– Recent press reports purport to suggest that there exists ambiguity as to the VAT treatment of supplies of services made in the Port Area between Port licensees.
The Ministry of Finance wishes to reaffirm that the VAT Act that was recently passed by Parliament clearly sets out the VAT treatment of such supplies. Specifically, section 3.(3)(a) states that the VAT Act does not apply where:
“a supply of goods within the Port Area is made by a taxable person who is a Port Licensee to another Port Licensee and the goods are of a kind and for a use within the customs duties exemptions in clause 2 of Hawksbill”.
It is to be noted, in this context, that the VAT Act excludes the application of VAT specifically in the case of goods that are of a kind and for a use within the customs duties exemptions of Hawksbill, thereby explicitly excluding services from the non-application of VAT.
The Guidance Note on VAT and the Hawksbill Creek Agreement that was recently issued by the Ministry of Finance provided further clarification on this matter. In the section entitled “What if I provide services to another Port licensee, will they be subject to VAT?”, it is explained that: “Services provided by a Port licensee are subject to the general VAT rules and therefore services provided by one Port licensee to another Port licensee will be subject to VAT”.
Of course, such transactions will be subject to the general exemptions of services that are provided in the Second Schedule of the VAT Act. Examples of such exemptions relate to the provision of financial and insurance services.
15 September 2014
