AForewordbyTheCommissionerGeneraloftheGuyanaRevenueAuthority Nooneenjoyspayingtax buttaxesarenecessarytoprovideforeducation,hospitals, welfareservices,roadsandnationalsecurity. Itisrightthereforethateverycitizenshouldmakeacontributiontotherunningofthe State. Atthesametime,everycitizenshouldexpecttopayonlyafairandpropershareand shouldnothavetocontributemorethanisnecessaryasaresultofadministrative inefficiencies,orbecauseothershavecheatedbyavoidingthepaymentoftheirtaxes. Forthisreason,taxesshouldraisethemaximumamountofrevenuefortheminimumcost andbeprotectedagainstfraudwithoutplacingunnecessaryburdensonthetaxpayer,or interferingwiththefreeflowoflegitimatetrade. ThatiswhytheGuyanaGovernmentdecidedmodernisethetaxsystembyadoptinga ValueAddedTax(VAT)toreplacesomeexistingoutdatedtaxes.

Infact,sixtaxes, includingConsumptionTax,willdisappearwhenVATisintroduced on1January2007. TheGuyanaRevenueAuthorityhasbeengiventhetaskofimplementingandoperating VATandwearecommittedtoensurethatitisfairlyandefficientlyadministered. ItismyintentionthatVATwillbeadministeredeffectively,fairly andinabusiness friendlymannerandIampleasedtogiveanassurancethattheGuyanaRevenue Authoritywillprovideallnecessaryhelpandinformationtoenabletaxpayerstomeet theirlegalobligations. Wewillberesponsivetotheneedsofthepublicandthebusinesscommunity.Inreturn, weseekyourcooperationandcompliance. Detailsofhowyoucanaccessmoreinformationorreceivefurtheradviceandhelpare includedinthisleaflet.Wehopeyouwillfinditusefulandinformative. KurshidSattaur CommissionerGeneral GuyanaRevenueAuthority 1stDecember2006

ANINTRODUCTIONTOGUYANASVALUEADDEDTAX From1stJanuary2007,ValueAddedTax(VAT),togetherwithanExciseTaxon motorvehicles,petroleumandtobaccoproductsandalcoholicbeverages,willreplace sixexistingtaxes,includingConsumptionTax. ThisleafletisoneofaseriesproducedbytheGuyanaRevenueAuthoritytoexplain whythisnewtaxisbeingintroduced,howitwilloperateandhowitwillaffect businessesandconsumers.ItalsoprovidesashortsummaryoftheVATlegislation. Assuch,itisnotlegallybinding.Whilstcarehasbeentakeninpreparingthisleaflet, readersareadvisedtoconsulttheGuyanaVATAct#10,2005andVATRegulations forauthoritativetext.Incasesofconflictinginterpretation,thelegislationtakes precedence.

WhatisVAT? ValueAddedTaxisataxonthedomesticconsumptionofimportedandlocallyproduced goodsand/orservices(notexports),paidasapercentageoftheirvalueatthetimethey aresoldoracquired. TheTaxischargeableateverystageofproduction,distributionandsupply(asvalueis addedtotheproductorservice)andiscollectedbyVATregisteredbusinessesfromtheir customerswhentheysellgoodsand/orservicesthathavebeendefinedbylawastaxable (knownas'taxablesupplies'). Registeredbusinessesmustaccountforthetaxtheycollectandmustmakeregular paymentstotheGuyanaRevenueAuthority. However,VATisataxonconsumerspendingnotataxonbusiness.Infact,registered businessesactuallygainunderaVATsystembecausetheyareallowedtodeductany VATtheyincurontheirbusinessexpenses,subjecttocertainconditions,thereby reducingtheiroverheadcosts.Thisalsobenefitstheconsumersince,inthisway,a'tax cascade'effectisavoided.Youdon'tpayVATonVAT,ashappenswithsomeother formsofconsumptiontaxes. (Note:Businessexpensesincludethelegitimatecostsincurredinrunningabusiness suchasrawmaterials,tools,processingcostsandsubcontractors'fees butnot employees'wages,privateexpensesormotorcars,unlessmotorcarsformanessential partofatransportbusiness,suchasataxiorcarhirecompany). WhydoweneedVATinGuyana?

