Businesses and individuals engaging in taxable activities will be required to register with the Inland Revenue Department, however registration is not mandatory for persons not meeting the minimum $100,000 - $150,000 per annum gross sales threshold. Small businesses would pay VAT on their purchases and not be permitted to charge VAT on their sales. All registered persons will be issued a VAT Certificate of Registration which must be placed in a conspicuous place in the business at which the registered person engages in taxable activity.

As proposed by the White Paper, "VAT registrants will charge VAT on the sale of his/her taxable goods or services (Output Tax) and pay VAT on his/her purchases and imports (Input Tax). If the VAT charged on the sales is more than the VAT paid on the purchases, the difference must be paid to the Inland Revenue Department. If output VAT is less, the registered person or business will be allowed to carry forward the excess credit to the following tax period.

If after four consecutive tax periods/months the excess for a given tax period is not used, then the business will be eligible for a refund."

The insurance sector will be affected by the new tax system as companies will be required to charge VAT on all insurance premiums except premiums on life insurance. VAT will also apply to the entertainment industry as individual promoters, licensees and proprietors of places of public entertainment will be required to apply for VAT registration at least 48 hours prior to commencement of the event. Those businesses granted duty concessions and income tax exemptions will pay VAT on all transactions except where goods are zero rated or exempted.

"These businesses will be required to register and collect VAT on taxable sales, pay VAT on their imports and domestic purchases and file a tax return monthly," the White Paper proposes.

All government departments and statutory corporations would be required to registered for

VAT and only those in direct competition with the private sector will be required to charge VAT on their sales.

The proposed VAT tier will comprise a standard rate, zero-rate and exemption. Some items on the zero-rated list include the majority of items contained in the Basic Needs Basket of Goods such as rice, sugar, flour, milk, infant formula, and infant and adult disposable diapers. Other proposed items which will attract a zero rate include goods and services for export; sale of commercial real property that is subject to Stamp Duty where the transfer is from one registered person of commercial real property to another registered person; fuel- which will attract excise tax only; and medicines for chronic diseases (HIV/AIDS, Diabetes, Hypertension/Cardiovascular diseases, cancer and mental illness).

Some items customers will not be required to pay VAT on include some of the services provided by licensed financial institutions (banks, credit unions and other similar institutions); educational services; residential rentals to the extent provided in the proposed VAT regulations; sale of real property, including land attributable to a dwelling; domestic transportation; supply of locally produced agricultural products by the producer; a supply of water provided to a residential dwelling for domestic use by the NIA or St. Kitts-Nevis Water Services Departments; supply of the first 100 units of electricity for domestic use; daycare services; supply of religious services by an institution of religious worship; services supplied to an offshore business entity and exempt companies registered under the Companies Act No.22 of 1966.

Also making the proposed VAT exempt list is bona fide unsolicited gifts of food which do not exceed 45 kilograms; unconditional gift of goods to an approved charitable organization and not for sale; a passenger allowance of $400; goods shipped into the federation in transit; goods imported by nationals returning home for permanent residence; containers temporarily imported under Customs Tariff Heading 8609.00; and the human remains of a citizen of St. Kitts and Nevis who has died abroad.

VAT registrants would be required to adhere to prescribed accounting practices including-issue sales invoices; keep accounts, books and records as prescribed; produce relevant accounts, books and records whenever they are requested by the Comptroller or a person authorized by him/her; and retain accounting records for 6 years after the end of the tax period to which they relate. Some of the accounting records include purchases and sales books; purchase invoices/import and export documentation; sales invoices, services billing invoices; credit and debit notes; income and expenditure records; cash register tapes or similar records; bank statements; and tax invoices.

Any decision relating to VAT can be challenged by the affected person. The person would have to submit a written objection to the Comptroller of the IRD within 30 calendar days after notice of the decision has been served however a person may not be allowed to object to an assessment unless he has paid 50% of the amount due. The burden of proof of excessive taxation lies with the person making the objection.

"If after receiving the decision on the objection the taxable person is dissatisfied with the results,

that person may lodge a notice of appeal with the Appeal Commissioners within 30 calendar days after being served with the notice of the decision. An appeal may also be filed if the Comptroller has not made a decision on an objection 90 calendar days after the objection was lodged. A person who is dissatisfied with the decision of the Appeal Commissioners may within 30 calendar days after being notified of the decision, lodge a notice of appeal with the High Court. A person who is dissatisfied with the decision of the High Court may appeal to the Court of Appeal," the White Paper states.

It also outlines various VAT offences including failure to register; issuance of false invoices; failure to pay; failure to file; failure to comply with notice for recovery of tax; failure to keep proper records; non-compliance with price quotation requirements; and making false or misleading statements.

If VAT is collected but not paid to government, the Comptroller of Inland Revenue would be authorized to recover the amount through garnishment, seizure of property by court action, or through legal proceedings.

"The Comptroller of Inland Revenue may also, by order of the court, temporarily close businesses for a period between 3 to 30 days where taxable persons repeatedly violate the provisions with respect to filing of returns; issuing proper tax invoice; improperly claiming tax refunds; impeding tax administration and failing to pay tax when due."

Businesses are urged to unload inventory prior to the proposed November 1 VAT implementation date as the cost of these items already include Consumption Tax and will then attract a VAT. The White Paper called for "voluntary compliance amongst taxpayers".

Prime Minister and Minister of Finance Hon. Dr. Denzil Douglas has yet to reveal the VAT rate. He says it will be determined only after consultation with stakeholders including the general public.