VAT On Online Transactions

Special Envoy to the Prime Minister for Investment and Finance, Professor Avinash Persaud , addressing attendees at the Information Session

In light of Government’s decision to amend the Value Added Tax Act to allow for the 17.5 percent tax to be collected for online transactions from May 1st 2019, the Small Business Association (SBA) held an information session for small business owners to allow for clarity on how the tax would be implemented and who it would affect.

 

The session’s guest speaker was the Special Envoy to the Prime Minister for Investment and Finance, Professor Avinash Persaud who answered questions posed by numerous small business owners and outlined the process by which the tax would be collected.

Here are the key points to note about the implementation of VAT On Online Transactions:

1. Not a New Tax

This tax is a not a new VAT , but rather a new way of collecting VAT. Due to E-Commerce shopping becoming more rapidly utilised, it has become necessary to implement this new way of charging VAT so that the tax is more accurately collected. This would also allow government to get a better idea of what is being purchased outside of Barbados for use in the island and what taxes were not being collected on them before.

2. Only Vatable Items Apply

Only those items that would incur VAT normally are applicable to this tax process. These items include, clothes, accessories and the booking of hotel rooms. Items which do not incur VAT include: books and computer software. See the Value Added Tax Act Cap. 87 for the full list of vatable items.

3. Goods/Services Must be Consumed in Barbados

This tax will only apply to items which are bought and sent to be consumed in Barbados. Therefore, if a blouse is bought online and sent to a relative in America, the VAT charge will not be applied. However, if a pair of shoes is bought and sent directly to a Barbadian address, the tax will be applicable.

4. Payment Processors

This method of taxation is being done online via online payment processors who view the transaction and determine whether an item is vatable and will be consumed in Barbados and charge accordingly.

5. No Double Taxation

Persons are not expected to pay VAT twice. If an individual pays VAT online for both the good and shipping and has a hard or digital copy of the receipt as proof, customs will not charge VAT a second time when the good is collected. It is therefore imperative that persons walk with this proof of payment upon collection to prevent being charged a second time.

To watch the livestream of the information session, visit the SBA’s Facebook Page at facebook.com/sbabarbados.