VATissuccessfullyinuse,invariousforms,inmorethan120countriesaroundthe worldand,inadditiontoavoidingataxontaxsituation,ithasmanyfeaturesthatmakeit anattractiverevenueraisingoptionforGuyana. Itisamorestablerevenuesourcethanmanyothertaxes.Itavoidstheeconomic uncertaintiesandfluctuationsofdirecttaxation. ItprovidesanimmediatecashflowbenefittotheGovernment. Substantialamountsofrevenuecanbegenerated,evenatrelativelylowtaxrates, andtherevenueaccruessteadilythroughoutthesupplychain. Itisafairsystembecauseitaffectsabroadrangeoftaxpayersensuringthat morepeoplewhobenefitfrompublicservicesalsocontributetopayingforthem. Becauseitappliestomostgoodsandservicesitdoesnotunfairlydiscriminate againstafewgoods,asdosomeformsofSalesTax. Itisanefficientandrelativelyinexpensivetaxtoadminister. Thecompulsoryissueoftaxreceiptsandinvoicesprovidesanaudittrailthat makesiteasierforthetaxauthoritytouncoverfraudandevasion. Thesystemfitsinwellwiththenormalproceduresthattradersadoptfortheir routineaccountingand,becausethesystemislargelyselfmonitoring,thereisthe addedbenefitforthehonesttraderofminimuminterferencebytaxofficials. Unlikecorporationandpersonalincometaxes,VATdoesnottaxinvestmentsand savings.Itencouragessavingratherthanspending. Thetaxincurredintheproductionofexportscanberefunded,assistingexporters tobecompetitiveintheworldmarket. VisitorstoGuyanawillcontributetothecountry'srevenuewhentheypurchase goodsandservicesfordomesticconsumption. VATiseffectiveincontrollingthegrowthofoverallconsumption. Itisnotsurprising,therefore,thatsincethemid1980s,manyadvancedcountriesof EuropeandAsiahavetriedtorebalancetheirtaxsystemsawayfromaheavyrelianceon directtaxesandtowardsthetaxationofconsumptionunderaVATtyperegime. AtypicalVATtransaction ThisishowatypicalVATtransactionworks.

Letustaketheexampleofthreeregisteredtradersinvolvedinthemanufactureandsale ofachairatimbermerchant,afurnituremakerandashopkeeper wheretherateoftax is16percent. Firstthefurnituremakerbuyswoodfromthetimbermerchant.Ifthevalueofthewoodis $1,000thetimbermerchantchargesthefurnituremaker$1,000plus16percentVAT, makingthetotalcost$1,160. Thetimbermerchantmustgiveareceiptfor thetransactionandkeeparecordofthesale. Heisthenresponsibleforpayingthe$160ofVATtothetaxauthority. Havingmadethechair,thefurnituremakerthensellsittoashopkeeperfor$2,000.In doingso,$1,000ofvaluehasbeenaddedtotheoriginalitem.Thefurnituremakermust thereforechargetheshopkeeper$2,000plus$320representing16percentVAT makingthetotalcostofthechairsofar$2,320. Againthefurnituremakermustgiveareceiptforthetransactionandmustkeepa record ofthesale.Hethenpays$320tothetaxauthority,minusthe$160VAThepaidonhis rawmaterials.Sothetaxauthorityreceivesanother$160. Finallytheshopkeepersellsthechairtoacustomerfor$3,000.Morevaluehasbeen addedtothechair.Theshopkeeperthereforechargeshiscustomer$3,000plus16per centVATof$480atotalof$3,480. Again,hemustgivethecustomerareceiptandkeeparecordofthetransaction.Hethen paystothetaxauthority$480minusthe$320VAThehasalreadypaidtothefurniture maker. So,asthesaleofthechairhasprogressed,thetaxauthorityhasreceived$160fromthe timbermerchant,$160fromthefurnituremakerand$160fromtheshopkeepermaking atotalof$480,or16percentofthefinalcostof$3,480. However,attheendofthechain,itwastheconsumer,notthebusinesses,whoeventually borethewholeVATof$480,representing16percentoftaxonthefinalvalueofthe product.

HowwillVATworkinGuyana? TheGuyanaRevenueAuthority(GRA),whichmanagestheadministrationandcollection ofalldirectandindirecttaxes,customsdutiesandotherGovernmentrevenues,suchas licencesandfees,willberesponsiblefortheimplementationandoperationofVATin Guyana. From1stJanuary2007,VATwillbeappliedonmostgoodsandservicesthatare suppliedfordomesticconsumption,atastandardrateof16percentoftheirvalueatthe

