Barbados legislation imposes Value Added Tax (“VAT”) on the supply of goods and services by a taxable person (registrant) in Barbados and on the importation of goods.
The registration requirement is imposed on any person who makes taxable supplies in Barbados, other than a person whose turnover is less than BB$80,000 annually.
In general, any person that commences making taxable supplies in Barbados must apply to the VAT authorities for registration within 21 days of first making supplies. The Barbados VAT & Excise Department facilitates the online registration and filing of taxpayers via its website [https://evetas.customs.gov.bb]
There are three rates of tax charged on taxable supplies. The first is the standard rate of 17.5% which is generally applicable to all taxable supplies. The second is the reduced rate of 7.5% reserved for the supply of accommodation in guest houses, hotels, inns and similar accommodation. The rate of 7.5% also applies to the supply of certain tourism related goods and services by persons who meet the requirements of the VAT Act. The third rate is a zero rate which applies to supplies outlined in the First Schedule to the VAT Act. These include the supply of a prescribed medical device, a supply of crude oil, a payment known as a service charge payable to hotels, guest houses and restaurants, and the supply of international cruises and certain basic food items such as frozen meat, fish, potatoes, onions, citrus fruits and rice. Some supplies are also treated as exempt supplies. This means that no VAT can be charged on such supplies and the input VAT incurred in making these supplies cannot be recovered.
The following table lists examples of exempt supplies:
|Examples of Exempt Supplies of Goods and Services|
|Financial services||Public postal services|
|Medical services||Transportation services|
|Residential property sales||Betting and gaming|
|Water and sewerage services|
Time of Supply
The time when VAT becomes due is called the “time of supply”. Generally, the time of supply for goods and services supplied by a taxable person is the earliest of the following events:
- the date of issue of the invoice by the supplier;
- the date when payment is received for the supply; or
- the date when the goods are made available to the recipient or the services are performed.
A taxable person must account for VAT in respect of the VAT period when the time of supply occurs, whether or not payment is received.
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 off-setting it against output tax (tax charged on supplies made) in the VAT return for each VAT period. If input tax exceeds output tax in a period, the excess will be 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 any of the following purposes:
- their supply or re-supply as a taxable supply; or
- their consumption or use (whether directly or indirectly or wholly or partly) in producing goods or services for supply as a taxable supply; or
- their consumption or use, whether directly or indirectly or wholly or partly, in making taxable supplies.
Non-Deductible Input Tax
Input tax may not be recovered on purchases of goods and services that are not used for making taxable supplies. However, input tax is deductible in respect of certain items of expenditure, such as business entertainment and business travel expenses, if the expenditure is related to the making of taxable supplies.
The Barbados VAT legislation 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 provision relates 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 input tax is recoverable in full;
- if none of the input tax for the period is directly related to the making of taxable supplies, none of the input tax is recoverable; and
- If part or all of the input tax for the period is related to the making of both taxable and exempt supplies, then an apportionment calculation must be applied. The amount of recoverable input tax is calculated based on the ratio of the value of taxable supplies made during the period to the value of total supplies (taxable plus exempt supplies) 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 in the Act is generally not invoked.
A refund arises when the amount of input VAT recoverable in a month exceeds the amount of output VAT payable. Refunds are generally paid by cheque some time after the submission of the VAT return. Additionally, if
- the refund claim was submitted within the specified time (21 days after the end of the tax period)
- the refund remains unpaid after 6 months,
- and all subsequent returns during that 6 month period have been filed on time,
then the tax authorities were required to pay interest on the outstanding balance, at a prescribed rate of 1%.
The VAT Act provides that registrants may offset unpaid VAT refunds owed for a previous period against output tax due for the current period.
Sales invoices and credit/debit notes
A taxable person must provide a tax invoice for all taxable supplies made to registrants upon request by that registrant. Tax invoices must also be provided on request by certain non-registrants such as approved educational institutions, diplomatic missions, and entities in the international financial sector. A tax invoice is necessary to support a claim for input tax recovery.
A credit note or debit note, as the case may be, must be issued when it becomes necessary to alter the quantity of or consideration for goods and services shown on any invoice. Credit and debit notes must contain broadly the same information as a tax invoice.
VAT is charged at a rate of 0% on supplies of exported goods. However, to qualify as zero-rated supplies, exports must be supported by evidence that confirms that the goods have left Barbados.
VAT returns and payment
VAT reporting periods are generally two months. However, the tax authorities may assign longer or shorter periods if considered appropriate. Returns must be completed and filed by the 21st day of the month following the tax period. Any tax due for the period must be submitted with the return.
The following are some of the penalties associated with breaches of the VAT legislation:
- a penalty of BB$100 for the late submission of a VAT return;
- a late payment penalty of 10% of any output tax due; and
- interest at the rate of 1% of any outstanding tax and penalty.
In addition, a number of other penalties may apply, including:
- failure to display a certificate of registration – BB$1,000; and
- failure to notify the tax authorities of changes relating to the registration – BB$1,000.
Criminal penalties may also apply in certain circumstances, e.g. in cases of fraudulent activities.