1. Antigua and Barbuda Sales Tax (ABST): Presentation on draft ABST law

2. Basic concepts taxable transactions:  taxable supplies of goods or services  taxable imports taxable activities taxable persons; registration requirements place of supply (in A & B) time of supply (when to pay & deduct) zero-rated (0%) & exemptions (not taxable)

3. Taxable supplies must be a supply made in the course of the taxable activity in Antigua and Barbuda by a taxable person (registered or required to be registered) not exempt

4. Supplier  goods or services  to Recipient (action)  (thing supplied)  (receipt) = any transaction involving at least two parties: a supplier makes a supply to a recipient of the supply = the supplier does something to: (a) cause something to pass from supplier to recipient; or (b) cause some benefit to arise for recipient = the recipient receives/acquires the thing supplied Supplies may involve other entities e.g. the supplier contracts with the recipient to provide something to a third party but the tax consequences fall on the supplier and the recipient

5. Supplies of goods and services Supplies of goods: goods = tangible property (real or personal); not only sales – includes leases, licences, options to purchase, commodity futures Supplies of services: everything else, e.g. service industries (including lawyers & accountants), IP, restrictive covenants, supplies of rights, etc The distinction is particularly relevant for the jurisdictional rules (place of supply & exports)

6. Taxable activity (broader than business) any activity carried out on a regular or continuous basis & involving the supply of goods or services includes business, trade, manufacture, commerce, or adventure in the nature of trade licensing of copyright, leasing of property includes non-profit activities (because aim is to tax consumption) one-off activities carried out with a profit-making intent (e.g. acquire property to develop & sell)

7. Taxable activity (broader than business) Doesn’t include:  hobbies & private activities  employment (employee is your value added)  acting as director of a company (except where engaged to do so through a business, e.g. where lawyer or accountant engaged to act as Director)  government activities that don’t involve supplying goods or services to the public

8. Taxable persons Person includes non-legal persons such as partnerships, trusts, and unincorporated entities must be registered if an annual turnover ≥ threshold persons are registered, not activities: if person has >1 taxable activity, all will count towards threshold, only one registration Exclude from turnover your exempt supplies, other non- taxable supplies, sales of capital assets, closure of a business… …

9. 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  special rules for rights and options (including vouchers and phone cards)

10. Some supplies are not taxed zero-rated (0%) & exemption (no tax) difference lies in the input tax credit entitlements  no credits for exempt supplies  therefore the supplies are “input taxed”  undeductible input tax passed on in the price of exempt supplies is hidden from consumers

11. Zero-rated supplies by accountants and lawyers Most common will be exported services  supply to a non-resident who is outside Antigua and Barbuda when supply is made  services physically performed outside Antigua and Barbuda  patent attorney services for rights to be used outside Antigua and Barbuda Not zero-rated if billed to a non-resident but provided to a local person (e.g. global services contracts)

12. Imports any import by any person  registration not required aim is to tax value of consumption in Antigua and Barbuda  taxed charged on: customs value + customs duty & other import taxes + freight & insurance close links between ABST on imports and customs duties: collection (by Comptroller) administration (under customs laws); time & place of payment (when & where the duty is paid)

13. Net basis for payments Output tax = ABST paid on supplies (not tax paid on imports) Input tax = ABST included in price of acquisitions plus ABST paid on imports Net amount paid to IRD in each tax period = total output tax – total input tax for the period Adjustments for bad debts, changes to transactions (cancellations, variations, volume discounts, etc), and changes in use of assets also factor in to the calculation of the net amount payable

14. Time of supply When do you account for ABST 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 ABST periodically

15. Global basis for calculations Net ABST 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)

16. Input tax credits for businesses Registered businesses can reclaim the ABST incurred on most business inputs (purchases & imports) No input tax credits for:  private acquisitions  acquisitions that relate to making exempt supplies  cars (unless business = supplies of cars)  entertainment Input tax on capital acquisitions is immediately creditable – c.f. income tax depreciation

17. Apportionment Input tax apportionment formula where inputs relate to more than one type of supply First: allocate inputs that are wholly related to one type of supply or other Then: everything else is deductible based on the on the formula: A * B / C A = input tax not directly allocated B = value of taxable supplies C = value of all supplies

18. ABST for unregistered businesses Unregistered businesses, end consumers, and persons making exempt supplies are all treated the same way  No output tax and no input tax credits  effectively input taxed Exempt suppliers and small businesses add value that isn’t tax (end consumers can also add value that isn’t taxed, e.g. cakes & jams sold at a school fete, hobby proceeds) 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.