timeofsaleoracquisition.Taxablesupplieswillincludebothgoodsandservices providedlocallyandimportedgoods,iftheyareforuseinGuyana. Asmentionedabove,VATwillbecollectedbyregisteredVATbusinessesfromtheir customerswhentheymakesalesofgodsandservicesthatareprescribedinlawas taxable. Thevalueofthesetaxablesupplieswillbedeterminedintermsoftheirvalueinmoney, ormoney'sworth,accordingtothefairmarketvalue,wherethereisabenefitor 'consideration'otherthanmoney,chargedtothecustomer,suchasanexchangeofgoods andservices. With regardtoimports,VATwillbechargedontheirtotalvalue(packagingandany CustomsdutiesorExciseTaxwillbedeemedtobepartofthevalue)andwillbe collectedbytheCustomsDepartmentoftheGRAinmuchthesamewaythatCustoms dutiesarecurrentlycollected. ThereisprovisionintheGuyanaVATlegislationforsomerelieffromVATbymeansof zeroratingorexemptingcertainitems.Zeroratedsuppliesarethosegoodsandservices thatareclassedas'taxable'but,formainlyeconomicreasons,aretaxedatazerorate. Exemptsuppliesarethosethat,forsocialordifficulttotaxreasons,arenottaxed. Zeroratedsupplieswillincludebasicfooditems,medicalservicesandsupplies (includingprescriptionand'overthecounter'drugs),educationservicesandmaterials (includingbooks),electricitysuppliedundertheElectricitySectorReformAct,waterand sewageservices,somelocallyproducedbuildingmaterials,motorvehiclesolderthan fouryears,computers,sportsgear(subjecttotheCustomsAct),fertilisersandpesticides, smallgiftparcels(subjecttotheCustomsAct),Governmentprojects,goodsforexport, internationaltravel,coinsandbanknotesimportedonbehalfoftheBankofGuyana,the saleofagoingconcernandincentiveschemesforthepurchaseoflargecapitalitems. 'Exemptsupplies'arethosethat,forsocialordifficulttotaxreasons,arenottaxed. Examplesofexemptsuppliesarekerosene,liquidpropanegas(cookinggas),gasoline anddiesel,residentialrent,insuranceandfinancialservices(suchasloans,currency exchange,moneytransfers,deposits,savingsaccountsandthemanagementof investment,annuity,pensionandpreservationfunds)andlocallyminedrawgoldand diamonds. Forfurtherdetailsofzeroratedandexemptsupplies,seetheVATAct#10of2005and theGuyanaRevenueAuthority'sinformationleaflet, WhatistaxableunderVAT? AlthoughnoVATischargedonzeroratedorexemptsupplies,thereisanimportant differencebetweenthem.Businessessupplyingzeroratedsuppliesareabletoreclaim,or offset,themajorityofVATincurredontheirbusinessexpenses.Businessesmakingonly exemptsuppliesmustnotchargeVATandcannotreclaimanyVATontheiroverheads.

ThenewtaxwillreplacesixexistingtaxesConsumptionTaxonimportedandlocally producedgoods,ServiceTax,HotelAccommodationTax,EntertainmentTax,Purchase TaxandTelephoneTax therebysimplifyingandstreamliningthepresentsystemof indirecttaxation. Asaresult,afewgoodsandservicesmaybemoreexpensiveunderVAT,becausethey arenotsubjecttotaxunderthepresentsystem.However,manyotherswillcostless, sincetheywillbetaxedatalowerrateand,overall,taxpayersshouldnotpayanymore taxthan theydoatpresent. Indeed,thereisthepotentialunderVATforregisteredbusinessestopassonsomeofthe savingstheyhavemadeontheiroverheadcosts,asaresultofbeingabletoreclaimthe majorityoftheVATtheyincurontheirbusinessexpenses. Responsibilitiesofbusinesses BusinesseswillberequiredtoregisterforVATbefore1stJanuary2007,iftheirannual turnover,orprojectedturnover,oftaxablesupplies(i.e.thosegoodsandservicessubject tothestandardorzerorateoftax),exceeds,orislikelytoexceedalimit,orthreshold,of $10million,oratanytimethereafterwhentheirtaxablesuppliesexceedorarelikelyto exceedthethresholdinanyperiodof12monthsorless. From1stJanuary2007,theseregisteredbusinessesmustchargeVATtotheircustomers onallstandardratedgoodsandservices. Thosebusinessesbelowthestatutorythresholdwillnotberequiredtoregister,although voluntaryregistrationwillallowedforsuitablebusinessesoperatingbelowthethreshold atthediscretionoftheCommissionerGeneral.Normally,thisdispensationwillbefor businesseswhoseabilitytocomplywiththeVATLawisnotindoubtandwhichhave goodgroundsforregistration,e.g.supplyingbiggerbusinesseswhichchoosetodealonly withotherVATregisteredbusinesses. BusinessesprovidingonlyexemptsupplieswillnotbeeligibletoregisterforVAT,since exemptsuppliesarenottaxable.Thoseprovidingamixtureoftaxableandexempt supplieswillberequiredtodistinguishbetweenthemandonlytheirtaxablesupplieswill countinmeetingtheregistrationthreshold. NonVATregisteredbusinesses(whetherasaresultofbeingbelowtheregistration thresholdorbecausetheysupplyonlyexemptgoodsand/orservices),willnotbeableto obtainreliefonanyVATincurredinthecourseoftheirbusinessandwillbeprohibited fromchargingVATtotheircustomers.Theywillbeclassedas'finalconsumers'andany VATtheypayinthecourseoftheirbusinesswill'stick'withthem.Thepricesthey chargetocustomerswill,ofcourse,reflecttheirhigheroverheadcosts. Beforeregistering,businesses,or'taxablepersons,'mustobtainaTaxIdentification Number(TIN)fromtheGuyanaRevenueAuthority.Afterregistrationtheywillbeissued

