Policy 5 – VAT and the State and Agencies of the State

A number of persons have been questioning whether purchases by Government and other State agencies are subject to Value-Added Tax (VAT). The following forms the guiding principle under the VAT Act with respect to the state and agencies of the state and VAT.

Purchases

Except for those items that are exempt or zero rated under the VAT Act, purchases by these agencies will be subject to VAT at the standard rate of 16%. The VAT ACT 2005, Schedule I, paragraph II (w) provides for the zero-rating of:

1. goods when imported and consultancy services, to be supplied to the State, an agency of the State, or a local authority and directly incorporate into a project funded  by grants or loans supplied by a foreign government (or agency of that government) or a public international organisation;

1. goods when imported and works and consultancy services purchased by a budget agency named in the schedule to the Fiscal Management and Accountability Act 2003;

Therefore the State or an Agency of the State will not be required to pay VAT on imported goods or consultancy services if they satisfy the following requirements:

1. the goods and services are directly incorporated into a project
2. The project is funded by foreign grants or public international organizations.
3. In the case of a budget agency, such agency must be named in the Fiscal Management and Accountability Act 2003.

Any other purchases including security services will be subject to VAT.

Sales

Further, Sales by budget agencies are exempt from VAT as stated in Schedule II paragraph 2 of the VAT Act.  Paragraph 2 (f) provides as follows-

“a supply of all goods and services by budget agencies named in Schedule to the Fiscal Management and Accountability Act 2003 and by State agencies that perform regulatory functions by statute”

Note: While the state and budgetary agencies etcetera are exempt, it does not mean that they are excused from paying VAT. Exempt means that the entity will pay VAT on their purchases (except where the item is specifically zero-rated or exempt under schedule 1 or 11 of the Act) and they are not allowed to charge VAT on the good or service they provide.

Further, any VAT incurred by these entities will not be recoverable.
 
Therefore, no VAT is to be charged on birth certificates, death certificates, marriage certificates, licenses and registration, affidavits, Power of Attorney, Deed Polls and National CSME Certificates provided by an agency of the state, local authority budget agency etcetera.

Persons who still have queries with respect to VAT are encouraged to write to the Commissioner, VAT and Excise Tax Department, 210’E’ Albert and Charlotte Streets, Bourda for clarification.