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Cruiser’s Guide to Trinidad and Tobago’s Value Added Tax (VAT)

By doina — last modified Apr 19, 2003 10:24 AM

Published: 2003-04-19 10:24:38
Countries: Trinidad & Tobago

by Christopher Marshall, Vice President Yacht Services Association of Trinidad and Tobago (YSATT)

VAT or Value Added Tax is a consumption tax that was introduced in Trinidad and Tobago in 1989. The VAT Office has applied specific measures on several different occasions in the past 14 years to cater for the yacht services industry, leading to some confusion in its application today.

How does it work?

Value Added Tax is rated at 15%. As the term suggests, the government effectively earns revenue from the value that is added at each stage of the supply of a good or service to the consumer. For example, an anchor imported by a chandlery has a landed cost (including duty) of TT$100.00. The importer pays 15% VAT to clear the goods from Customs. The Government has earned $15.00. The chandlery applies a 20% mark-up. The anchor is listed for sale at $120, plus 15% VAT ($18.00) bringing the total cost to $138.00.

Can a Yacht in Transit avoid paying VAT?

A yachtsman is exempt from paying VAT in the following circumstances:

  1. Where a business supplies a good or product and uses this good or product to carry out repairs both the labour charge and the product supplied can be VAT-free. Conversely, if a party other than the one conducting the repairs supplies the product then the VAT must be charged to the Customer.
  2. The goods are imported directly to the vessel and consigned as Yacht-in-Transit. The Captain/Owner of the yacht must be present to clear the goods.
  3. The vendor prepares an export document known as a shipping bill, which must be presented at the time of departure from the country. Once cleared out the goods are physically brought on board with the supervision of a customs officer and the documents are stamped with approval from the Customs that the vessel has left the country with the goods in question.

Issues to be Aware of with VAT!

  1. A business or company must be VAT registered in order to claim back the VAT paid on imports. However, to be registered, the business must have an annual turnover of more than TT$200,000.00. This is important to note when dealing with many of the smaller contractors who are not VAT registered. Although they may provide a service which entails the supply of product, the VAT is still effectively passed on to the consumer since unregistered companies cannot claim back the VAT.
  2. For companies that are VAT registered (ask to see the certificate as this must be displayed), there can be a cash flow issue that can affect day-to-day business operations. If the good and service is supplied VAT-free, the business operator will be out-of-pocket for the VAT paid when the item was purchased but has not passed on this cost to their customer. The operator must now apply for and wait for a refund (which can take up to 6 months).
  3. To qualify for a VAT exemption the vessel must be 1) foreign registered, 2) non-resident (duration of stay is less than 6 months) and 3) the owner of the vessel must also be a foreign national and must not be a resident or citizen at the time of the repairs.

Note: Though Value Added Tax (VAT) is applicable to purchases made by yachtsmen after 6 months’ residency, this is based on the owner or captain’s stay in Trinidad, not the vessel’s. For example, if a yacht is in storage for 12 months but the owner visits Trinidad for 3 months during this period, his/her purchases are still exempt from VAT.

YSATT and VAT

VAT and related issues are high on YSATT’s agenda, with the ultimate goal of VAT-free goods being made available over the counter for the repair/upgrade of bonafide yachts in transit. However, consumables sold to yachtsmen, e.g. foodstuffs, will continue to be subject to VAT as these items are consumed locally by the visitor. The other important issue that needs to be addressed is the classification of resident as many yachts remain in Trinidad for longer than 6 months to have repairs completed.

On a final note, although it may hurt to look at your invoice and see 15% added to your bill, one must take into consideration the final net price of what the item costs. In many cases you will find that the prices are very competitive and that many of the local retailers have tailored their margins to remain competitive with other islands.

Please contact the YSATT office at CrewsInn (868-634-4938) if you have any queries about the application of VAT, or visit our website www.ysatt.org for more information on the association.

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