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Barbados - Indirect Tax Guide

Barbados - Indirect Tax Guide

Explore the requirements and rules that apply to Indirect Taxes in Barbados.

Explore the requirements and rules that apply to Indirect Taxes in Barbados.

Promenade Bridgetown Barbados

General

Types of indirect taxes (VAT/GST).

Value Added Tax (VAT) and others noted below.

What supplies are subject to VAT?

Supply of goods or services made in the course of a taxable activity; includes a zero-rated supply but does not include an exempt supply.

What are the standard or other rates (i.e. reduced rate) for VAT/GST?

Standard VAT rate is 17.5 percent.

The VAT rate on accommodation in the hotel sector is 7.5 percent however there is a budgetary proposal to increase to 15 percent effective 1 January 2020. This has not been legislated at the date of this publication.

On certain mobile services the VAT rate is 22 percent.

Certain supplies are exempt.

VAT/GST registration

Who is required to register for VAT/GST and other indirect taxes?

Under the VAT Act, a person is required to register for VAT purposes if they supply goods and services in Barbados in the course of a business or other taxable activity and if their annual taxable supplies are worth 200,000 Barbadian dollars (BBD) (100,000 US dollars (USD)) or more. Registration allows a person to recover all or part of the input tax incurred on purchases for use in their taxable activities.

Is voluntary registration for VAT/GST and other indirect taxes possible for an overseas company (e.g. if the annual turnover is below the relevant VAT/GST and other indirect taxes registration threshold)?

Voluntary registration is permissible.

Are there any simplifications that could avoid the need for an overseas company to register for VAT?

This response presumes that the overseas company is conducting a taxable activity in Barbados. Where the overseas company’s taxable supplies are below the BBD200,000 threshold, registration is not required.

Does an overseas company need to appoint a fiscal representative?

Where a company incorporated outside Barbados carries on business in Barbados and renders taxable supplies, it is required to register an external company and must appoint an agent who is resident in Barbados to carry out their obligations under the VAT Act.

Which forms and supporting documentation does an overseas company need to submit for VAT/GST and other indirect tax registrations?

Registration documents of the external company.

Is grouping* for VAT/GST and other indirect taxes possible?

Grouping is not possible for VAT and other indirect taxes.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

VAT returns are submitted bi-monthly on the twenty-first day of the month immediately following a tax period.

What are the exchange rate rules in your country?

Where the consideration for a supply is a foreign currency or other money, denominated or expressed in a foreign currency, for the purposes of determining the value of the supply, the consideration shall be valued in Barbados currency at the rate of exchange at which the Central Bank of Barbados would, at the time of the supply, have purchased that currency in the form of notes. Barbados has a fixed exchange rate of USD1 / BBD2.

International Supplies of Goods and Services

Exports – Goods

How are exports of goods treated?

Goods which are to be taken outside of Barbados and have been entered by the registrant for export, and that are exported in compliance with the Customs Act and the Customs Regulations without being used in Barbados, are treated as zero-rated supplies. Any input tax which the registrant has paid or incurred on goods for the purpose of making the zero-rated goods may be claimed as allowable input tax, or the amount may be refunded by the comptroller upon application within a two-year period after the supply was made.

Exports – Services

How are exports of services treated for VAT/GST purposes?

Where the supply of a service is rendered to an unregistered non-resident person which does not relate to a service pertaining to real property situated in Barbados that: (a) is not for the consumption, use or enjoyment in Barbados by any person or; (b) is of an advisory or consultative nature, where the beneficiary of the service directly or indirectly is outside Barbados at the time the service is performed, and that is for consideration payable in a currency other than that of Barbadian dollars to a registrant as a fee, commission or income for performing the service. The supply of the service is treated as a zero-rated supply. Any input tax which the registrant has paid or incurred on the service for the purpose of making the zero-rated service may be claimed as allowable input tax or the amount may be refunded by the comptroller upon application within a two-year period after the supply was made.

Imports – Goods

How are goods dealt with on importation?

Goods imported into Barbados are subject to VAT on the value of the goods and are payable, at the time the goods are entered for use within Barbados, by the importer, proprietor or anyone who is liable under the Customs Act to pay duties on the goods.

Imports – Services

How are services brought in from abroad treated for VAT purposes?

Where a supplier who is not resident in Barbados and is not registered or liable to be registered for the purpose of VAT makes a supply to a registrant of services to be physically performed or utilized in Barbados, and the registrant is acquiring the services exclusively for the purpose of making taxable supplies, the supply shall be deemed to have taken place outside Barbados, unless the supplier and the recipient agree that the supply is to be regarded as having taken place in Barbados and therefore subject to VAT.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

There is a local registration requirement in order to file VAT returns. Certain entities operating in the international financial services sector are not required to be registered for VAT purposes but can recover VAT by filing certain prescribed forms.

