GEA withholds final payment from German company over taxes

Dec 28, 2018 News

A German firm contracted by the Guyana Energy Agency (GEA) to install solar systems would have got off without paying withholding taxes, except for the watchful eye of the Auditor General’s Office.
GEA had contracted the services of Meeco Services Deutschland GmBH, a German-based Company, for the supply and installation of solar photovoltaic systems on 57 Government Buildings. The contract amount was $253M.
A grid-connected photovoltaic power system – or grid-connected PV power system – is an electricity generating solar PV power system that is connected to the utility grid. A grid-connected PV system consists of solar panels, one or several inverters, a power conditioning unit and grid connection equipment.

Meeco Services Deutschland GmBH, a German-based company, boasts about its work on State House.

Meeco is the same company that had previously undertaken a 43 kilowatt ‘peak’ (kWp) solar rooftop installation on the State House.
Auditors pointed out that under section 39 of the Income Tax Act Chapter 81:01, the Agency has an obligation to deduct Withholding Tax at the rate of 20% on payments made for the provision of services by non-residents.
According to the GEA’s financial report for 2017, the total deduction amounted to $8M.
Further, Auditors advised the GEA that the Withholding Tax deducted should be remitted within 30 days following date of payment.
According to the Audit Office, it was noted that the contracted amount included the provision of goods and services. Auditors advised in order to compute the applicable Withholding Tax, the Agency should split the components of the contract between goods and services.
Auditors had warned that the Agency will have an exposure to Withholding Tax on the service component of the contract sum. The outstanding Withholding Tax may also attract interest and penalties.
The GEA had told auditors that they were unaware of this requirement at the time of signing the contract.
GEA took the position that the contract template provided by the National Procurement and Tender Administration Board did not include reference to such a deduction from the contract amount.
However, GEA heeded the advice of the audit Office and wrote to the company informing them of the Agency’s obligation under Section 39 of the Income Tax Act, Chapter 81:01 of Guyana, to deduct Withholding Tax at a rate of 20% (for nonresident contractors) for services rendered under the contract.
GEA is said to be awaiting a response from the contractor. A senior GEA official told Kaieteur News yesterday that the agency has withheld the final payment to the Contractor pending resolution of the taxes.

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