witharegistrationcertificate.Thiscertificate,oranauthorisedcopy,mustbeprominently displayedatthemainplaceofbusinessandtheTINmustberecordedonallsales invoices. Note:Afailuretoregisterrendersapersonliableforanytaxthatisdue,fromthedate thatregistrationshouldhavecommencedinadditiontofinancialpenaltiesandapossible termofimprisonment. TheVATLawalsorequiresthattheamountofVATchargedmustbeincluded,orshown separately,inthedisplayedoradvertisedpriceofgoodsand/orservices.Itmustnotbe added'atthetill.' VATregisteredbusinesswillhavetoissueinvoicesforeachtaxablesupplytheymake andkeeprecordsoftheirsalesandtheamountofVATtheyhavecollected.Within15 daysoftheendofthemonthlytaxperiodtheywillhavetomakereturnstotheGuyana RevenueAuthorityandpaythetaxtheyhavecollectedfromtheircustomers,lessany allowableVATincurredintheirbusinesscosts.VATreturnsmustincludeadeclaration ofthevalueofanyimportsandtherelatedVATthevalueofexportsandthevalueof exemptsupplies. InVATparlance,salesandtheirrelatedVATarereferredtoas'outputs'and'outputtax' andpurchases,expensesandtheirrelatedVATas'inputs'and'inputtax'. Ifduringanymonthlytaxperiodtheamountofinputtaxisgreaterthantheoutputtax,a creditwillbecarriedforwardtothenexttaxperiod. AlthoughVATislargelyaselfregulatingtax,registeredbusinesseswillbevisitedfrom timetotimebyVATofficerstocheckontheaccuracyofrecords,returnsandpayments. Theywillbelegallyrequiredtocooperatewiththeofficersandtoprovideany informationnecessaryforverification. ResponsibilitiesoftheGuyanaRevenueAuthority(GRA) TheCommissionerGeneraloftheGRAwillhavelegalpowerstoenforcetheVATLaw andRegulationsandtoprotecttheRevenue.Thiswillincludetheauthoritytoenter, searchandsealpremisesandtoinitiateprosecutionsbutnotthepowerofarrest. HewillexercisethesepowersandadministerthetaxthroughtheVATandExciseTax DepartmentoftheGRA,withtheCustomsDepartmentcollectingtheVATonimportson hisbehalf. (Note:ThepowerofsearchandentrymayrequirethepresenceoftheGuyanaPoliceto enforcetheCommissionerGeneral'sauthorityandtomakeanynecessaryarrestsof persons).

