How to register your business for VAT

Value added tax (VAT), is charged under Section 6 of the Value Addrd Tax Act 1989, "on the entry of goods imported into Trinidad and Tobago and on the commercial supply within Trinidad and Tobago of goods or prescribed services by a rregistered person". Section 14(1) of the Act defines a " commercial supply" as, "a supply of goods or prescribed services that is made in the course of, or furtherance of, any business". A prescribed service means any service not listed as an exempt service under the Act. Exempt services include for example, medical, dental, hospital, optical and financial services. Thus a supply will be taxable if:

1. It is one of goods or prescribed services;
2. It is made in the course of, or furtherance of, any business; and
3. The supplier is required to be registered under the Value Added Tax Act.

The question that follows is what then constitutes a business? For the purpose of the Value Added Tax, a business generally refers to a trade, profession or vocation, but the following activities are also regarded as a business:

• An activity that is carried on, whether or not for pecuniary profit, and involves or is intended to involve, in whole or in part, the supply of goods or services for consideration (money); and
• An activity involving the admission, for a consideration (money), of persons to any premises. (An example of this activity includes the promotion of fetes, dances and shows.)

It should be pointed out that an activity does not cease to qualify as a business merely because it is not carried on with any degree of regularity. Hence, even a single undertaking of an activity, for which admission is charged, would be sufficient to deem the undertaking a business.

When a person establishes that he makes "commercial supplies", ie , supply of goods or prescribed services in the course of, or furtherance of a business, the next thing he ought to do is determine the level of these supplies, since he may, depending upon the amount, be required to register under the Value Added Tax Act. A person would be required to register if he makes or intends to make commercial supplies (gross sales) in excess of $200,000 within a consecutive 12-month period. For VAT purposes it is not the business activity, which is registered, but the person who conducts it and the registration covers all business activities of that person. " Person" in this context means not only an individual, but also a company, partnership, unincorporated club or society. There are some aspects of the registration process, which may differ according to the person making the application for registration. We will first deal with the registration procedure as it pertains to the sole proprietor.

A sole proprietor must register for VAT having made commercial supplies of $200,000 or more in a 12 month period. Applicants please note that the VAT administration does not register persons, simply because they may wish to apply for a tender. The procedure with regards to tender is as follows: The person who is making the application for a tender must first apply for a VAT Clearance Certificate to any of the VAT office. If he/she is granted the tender and intends to make commercial supplies of $200,000 or more, then it is at this point, the person applies for VAT Registration.

Documents Required

The sole proprietor or business owner must complete all sections on the application for registration form or VAT1 as it is called.

If a section does not apply, please indicate so by filling in the words "Not Applicable". or N/A on the form.

• Sole proprietors who operate under a registered business or trade name must supply the original and a copy of the Certificate of Registration obtained from the Registrar General's Office.
• The prospective registrant must also submit a cash flow projection signed and dated by the person, showing the projected income for a period of 12 month, starting one month from the date of the application, eg. If a person applies for registration on January 1, 2001, then his 12 month period would be from February 1 2001 - January 1, 2002.
• The original and copy of the document bearing the assignment of an individual's Board of Inland Revenue File Number must also be submitted as proof of the assignment of the BIR File Number, the VAT Administration will also accept the following: a BIR computer generated payment slip, a BIR assessment notice or a tax exit certificate (no longer exists by law).
• If employees form a part of their business, sole proprietors should also submit the original and copy of the employees PAYE file numbers.
• Finally, the VAT Administration requires evidence of commencement of a business. If the business referred to as a new business, the VAT Administration will accept as evidence of commencement, documents which may include the original purchase invoices, customs documents, contracts or agreement, rent receipts for the business premises, or copies of sales invoices. Any relevant document that can support your claim for registration can also be submitted.

In the case of an existing business, the proprietor must submit a statement of his gross receipts for the past 12 months or less which must be signed and dated by him/her.

The partners must complete both the VAT1, which is the application for registration and the VAT2, which is the registration detail of the partnership. A partner, preferably the precedent partner should sign the VAT1.

Documents Required

The documents to be supplied by the partner are :

• A Certificate of Registration obtained from the Registrar General's Office.
• A cash flow projection for a period of 12 month, starting the month following the date of the application for registration.
• The Board of Inland Revenue Partnership File.
• Statements of actual income, with purchase and sales invoices, if the partnership is an existing business, or the original and copy of a contract or agreement for the provision of services, if the partnership has now come into existence. Partnerships please note the Income Statements must be signed by one of the partners.
• If persons are employed by the partnership, then an original and copy of the partnership PAYE file number are also required.
• Finally, as evidence of commencement of a business, the following documents must be submitted: the originals of purchase invoices, customs documents, contracts or agreement, rent receipts, or copies of sales invoices.