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VALUE ADDED TAX ACT
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4. Value of supply
2023 Laws not yet authenticated through a Commencement Order

Revised Laws of Saint Lucia (2023)

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4.   Value of supply

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    4.1   Price discounts and rebates provided at time of supply.—The consideration for a supply and therefore the value of a supply is reduced by any price discounts or rebates allowed and accounted for at the time of the supply of goods or the rendition of services. For example, discounts taken at the cash register for goods on sale reduce the value of a supply subject to tax. Post-supply price adjustments do not affect the tax imposed on the supply. For example, if a retailer sells computer software and the manufacturer of the software offers a rebate to a purchaser of the software upon proof of purchase (such as submission of a tax invoice), the manufacturer's rebate does not reduce the consideration subject to tax when the retailer sells the software. Those adjustments must be accounted for by a registered seller and registered purchaser in accordance with section 32 of the Act.

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    4.2   Tax not accounted for separately.—Where a portion of the price of a supply represents tax imposed by the Act that is not accounted for separately, the value of the supply is the price reduced by the amount of tax, determined as an amount equal to the product of the tax fraction multiplied by that price (section 20(2)). The tax fraction under the definition in section 2 of the Act is R/(1 + R), where “R” is the rate of tax (expressed as a percentage) under section 10(1) of the Act.

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    For example, where the price (including tax that is not accounted for separately) is $115 and the tax rate is 15%, then the amount of tax is determined as follows —

115 (.15) / (1.15) = 100 (.15) = 15, and the value of the supply is $115 less $15, or $100.

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    4.3   Transfers for no consideration or for less than fair value.—Section 20(3) of the Act provides that the value of a supply of goods without consideration or for less than fair market value is the fair market value of the goods. This special valuation rule applies only if the supplier and recipient are related persons or if the recipient is an approved charitable organisation. This rule is designed, in part, to prevent tax avoidance on transfers to purchasers who are not entitled to claim input tax deductions on purchases. When fair market value applies, a reduction for the amount of tax included in the fair market value must be computed as is explained under paragraph 4.2 above.

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    4.4   Change of use of goods or services.—If a registered person converts an entire good or service from use in a taxable activity to a different use and the person was allowed an input tax deduction in respect of the acquisition of that good or service, section 4(6) of the Act generally treats the change in use as a supply of goods or services in the course or furtherance of a taxable activity. Under section 20(4) of the Act, the value of the deemed supply is the lesser of the consideration paid or payable on the acquisition of those goods or services, or the fair market value of the goods or services when they are converted to a different use. For example, if a computer acquired by a registered person for business use for $1,000 now is worth $400, the transfer of that computer to an employee for personal use is a taxable supply with a value of $400.

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    4.5   Change of use of goods or services – special rule.—

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      4.5.1     Input tax deduction disallowance.—Under section 4(17) of the Act, the change in the use of goods or services by a taxable person is not a taxable supply if that person was not entitled to claim a deduction for input tax imposed and paid on the acquisition of those goods or services. As a result, the valuation rules under section 20(4) of the Act do not apply to a change in the use of such goods or services.

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    4.5.2   Cancellation of registration.—Under section 4(21) of the Act, the cancellation of registration does not produce a taxable supply of goods and services on hand on the date of cancellation to the extent that input tax on the acquisition of those goods or services was not deductible. As a result, the valuation rules under section 20(4) of the Act do not apply to a change in the use of those goods upon cancellation of registration.

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    4.6   Change of use of goods and services – conversion of less than the entire goods or services to a different use.—This paragraph governs the value of a supply under section 20(5) of the Act, when less than an entire good or service is applied to a different use. If, in a transaction governed by section 4(6) of the Act, a registered person changes any part of the use of goods or services from use in a taxable activity to a different use, then generally, the change is treated as a conversion of the entire good or service to a different use unless the registered person establishes to the satisfaction of the Comptroller that less than the entire good or service was converted. There is an exception. If a registered person converts 10 percent or less of a good or service to a different use, the change in use is not treated as a supply under section 4(6) of the Act. Changes within a 12-month period are aggregated for purposes of determining the portion of a good or service that was converted to a different use under this paragraph.

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    4.7   Balance of the cash value.—The balance of the cash value of the supply under section 20(8) of the Act is the amount remaining after deducting from the cash value so much of the sum of the payments made by the debtor under the credit agreement as, on the basis of an apportionment in accordance with the rights and obligations of the parties to such agreement, may properly be regarded as having been made in respect of the cash value of the supply. For example, assume that the seller of goods is a dealer who finances the purchase, the consideration for the sale was $5,000, and the payments by the buyer properly attributable to the principal were $1,500. For purposes of section 20(7) of the Act, the value of the goods repossessed is $5,000 less $1,500, or $3,500.

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    4.8   Reporting of Deposits.—The consideration and therefore the value of a supply does not include a deposit given by the purchaser in connection with a supply unless and until the deposit is forfeited or the supplier applies the deposit as part payment for the supply. This rule applies to refundable and non-refundable deposits, including payments under a lay-away plan, but does not apply to deposits on returnable containers. Deposits on returnable containers are treated as part of the consideration for a supply (see definition of consideration in section 2 of the Act), and are included in the value of the supply.

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    4.9   Calculation of value of a supply incident to transfer of going concern.—The value of the goods and services treated as a supply by the recipient under section 4(18) of the Act shall be the consideration for the acquisition of the taxable activity, reduced by an amount which bears to the amount of such consideration the same ratio as the intended use or application of the taxable activity for making taxable transactions bears to the total intended use or application of the taxable activity. For example, assume that the consideration for a zero rated supply of a going business is 1,000,000 and that the recipient will use 80 percent of the acquired goods and services in making taxable supplies, the value of the acquisition deemed to be supplied by the recipient is $1,000,000 – (80% x $1,000,000), or $200,000.

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    4.10   Supplies of goods used partly in taxable and partly in exempt activities.—When goods are used by a taxable person in mixed activities, the value of the supply of the goods must be apportioned between or among the multiple uses. For example, if goods used 60 percent in taxable activities and 40 percent in exempt activities are sold for a tax-exclusive price of $10,000, and the portion of the goods used in exempt activities is treated as a supply not in the course or furtherance of taxable activities under section 4(17), then unless section 20(3) of the Act or another exception applies, the value of the taxable supply for purposes of section 20 is 60 percent of $10,000 or $6,000.

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