No investment agreement needed to get tax waivers on certain imports – GRA

Sep 06, 2014 News

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Suspicions of preferential treatment when it comes to awarding tax concessions seemed to be somewhat mitigated after officials from the Guyana Revenue Authority (GRA) explained to some uneasy investors yesterday, that the opportunities to access those very concessions are also available to them.

The presentation was done by GRA senior officials, Naresha Bobb-Semple and Radandra Singh at a seminar which spotlighted the incentives and investment opportunities for value added processing within the forestry sector.

Investors and businessmen present at the seminar were particularly interested in how they can get tax waivers on exports and imports. Singh, the Assistant Commissioner of the GRA handled this part of the discussion.

As it relates to imports, he explained that an investor can get exemptions on raw materials once they have been verified as a manufacturer. He said that they can also get certain tax exemptions on imports with or without an investment agreement between them and an investment agency.

Singh said that of course, before the tax waivers are granted, the investors would have to be investigated by the GRA’s law enforcement arm to ensure they meet certain requirements. He said too, that if an investor exports more than 50 percent of his production, he will qualify for exemptions on VAT on raw materials as well. The Assistant Commissioner told his attentive audience, that if an investor is seeking to be free from paying duty on machinery then it must be free from tariff. These machines can include; excavators, tractors or loaders.

However, to access the tax concessions, he said that certain procedures must be followed. Singh outlined that the applicant must address a letter to the Commissioner-General of the GRA indicating the items and the reasons for the tax exemptions required. The letter must include the Invoice No.(s) and the applicant’s Taxpayer Identification Number (TIN). The applicant would also be required to submit a worksheet with the invoice attached. The worksheet must include a list of the items and the respective Customs Commodity Code (Tariff Heading).

The eligibility criteria also includes investors submitting proposed commencement of the operations, proof of financial ability to undertake the project and if the exemptions are related to the forestry sector , the Guyana Forestry Commission would have to clarify and provide proof of payment of royalties and any other charges.

Bobb-Semple then outlined the guiding principle with respect to Forest Products and VAT on logs, piles, poles and posts. She said that the VAT Act provides for the zero-rating of a supply of locally produced sand, stone, concrete blocks, plywood, lumber or similar materials of a type and quality used for construction, but not including items containing imported materials, except in the case of concrete blocks and plywood.

 

She said that in order for forest products to be zero-rated, they must satisfy certain requirements. These are; they must be locally produced, must be lumber or similar to lumber and must be used for construction. (Zero-rated refers to goods which are taxable but at a zero rate.) The significance of this rating is that businesses selling such goods may claim back their input tax – the VAT which they have paid to their suppliers.

With respect to the second requirement, She noted that the term lumber is used to describe “wood, either standing or that has been processed for use – from the time trees are felled, to its end product as a material suitable for industrial use as structural material for construction, or wood pulp for paper production.” She reminded that lumber is “partly prepared timber”, and timber being “wood prepared for use in building and carpentry”.

She said too that log is defined as “a part of the trunk or a large branch of a tree that has fallen or been cut off and is therefore classified as similar to lumber.” Hence, logs are eligible for zero-rating once used for construction. On the basis of the foregoing, Bobb-Semple said that piles and posts used in construction will be zero-rated for VAT purposes.

However, when logs are sold to saw millers and intermediary traders as raw material for the production of lumber, the GRA manager said that it will be taxed at the standard rate of 16 percent; having been sold for the purpose of production and not construction. She noted that poles used in the utility sector, specifically for electricity and telephone, are subject to VAT at the standard rate of 16 percent.

“It must be noted that spindles, mouldings, quadrants and such types when purchased for construction will attract VAT at the rate of 16 percent, since value has been added by way of their design. In addition, when sold to saw millers and intermediary traders, it will also attract VAT at the rate of 16 percent. Saw millers who are registered for VAT can reclaim the input credit when filing their VAT returns,” Bobb-Semple added.

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