Are there any exemptions with the right to recover or deduct input VAT?

In general, where a registrant provides tax-exempt supplies, the input VAT that may be deducted is reduced in proportion to the VAT-exempt supplies provided.

Are there any restrictions to the deduction of input VAT?

Same as above.

Tax points

When is VAT/GST due on a supply of goods or services?

Unless otherwise specified in the Value Added Tax Act, VAT is generally due at the earliest of: (a) an invoice for the supply being issued by the supplier; (b) payment is received for the supply; (c) the goods are made available to the recipient or the services are performed.

Invoices

Is a business required to issue tax invoices?

A registrant who makes a taxable supply in Barbados to another registrant shall, upon the request of the other registrant, issue a tax invoice to the other registrant containing such particulars as may be prescribed.

A registrant who fails to issue a tax invoice as required is liable to a penalty not exceeding BBD1,000 as the comptroller may determine.

Is it possible/mandatory to issue invoices electronically?

Yes, It is possible once the electronic record accurately retains all required information.

Is it possible for the vendor to issue an invoice (self-billing)? 

Self-billing is not permitted.

Record-Keeping Requirements

How long must records and invoices be retained?

Records and invoices must be retained for seven years after the end of the year to which the records and books of account relate, or for such other period as may be prescribed.

Can the invoices be stored abroad?

No. Records and books of accounts must be kept in Barbados.

Audits

Do tax audits take place on a regular basis?

Audits take place but not in any specified periods or frequency. Commonly they occur where the person is in a refund position.

Are audits done electronically in your country (e-audit)? If so, what system is in use?

Audits are not done electronically. Officers of the Barbados Revenue Authority will generally conduct site visits or request submission (electronic or otherwise) of supporting documentation.

Non-Compliance

What penalties can arise from non-compliance?

A person who is required to file a return and fails to do so within the time prescribed shall pay to the comptroller a penalty of BBD100.

A registrant who defaults in paying the total amount of output tax payable for a taxable period, by the day prescribed, shall in addition to the amount of output tax in default, pay to the comptroller:

  • a penalty equal to 10 percent of the amount of output tax in default
  • interest at 1.5 percent calculated from the month in which the tax is unpaid plus penalty.

Special Indirect tax rules

Are there any special rules for the sale of a company by one taxpayer to another where VAT is not due on the sale?

The sale of shares in the capital stock of a corporation or any interest in or right to such a share is an exempt supply and therefore no VAT is chargeable. Various other provisions may apply.

Are there unique specific indirect tax rules that you would not expect to find in ‘standard’ VAT jurisdictions?

None of which we are aware.

Does a reverse-charge mechanism apply for goods or services?

There is no reverse-charge mechanism applicable for goods and services in Barbados.

Are there indirect tax incentives available (e.g. reduced rates, tax holidays)?

Incentives are generally specific to a taxpayer and made available on a case-by-case basis. Companies in the international business sector are not required to register for VAT and any VAT charged may be refunded upon application to the VAT division on the prescribed form.

Rulings

Are rulings and decisions issued by the tax authorities publicly available?

Rulings and decisions are generally not made public and are issued on a case-by-case basis. The Commissioner may communicate confidential information to any person who is otherwise legally entitled to that information under the Value Added Tax Act or any other enactment. Hearings on appeal to the Value Added Tax Appeal Tribunal are held in-camera.

Other Indirect taxes

Are there other types of indirect taxes?

  • National Social Responsibility Levy (NSRL), repealed effective 1 July 2018.
  • Excise duty.
  • Property transfer tax.
  • Stamp duty.
  • Fuel tax.
  • Accommodation levy.

What are the standard or other rates (i.e. reduced rate) for other indirect taxes?

The following list is not exhaustive. Accommodation levies effective 1 July 2018 are as follows:

  • B class: BBD5 per room per night
  • A class: BBD11 per room per night
  • luxury class: BBD20 per room per night
  • villa sub-sector and all other vacation rental properties: 2.5 percent of the nightly rate; however, where that amount exceeds BBD20 per night, the rate to be charged shall be BBD20 per bedroom per night
  • shared Economy levy effective 1 August 2018 on all fees charged for shared accommodations: 10 percent
  • direct tourism services rate is 7.5 percent
  • product levy on all direct tourism services is 2.5 percent
  • fuel tax rate is BBD0.40/l on petrol and diesel and BBD0.05/l on kerosene.

For further information please contact:

Louisa Lewis-Ward
Partner, Tax
KPMG in Barbados and Eastern Caribbean
T: +1 246 434 3941
E: louisaward@kpmg.bb

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

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