Businesses in St.Vincent and the Grenadines need to become familiar with the Value Added Tax, which is going to be implemented in January 2007. This is very important because businesses will have to pay VAT when they import goods and foreign services at the Customs or the General Post Office. They will also pay VAT when they buy goods and services locally.

It means that businesses would no longer pay the consumption tax that is currently paid at the Customs Department, but instead, VAT would be paid at a standard rate of 15 percent on imported goods and services. This is certainly a change in the right direction for many businesses in St.Vincent and the Grenadines.

Moreover, most businesses currently find the level of consumption tax as being too high, with multiple rates on a number of goods. This situation is both burdensome to the importer and the tax administrator. That is, some consumption tax rates are above the VAT rate and others are below. But the evidence shows that the average consumption tax rate is much higher than the proposed VAT rate of 15 percent. As a result, the business community is embracing the introduction of VAT alongside the modern Excise regime.

However, it must be noted that, it is only those businesses that are going to be registered, would have the authority to act as agents for the government to charge and collect VAT. Registered businesses will also have an obligation to file a VAT return and pay any VAT due at the end of the tax period, which will be one (1) month to the Inland Revenue Department.

Who will be registered as a VAT-collector and charger?

Persons who have businesses that are currently making gross sales of $120,000 per year are required to register for VAT according to the Value Added Tax Act of St.Vincent and the Grenadines. This requirement is a mandatory one for all businesses that would meet the threshold.

The person to be registered can be, for example:

• A sole trader;
• A partnership;
• A company
• An unincorporated entity; and
• A service provider (e.g Lawyers, Accountants, Contractors etc)

The above categories of persons are all required to apply for registration under the VAT Act on the last day of any month if their gross sales meet the threshold of $120,000 per year. In other words, if a business person is making on average, gross sales i.e.(sales before any expenses are deducted) of $10,000 per month, then that person is required by law to register as a VAT-collector and charger; and thus becomes an agent for the government.

The VAT Act also requires the following persons to register for VAT irrespective of their annual sales or turnover.

• Promoters of public entertainment
• Government entities
• Local authority, council of similar body and other organizations

With the introduction of VAT, all persons will pay VAT. However, only registered businesses will be responsible for submitting the VAT payable to the government.

Registered businesses will collect VAT at 15 percent on sales of goods and services to their customers and deduct VAT paid on their purchases and submit the difference to the Inland Revenue Department at the end of every month. This payment must be submitted by the 15th of the following month.

This is a requirement that all registered businesses must take seriously upon the introduction of VAT in January 2007.