VAT, GST and Sales Tax in Barbados

Summary

Name of the tax Value-added tax (VAT)
Date introduced 1-Jan-97
Trading bloc membership CARICOM
Administered by Barbados Revenue Authority Value-Added Tax Division
VAT rates
Standard 17.50%
Reduced 7.50%
Other Zero-rated (0%) and exempt; an increased rate of 22% applies to the supply of mobile services of voice, data and text messaging
VAT number format 2XXXXXXX-X (9 digits)
VAT return periods Bimonthly and monthly
Thresholds
Registration BBD80,000 (a threshold of $200,000 is currently applied in practice)
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the supply of goods and services by a taxable person (registrant) in Barbados and to the importation of goods.

Who is liable

Barbados VAT law imposes a registration requirement on any person who makes taxable supplies in Barbados, other than a person whose annual turnover is less than BBD80,000 a year. An increase in the registration threshold to BBD200,000 per annum has been proposed and is being applied in practice by the Barbados Revenue Authority. However, this change has not yet been officially legislated.

In general, any person that begins making taxable supplies in Barbados must apply to the VAT authorities for registration within 21 days after the date on which taxable supplies are first made.

Group registration. VAT grouping is not allowed under the Barbados VAT law. Legal entities that are closely connected must register for VAT individually.

Reverse charge. No reverse-charge mechanism applies in Barbados.

Non-established businesses. Non-established businesses, which in Barbados are referred to as nonresident, non-registrant busi­nesses, are generally not liable to VAT.

Tax representatives. Where a corporation fails to pay an amount of tax required, the persons who were directors at the time of the failure are jointly and severally liable, together with the corpora­tion, to pay the amount and any interest or penalties attaching to such amount.

Registration procedures. Taxpayers may register online at https:// evetas.customs.gov.bb or in person at the Barbados Revenue Authority at the following address:

Barbados Revenue Authority Value-Added Tax Division 3rd Floor

Weymouth Corporate Centre Roebuck Street

St. Michael

Barbados

Taxpayers are required to provide two forms of identification in addition to the incorporation documents of the entity being reg­istered. Registrations can typically be completed within one week.

Late-registration penalties. A person who fails to register is com­pulsorily registered and may be subject to a penalty not exceeding BBD1,000.

Digital economy. There are no specific rules relating to the taxation of the digital economy.

Deregistration. An application to cancel registration can be made in writing when the VAT registrant is no longer required to be regis­tered, such as when a company ceases to carry on a taxable activity or make taxable supplies.

VAT paid directly to the Barbados Revenue Authority. Where a registrant enters a contract for the provision of goods or services to the Government of Barbados, the VAT payable to the registrant in respect of those supplies is paid directly to the Barbados Revenue Authority by the government accounting officer or authorized per­son that is making payment. In such instances, the registrant will receive payment exclusive of the VAT portion and will not be required to account for the VAT on that supply when filing their VAT returns for that period.

VAT rates

The term “taxable supply” refers to a supply of goods and ser­vices that is liable to VAT, including a supply taxed at the zero rate.

In Barbados, the following three rates of VAT apply:

  • Standard rate of 17.5%
  • Reduced rate of 7.5%
  • Zero rate (0%)
  • Increased rate (22%)

The 17.5% standard rate applies to most supplies of goods or services. The 7.5% rate applies to the supply of accommodation in guest houses, hotels and inns or similar places, including a dwelling house normally let or rented for use as a vacation or holiday home and to direct tourism services. The First Schedule of the VAT Act lists the goods and services that are zero-rated, and the Third Schedule of the Act lists the goods that are zero-rated on importation.

Effective 1 January 2016, an increased rate of 22% was intro­duced and applies to the supply of mobile services of voice, data and text messaging. This increased rate is generally applicable to telecommunication companies operating in Barbados and is pay­able at the time that the supply of such services is made by the VAT registrant.

The Customs and Excise Department has published the condi­tions and procedures necessary for manufacturers, who export 40% or more of their total production, to qualify for the zero-rating of inputs (for example, machinery and equipment and raw materials) im ported for use exclusively in manufacturing.

Examples of zero-rated supplies (taxable at 0%)

  • Exported goods and services
  • A small basket of staple food items (The number of items com­prising the basket of staple food items, which is zero-rated for VAT purposes, was significantly reduced.)
  • Prescribed drugs
  • Veterinary services
  • International cruises
  • Imported inputs for manufacturing

The term “exempt supply” refers to a supply of goods and ser­vices that is not liable to VAT and is listed in the Second Schedule of the VAT Act. Persons that make exempt supplies are not required to register for VAT, and they are not permitted to recov­er any input tax incurred in making those exempt supplies (see Section F).

Examples of exempt supplies

  • Financial services
  • Medical services
  • Residential property sales
  • Water and sewerage services
  • Public postal services
  • Transportation services

Option to tax for exempt supplies. Barbados offers no option to tax for exempt supplies.