FraudulentattemptstoevadethepaymentofVAT,ortodiverttaxmoniesforunlawful personaluse,workagainstthewholeofsociety.Therefore,thepenaltyforfraudwillbe severeaprisonsentence,aheavyfine,orboth.Therewillalsobeasystemof administrativefinancialpenaltiesforfailuretoregister,latedeclarationsandpayments etc.andinterestmaybechargedonlatepayments. However,itisnottheintentiontopersecutelegitimatebusinesseswhomakegenuine mistakesrathertoencourageandassisttheirvoluntarycompliance. Tothisend,VATwillbemanagedina'businessfriendly'andflexiblemanner.TheGRA willberesponsivetobusinessneedsand,asfaraspossible,willaccommodatebusiness practicesinordertominimisethecostofcompliance. AllbusinesseswillreceiveaneducationalvisitfromVATofficersassoonasthey registertoensurethat theyarefullypreparedtomeettheirVATobligationsandthe GRAhasproducedacomprehensiveseriesofeasytoreadtaxeducationnoticesand leafletsdealingwithvariousaspectsofVAT.(See'HowcanIfindoutmoreabout VAT?'Below). Inadditiona'HelpDesk'hasbeenestablishedtorespondtoenquiriesfromthebusiness communityandthepublic.DetailsofhowtocontacttheHelpDeskareprintedattheend ofthisleaflet. IftheCommissionerGeneralfailstopayarefund,heisliabletopayinteresttothe taxableperson. AnindependentReviewBoardhasbeenappointedtoadjudicateappealsagainstdecisions madebytheCommissionerGeneral.DecisionsoftheReviewBoardcanbeappealedto theHighCourtonapointoflaw. ConsumerProtection OnlythosebusinessesthatareregisteredforVATareallowedtochargethetaxtotheir customers.Infact,itislikelythatonlylargerbusinesseswillberegistered. Therefore,inordertoassistconsumersinidentifyingbonafideregisteredbusinessesand toensurethatthecorrectamountoftaxispaid,certainsafeguardshavebeenincorporated intheLaw. Registeredbusinesseswillberequiredtodisplaytheircertificateofregistration prominentlyattheirplaceofbusiness.Theywillhavetogivereceiptstotheircustomers, whichmustincludeadescriptionofthegoods,theamountofVATpaidandtheirVAT number. Thiswillprovideanaudittrailthatwillmakefraudeasiertodetect.

Fortheirpart,customerswhoarechargedVATontheirpurchasesshouldaskfora receiptfromthesupplier,showingtheamountofVATthathasbeencharged.Thiswill beanimportantmeansofhelpingtopreventtaxfraud. IfcustomerssuspectthattheyhavebeenimproperlychargedVAT,theyshouldreportthe mattertotheGRA.ThereareseverepenaltiesforVATfraud. Finally,theGovernmenthasundertakentokeeptheprovisionsoftheVATlegislation undercontinuingreviewandtomakechangeswhereitidentifiescasesofunduehardship. HowcanIfindoutmoreaboutVAT? CopiesoftheVATActandVATRegulationsmaybeobtainedfromTheParliament Office,Brickdam,Stabroek,Georgetown,orviewedontheGuyanaRevenueAuthority websitewww.revenuegy.org TheGuyanaRevenueAuthorityhasalsopublishedaseriesofinformationleafletsto assistthebusinesscommunityandthegeneralpublic.Amongthosethatmightbeof particularinterestare: AguidetotheGuyanaVATlegislation AguidetotheGuyanaExciseTaxlegislation Abeginner'sguidetoVATforbusinesses VATandExciseTaxregistration Keepingrecordsandaccounts(Thisleafletcontainsasuggestedaccounting method) Partialexemption FillinginyourVATreturn TheTaxpayerIdentificationNumber VATandtheconsumer WhatistaxableunderVAT VisitsbyVATofficers Thesecanbeobtainedfrom:TheVATDepartment,GuyanaRevenueAuthority,210E AlbertandCharlotteStreets,Bourda,Georgetown,oryourlocalVAToffice,ortheycan beviewedanddownloadedfromourwebsitewww.revenuegy.org

HowcanIgetfurtherhelp? TheGRAwelcomesdirectapproachesfromthebusinesscommunityandthegeneral public.WehavethereforeestablishedaVATHelpDesktoprovideaninformation serviceforeveryone.Itisavailablefrom8.00amto5.00pm MondaytoFriday. YoucancontactourHelpDeskofficersbyletter,email,telephone,orbyvisitingthe VATDepartmentHeadquartersattheaboveaddressinGeorgetown.Theywillbepleased toansweranygeneralquestionsyoumayhaveaboutanyaspectofVAT,orarrangefor anofficialresponsetobeprovidedonaspecificissue.Theywillalsobeabletoarrange foranindividualappointment,duringofficehours,ifnecessary,togiveyouthe opportunitytodiscussyourparticularbusinessquerywithaspecialisttaxofficial. ThededicatedHelpDesktelephonenumberis2277929 Inaddition,theGRAalsooffersseminarsforvarioussectionsofthebusiness community,bothduringandoutsidenormalofficehours,whichincludeabasic introductiontoVAT. Youdonotneedtoberegistered,orliabletoberegistered,totakeadvantageofthese services. GRAPublicInfoVAT&ET006/Dec06