VALUE ADDED TAX

What is Value Added Tax (VAT)?

 Value-added tax (VAT) is an indirect tax

 This is charged at the time of consumption of goods
and services
 It is levied when a value has been added over
various stages of production/ distribution right from
the purchase of raw materials till the final products
are sold to the retail consumers.
 As VAT is a consumption-based tax, it is an
additional burden to the end consumers.
VAT RATE IN TRINDAD AND TOBAGO
 Value Added Tax, or VAT, is applied to both goods and services in
Trinidad and Tobago and is included in the final price of the product.
 The standard rate of VAT was reduced from 15% to 12.5% effective
February 1, 2016.
 VAT-registered businesses must collect VAT from customers,
 Submit VAT returns and pay any VAT that they owe to the Inland
Revenue Division of the Ministry of Finance.
 Value Added Tax Act, Chap 75:06
 VAT that they pay when purchasing goods and services for the
business from the VAT that they collect from customers
Different Category of Value Added Tax
 Standard rates for VAT and other indirect taxes?
 VAT standard rate: 12.5 percent

 SCHEDULE 1 EXEMPT SERVICES -  number of services, including

financial services, real estate brokerage, residential rentals, and educational
services, medical, dental, are exempt. 

 SCHEDULE 2 ZERO-RATING - Basic food items and agricultural supplies

are zero-rated, as are crude oil, natural gas, and exported goods and services.
Hotel accommodation and yachting services to non-residents are zero-rated
Who is required to register for VAT?

VAT registration is required when the value of the

commercial supplies within T&T during the period of
12 months or less (commencing the month that the
supply is made) will be more than 500,000 Trinidad
and Tobago dollar (TTD) (approximately 75,000 US
dollars (USD).
 When is VAT due on a supply of
goods or services?

The VAT liability must be remitted to the Tax

Authority on or before the twenty-fifth day of
the month after the end of the entity’s VAT
period. The VAT period is assigned by the Tax
Authority on registration.
e.g. Tax Period 1/1/2020 – 28/02/2020 ----

Tax Due 25/3/2020

01.03.2020 - 31.
 PENALTY AND INTEREST ON LATE PAYMENT OF VAT

 Where any amount that a person is required

to pay to the Board is not paid by the due
date, the amount outstanding bears a
penalty of eight per cent (8%) of the amount
outstanding and interest at the rate of two
per cent (2%) per month or part there of
from the due date to the day of payment.
 Record-Keeping Requirements

How long must records and invoices be

retained?
 Records must be kept for at least 6 years after the
end of the last tax period to which they relate.
 except in cases where the Board has given notice
in writing that such retention is not required
• or where the person has ceased to exist and the
affairs of the person have been wound up.
 ADVANTAGES OF VAT
 VAT is a consumption tax the revenue generated will be constant.

• Compared to other indirect tax VAT is easy to manage.

• Due to catch-up effect of VAT, it minimizes avoidance and tax evasion.

• Huge amount of revenue is generated on a low tax rate through VAT.

• As the VAT is collected in small installments so the consumers has minimum burden.

• You can reclaim it after payment

 VAT is a neutral tax so it can be imposed on all types of business.

 Disadvantages of VAT

 VAT implementation is expensive.

 It is not a simple task to calculate value added in every stage is not an easy task.
Thus VAT is difficult to understand.

 VAT is regressive in nature. Thus it will affect the poor people more than the rich
because they spend more proportion of their income.

 All purchase and sales records should be maintained which will cause increased in
cost to maintain.

 Tax negligence will be extensive through fake invoices.

 The circumstances VAT invoice
not required to be issued

 VAT invoice is issued when it makes a standard rated supply

to a VAT registered customer.

 A VAT invoice is not required if the supply is exempt, zero-

rated, or if the supply is to a non-VAT registered customer.

 A VAT invoice should be issued within 30 days of the date

that the supply of goods is treated as being made.
 Calculation of Value Added Tax

 VAT to be paid to Government = (sales)Output VAT –

Input VAT (purchase)

 Output VAT = It is a tax charged on the sale of

goods. It is charged on the selling price of the goods.

 Input VAT = It is the tax paid on the purchase of

goods. It is paid at the cost price of the goods.
 Calculation of Value Added Tax

 Example 1(sales)Output VAT – Input VAT (purchase)


Zoe is in the process of completing her VAT return for the quarter ended 31 March
2020. The following information is available:
 Sales invoices totaling $128,000 were issued in respect of standard rated sales.
 Standard rated material amounted to $24,800.
 On 15 February 2020 she purchased machinery at a cost of $24,150. This figure is
inclusive of VAT.

Unless stated otherwise all of the above figures are exclusive of VAT. VAT is at a rate of
12.5%.
 VAT Return – Quarter ended 31 March 2020

  $ $  

Output VAT      

Sales (128,000 x 12.5%)   16,000  

       

Input VAT      

Material Expenses
(24,800 x 12.5%)
3,100    

Machinery
(24,150 x 12.5/112.5%)
2,683    

    (5,783)  
Graded Discussion 1

Question 1
 Nancy is in the process of completing her VAT return for the quarter ended 31 March
2020.
 During the quarter, sales invoices totalling $66,900 (exclusive of VAT) were issued in
respect of standard rated sales
 Whilst standard rated expenses amounted to $19,200 she purchase some material
value $2,000 (inclusive of VAT).

 How much VAT will Nancy have to pay to Board of Inland Revenue for this quarter?
 VAT is at a rate of 12.5%.
Graded Assignment 1

 Question 2

 Kylie buys an article for $ 10,000 and pays 12.5% value

added tax.
 He sells the same article for $ 13000 and charges 12.5%
value added tax.
 Find the VAT paid by Kylie and the amount paid/refund
from /to Board of Inland Revenue.
 mohammedwendy06@yahoo.com
Question 3

 Write your point of views on the following topic statement:

 “Should the personal allowances be decrease, to allow
citizens to pay more taxes”.
 Your views should include comparing and contrasting with
other Caribbean Countries.