Solomon Islands Introduces Value-Add Tax Bill (VAT Bill)
The Solomon Islands government have introduced a Value-Add Tax Bill (VAT Bill) that, if passed, will considerably change the current Solomon Islands tax regime. The Bill was due to be tabled in April this year but that was postponed and it is not clear when it will be introduced in Parliament. However, the public release of the Bill suggests it is now close to going before Parliament. The key provisions of the VAT Bill are outlined below.
1. Standardised VAT rate
The Bill imposes a single standard VAT of 15% on:
(a) a taxable supply made by a registered person;
(b) a taxable import;
(c) a supply of imported services.
2. Registration
A person must apply to the Commissioner for registration for VAT:
(a) at the beginning of any 12-month period, if there are reasonable grounds to expect that the total value of taxable supplies to be made by the person in that period will exceed the registration threshold; or
(b) at the end of any 12 month or lesser period, if, in that period, the total value of taxable supplies made by the person exceeds the registration threshold; or
(c) if the person is a financial institution for the purposes of the Financial Institutions Act 1998 or the Central Bank of Solomon Islands Act 2012.
The registration threshold is a minimum annual turnover of $2,000,000.00
3. Procedure
The VAT Bill requires a registered person to file a VAT return for each VAT period within 30 days after the end of the period.
4. Exempt imports and supplies
The VAT Bill also outlines a number of imports and supplies that are exempt from the VAT regime.
Examples of import that is exempt for the purposes of the VAT Bill include an import of goods that if supplies in the Solomon Islands would be a taxable supply subject to a zero rate under the act or an import of goods by an international organisation or a foreign government to the extent required under an international agreement or the International Financial Organisations Act.
Examples of supplies that are exempt supplies for the purposes of the VAT Bill include a supply of medical services by a medical practitioner or a supply of education services.
5. Zero rated supplies
Schedule 3 of the VAT Bill provides an exhaustive list of the types of supplies that are zero rated supplies.
6. Consequential amendments
There is one consequential amendment to the Income Tax Act as a result of the VAT Bill. The amendment inserts a section into the Income Tax Act prescribing that VAT payment is not assessable income.
However, it appears that there may be more consequential amendments to be identified as the VAT Bill progresses.
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