Tax accountant: Watch out for VAT ‘transition’ costs
Guardian Business Editor
Published: Oct 24, 2013
A senior tax accountant has argued that “a lot of issues” often arise in the “transitional” value added tax (VAT) implementation period, when companies may have goods that they have purchased prior to the implementation of VAT in their inventory.
Wayne Lovell, KPMG Barbados partner and tax practice specialist, told attendees at a VAT luncheon organized by the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) yesterday that they will want to pay close attention to how the government plans to handle this “transition” if they wish to avoid undue costs.
“Usually, you get a lot of issues pop up during this time with respect to inventory. When the legislation is released, you’ll want to examine how they will handle the transitional period carefully. VAT is not a cost on business, but you will want to make sure it doesn’t become a cost on business,” said Lovell.
Lovell also urged business people to pay close attention to other critical definitions in the VAT legislation, such as how the government intends to compute VAT – given that there are different accepted methods – and how it defines the value of a good under the VAT system.
This could vary from its “cost” to its “cost including insurance and freight”, for example.
In his presentation, Financial Secretary in the Ministry of Finance John Rolle said the government has a plan for how goods purchased by companies prior to the implementation of VAT will be dealt with.
“If you are a large company and deal with lots of merchandising and are concerned about the sink customs duties cost in the inventories, there’ll be a transitional regime with the bonded warehouses so that as you build up your inventory, leading into the month of implementation (of VAT) you can have your goods sit in the bonded facilities.
“If they come out before the implementation date, it is (dealt with) by customs. If it comes out after that date, then it attracts the VAT rate, plus the reduced customs rate. So that’s very important.”
Rolle said he expects the VAT legislation and regulations to be released “very soon”.
“I know there is growing impatience. We’re very sensitive to that,” he said.
In other areas of interest noted during Lovell’s presentation, he drew attention to the fact that The Bahamas requires companies to file their VAT returns monthly. This is in contrast to the regional average, which is quarterly, while some countries – Barbados and St. Vincent and the Grenadines – require it every two months.