Should we charge VAT to company exempted from all taxes?
The VAT Corner
Stabroek News
January 16, 2007
Our entity supplies services to a company that has an agreement with the Government of Guyana under which it is exempted from all taxes. Should we charge VAT on our invoices for these services and can we re-claim any input VAT we pay?
Answer
For any supply of goods or services to be zero-rated or exempt it must be listed in Schedules I and II of the Value-Added Tax Act or it must be considered as exported from Guyana under section 15, sub-section (8) of that Act. The circumstances you set out do not seem to fall within the Schedules or section 15.
Any amendment to the Schedules may be made by the Minister by order subject to affirmation by the National Assembly while any changes to section 15 of the Act will require the more extended process of the tabling of a Bill in Parliament, debate and assent by the President.
Section 17 (2) of the VAT Act states that "where a taxable person has applied the rate of zero percent to a supply under this section, the taxable person is required to obtain and retain such documentary proof as is acceptable to the Commissioner substantiating the person's entitlement to apply the zero rate to the supply." This places the burden of proof on you, the supplier, and means that you could bear the cost and consequence of failure to charge VAT.
You will be entitled to reclaim any input VAT on taxable supplies, even if those supplies are charged at the rate of zero percent. If however the services are exempt, then you will not be able to claim any input VAT but must include such input VAT as part of the company's cost. Where supplies cannot be directly allocable to taxable (zero-and standard-rated) supplies or to exempt supplies, such as overhead costs, only a proportion of the input VAT incurred is recoverable. This is computed based on the ratio of taxable supplies to total supplies. If the ratio of taxable supplies to total supplies is more than 90%, the full amount of the input tax is recoverable.
Ram & McRae
Chartered Accountants
Professional Services Firm
157 'C' Waterloo Street
P.O. Box 10148
Georgetown, GUYANA
Tel: 22-61072/61302/60322
Fax: 592-22-54221
Questions from members of the public on VAT can be sent in writing to Stabroek News at 46-47 Robb Street, Lacytown or emailed to stabroeknews@stabroeknews. com. They will then be answered by Ram and McRae.