Time of supply

The time when VAT becomes due is called the “time of supply.” In general, the time of supply for goods and services supplied by a taxable person is the earliest of the following events:

  • The date of issuance of the invoice by the supplier
  • The date on which payment is received for the supply
  • The date on which the goods are made available to the recipient or the services are performed

A taxable person must account for VAT in the VAT period in which the time of supply occurs, regardless of whether payment is received.

Imported goods. VAT is payable on the importation of taxable supplies. It is levied on the sum of the value of the goods import­ed and the amount of duties, fees or other charges that are pay­able upon the entry of the goods into Barbados.

Recovery of VAT by taxable persons

VAT paid by a registrant is recoverable as input tax if it relates to goods and services acquired solely for the purposes of making taxable supplies. Input tax is recovered by offsetting it against output tax (that is, tax charged on supplies made) in the VAT return for each VAT period. If input tax exceeds output tax in a period, the excess is due to the registrant as a refund.

Goods or services are deemed to be for the purpose of making taxable supplies if the supplier acquired, imported or produced the goods or services for either of the following purposes:

  • Their supply or re-supply as a taxable supply
  • Their consumption or use (whether directly or indirectly or wholly or partly) in producing goods or services for supply as a taxable supply

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business pur­poses.

Examples of items for which input tax is deductible (if related to a taxable business use)

  • Business entertainment
  • Travel expenses
  • Utilities
  • Inventory purchases
  • Occupancy costs

Examples of items for which input tax is nondeductible

  • A personal vehicle
  • A portion of the input tax for company vehicles

Partial recovery. The Barbados VAT law states that if all the sup­plies made by a taxable person during a tax period are taxable supplies, the input tax incurred in the period is deductible in full. However, if some, but not all, of the supplies made by the person during the tax period are taxable supplies, a partial recovery cal­culation is required. This measure applies to persons making both taxable and exempt supplies. Input tax is recoverable on the fol­lowing basis:

  • If all of the input tax for the period is directly related to the making of taxable supplies, the VAT is recoverable in full.
  • If none of the input tax for the period is directly related to the making of taxable supplies, no VAT is recoverable.

If part or all of the input tax for the period is related to the making of both taxable and exempt supplies, an apportionment calcula­tion must be performed. The amount of recoverable input tax is calculated based on the ratio of the value of taxable supplies made during the period compared to the total value of supplies (taxable plus exempt) made during the period.

If a taxable person makes no taxable supplies during the tax period, the VAT authorities may limit the amount recoverable to the amount that they consider to be “fair and reasonable.” However, this provision is generally not invoked.

Refunds. A refund arises when the amount of input VAT recover­able in a month exceeds the amount of output VAT payable. The VAT Act now provides that registrants may offset unpaid VAT refunds owed for a previous period against output tax due for the current period. Under prior law, refunds were generally paid by check after the submission of the VAT return. If the refund claim was submitted within the specified time (21 days after the end of the tax period) and the refund amount remained unpaid after 6 months, the tax authorities were required to pay interest on the outstanding balance at a prescribed rate of 1%.

Preregistration costs. There is no provision for persons to claim VAT incurred on costs prior to registration.

Recovery of VAT by non-established businesses

Non-established businesses, which in Barbados are referred to as nonresident, non-registrant businesses, are not liable to VAT and do not recover input VAT.

Invoicing

Sales invoices and credit and debit notes. A taxable person must provide a tax invoice for all taxable supplies made to registrants. A tax invoice is necessary to support a claim for input tax recovery.

A credit note or debit note must be issued when the quantity or consideration shown on a tax invoice is altered. Credit and debit notes must contain broadly the same information as a tax invoice.

Exports. VAT is charged at a rate of 0% on supplies of exported goods. However, to qualify as zero-rated, exports must be sup­ported by evidence that confirms the goods have left Barbados.

Foreign-currency invoices. Invoices may be issued in a foreign currency.

Electronic invoices. Electronic invoices are accepted by the VAT Division. There are no separate requirements for the format of electronic invoices.

VAT returns and payment

VAT returns. VAT reporting periods are generally two months. However, the tax authorities may require longer or shorter tax periods if they consider it appropriate. Returns must be filed by the 21st day of the month following the end of the tax period. Any tax due for the period must be remitted with the return. Returns may be filed using the VAT Division’s electronic filing system. Additionally, requests may be made to offset refunds from prior years against current VAT liability.

Special schemes. Entities such as international business compa­nies (IBC) are not required to register for VAT or to file VAT returns. However, an IBC may reclaim any input VAT it has incurred on a monthly basis.

Electronic filing and archiving. VAT returns may be filed online at https://evetas.customs.gov.bb.

Annual returns. Not applicable. J. Penalties

VAT penalties generally relate to VAT accounting. The following are some of the penalties associated with breaches of the VAT law:

  • A penalty of BBD100 for the late submission of a VAT return
  • A late payment penalty of 10% of any output tax due
  • Interest at the rate of 1% of any outstanding tax and penalty

In addition, several other penalties may apply, including the following:

  • Failure to display a certificate of registration: BBD1,000
  • Failure to notify the tax authorities of changes relating to the registration: BBD1,000

Criminal penalties may also apply in certain circumstances, such as in cases of fraudulent conduct.