockery etc all taxed therefore input tax credits for these

Zero-ratings for hotels

as for restaurants, basic foods are zero-rated, but restaurant food is not

not likely to be any zero-ratings for hotels: the services and goods they provide are consumed here and are therefore taxable

this is the case even when they are sold via transactions with related or unrelated non-resident management companies and travel agents/tour operators

Sales to non-residents

Many supplies of goods or services to offshore recipients are zero-rated exports

This doesn’t apply to supplies of rights or options (including vouchers) if the goods and services will ultimately be consumed in Belize

Differences between approaches around the world relate only to the VALUE on which GST is charged all agree that there should be a local tax burden question is whether value added by non-resident

suppliers should be taxed locally

Management Company

Local Hotel

Foreign Travel Agent

Tourist (while overseas)

Belize

Overseas

Rights

Rights Rights

Tourist (in Belize)

Services & goods

Travels to Belize

How are these rights taxed?

Not treated as an export even though supplied to a non-resident (because the end consumption is in Belize)

Tax must be applied to the transactions

Some countries require the non-resident suppliers to register and pay tax on each transaction (ensures the full consumption price paid by the tourist is taxed)

More commonly, the non-residents are left out of the tax regime

If the parties are related, market valuation rules apply

How are these rights taxed?

If the non-residents are not included, how much tax is collected?

One option is that the local hotel must pay GST on the sale to the management company based on the value that will be charged to the tourist

Alternatively, this may only be required if all the suppliers are related parties: if the non-residents are unrelated entities, the local hotel can be taxed only on what it charges to the first overseas supplier

The foreign tour operator’s/travel agent’s margin is taxed where they are located.

What do you need to do?

identify whether you will exceed the threshold

if yes: will your supplies be taxable, exempt, zero-rated, out-of-scope, or a combination

implement systems to ensure GST is charged on the right kinds of supplies

work out how your prices should change: subtract taxes saved and then add GST

get ready to print invoices and documents

be prepared for submitting GST returns

What do you need to do?

ensure there are appropriate links to your accounting systems to separate GST from your income & costs

systems to capture input tax credit entitlements – to ensure you hold GST invoices and to determine connection between inputs and any exempt or private outputs

will your customers be registered?

will your suppliers be registered?

are you record-keeping systems up to the task?