19. ABST for consumers 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 ABST ≈ a retail sales tax on consumer purchases of goods and services in Antigua and Barbuda

20. Structure of the Act Basic provisions – definitions then application of the law Administrative provisions Schedules (zero-ratings & exemptions) Regulations – to cover transitional issues, special cases, format of tax invoices etc. Plain English drafting

21. Wholesaler Importer RetailerConsumer Cost: $60 Value added: $40 Sell for:$100 plus ABST: $10 Taxed Price: $110 Cost: $100 Value added: $20 Sell for: $120 plus ABST: $12 Taxed Price: $132 Cost: $120 Value added: $80 Sell for: $200 plus ABST: $20 Taxed Price: $220 Cost: $220 (includes $20 tax) ABST Treatment: taxable supplies and imports $6 $10 - 6 $4 $4 $12 - 10 $2 $20 - 12 $8 $2$8 To customsTo IRD $4$2$8 + + +=$20 $6

22. Wholesaler Importer RetailerConsumer Cost: $60 Value added: $40 Sell for:$100 plus ABST: $10 Taxed Price: $110 Cost: $100 Value added: $20 Sell for: $120 plus ABST: $12 Taxed Price: $132 Cost: $120 Value added: $80 Sell for: $200 plus ABST: $0 Taxed Price: $200 Cost: $200 (no tax) ABST: S upply to consumer is zero-rated e.g. electricity subject to the basic charge $6 $10 - 6 $4 $4 $12 - 10 $2 $ 0 - 12 -$12 $2 - $12 To customsTo IRD $4$2- $12 + + +=$0 $6

23. Wholesaler Importer RetailerConsumer Cost: $60 Value added: $40 Sell for:$100 Cost: $100 Value added: $20 Sell for: $120 Cost: $120 Value added: $80 Sell for: $200 plus ABST: $20 Taxed Price: $220 Cost: $220 (includes $20 tax) ABST Treatment: S upplies zero-rated until retailer taxed e.g. macaroni sold by a registered restaurant $20 - 0 $20 $20 To IRD $20 =

24. Wholesaler Importer BankConsumer Cost: $60 Value added: $40 Sell for:$100 plus ABST: $10 Taxed Price: $110 Cost: $100 Value added: $20 Sell for: $120 plus ABST: $12 Taxed Price: $132 Cost: $132 Value added: $80 Sell for: $212 plus ABST: $0 Taxed Price: $212 Cost: $212 (includes $12 tax) ABST: Supply to consumer is exempt (e.g. financial services) $6 $10 - 6 $4 $4 $12 - 10 $2 $2 To customs To IRD $4$2 + + =$12 $6

25. Bank Importer RetailerConsumer Cost: $60 Value added: $40 Sell for:$100 plus ABST: $10 Taxed Price: $110 Cost: $110 Value added: $20 Sell for: $130 Cost: $130 Value added: $80 Sell for: $210 plus ABST: $21 Taxed Price: $231 Cost: $231 (includes $31 tax) ABST: supply to retailer is exempt e.g. financial services $6 $10 - 6 $4 $4 $21 - 0 $21 $21 To customs To IRD $4$21 + + +=$31 $6

26. Wholesaler Importer RetailerConsumer Cost: $60 Value added: $40 Sell for:$106 Cost: $106 Value added: $20 Sell for: $126 Cost: $126 Value added: $80 Sell for: $206 Cost: $226 (includes $6 tax) ABST Treatment: all suppliers are under the threshold $6 To customs =$6

27. 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 ABST is charged on the right kinds of supplies work out how your prices should change: subtract taxes saved and then add ABST get ready to print invoices and documents be prepared for submitting ABST returns

28. What do you need to do? ensure there are appropriate links to your accounting systems to separate ABST from your income & costs systems to capture input tax credit entitlements – to ensure you hold ABST 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?