Compiled Financial Statements

A compiled financial statement provides the financial information of your company, including income, expenses, cash flow, assets and liabilities in the form of Profit & Loss and Income Statements. A financial statement features an accrual basis of accounting. In most cases, the Generally Accepted Accounting Principles (GAAP) dictate the method of compiling information. However, the Journal of Accountancy reports that certain situations require the reporting of financial statements under the "other comprehensive basis of accounting," (OCBOA). Both methods provide a comprehensive look at the worth of a company, but the OCBOA method usually takes less time and cost to prepare.

Submit Financial Records with Corporate Tax Returns

Tax returns operate on a calendar year spanning from Jan. 1 to Dec. 31 of the given year. Financial statements use the fiscal year indicated by the company. There are no universal dates establishing when a fiscal year begins and ends. It is at the discretion of the company. The rules regulating the reporting of information for the year are unique to each type of financial report. It is suggested that a certified accountant or accounting firm be hired to accurately report your financial statements

Instalments

Generally, corporations have to pay their corporate income taxes in instalments. An instalment payment is a partial payment of the total amount of tax payable for the year.

The Tax Act requires most corporations to make instalment payments so that they are treated the same as taxpayers who have tax deducted from their income at source. Some corporations, like new corporations, may not have to pay taxes by instalment in the first year. However, at the end of your first Financial year of operation, you have to pay any taxes owed.

When to Make Payments

Instalment Payments are made quarterly in dates June25, September 25, December 25 and March 25. After your first year of operation and filing you will be sent via mail an instalment letter which you must fill out and pay on the due dates. The quarterly payment are based on the prior year's corporate tax payment.

 CIT Refunds As Credits

Any overpayment of taxes results in refunds. Upon submitting the corporate tax return, any calculated refunds for a corporate income tax will be treated as a credit carried forward to subsequent years. In addition, the CIT credit for the current year may be increased later by the credits from later years. You subtract this credit directly from your tax.

Added Value

As goods and services progress through the production and delivery process extra costs are incurred. These costs include employee wages, transport, storage and other overheads plus profit mark up.

Such expenses or charges represent the Value Added to the goods or services.

How and When VAT Is Charged

VAT is charged when taxable goods are imported or when taxable goods and services are sold or provided.

VAT is added to the selling price of the goods or services. The VAT is, therefore, collected by the seller.

Who Can Charge VAT

No. Only those businesses that are registered for VAT with the Inland Revenue Department (IRD) can charge VAT.

In order to charge VAT, a business must meet a particular Threshold. The threshold is the minimum sales of taxable supplies for a business in one year.

The threshold for Saint Lucia is $400,000.00.

Examples of taxable supplies include:

• goods for sale
• commission received
• commercial rent
• sales of assets
• management fees
• import of service

VAT Taxable Goods and Services

Taxable goods and services will attract a VAT rate of 12.5%, 10% and 0%. Only a VAT-registered business can charge VAT on the sale of taxable goods and services.

Zero-rated Goods and Services

Zero-rated supplies are goods and services that will be taxable but at the rate of zero percent (0%).

Even though a zero percent rate is charged on supplies to the consumer, a VAT registered person is allowed to claim input tax on purchased/expenses used in making the zero-rated supplies. This mechanism ensures that VAT is completely removed from the supply.

VAT Exempt Goods and Services

Exempt supplies are those goods and services that are not directly subject to VAT. This means that VAT cannot be charged on the sale of exempt supplies. Businesses and persons engaged in supplying exempt goods and services cannot claim input tax credit on purchases associated with the exempt supplies.

VAT Refunds

The credit is carried forward and used as an input tax deductible in three consecutive tax periods, after which the taxable person may file with the Comptroller a claim for refund for the remaining amount.

Additionally where more than fifty percent of a registered taxpayer’s activity is zero-rated a claim for a refund may be made after one month.

VAT Registration

If you conduct a taxable activity that involves the supply of goods or services, you are required to register to charge VAT if you meet the registration threshold.

A “taxable activity” is defined under Section 6 of the VAT Act “as an activity which is carried on continuously or regularly by any person in Saint Lucia or partly in Saint Lucia, whether or not for profit, that involves or intends to involve, in whole or in part, the supply of taxable goods or services to another person for consideration.”

In other words if you are in the business of supplying or selling taxable goods and/or services, you are undertaking a taxable activity.

A. Businesses trading in taxable supplies must within ten working days (10) register with the Inland Revenue Department (IRD) if their taxable supplies or sales (goods and services):

meet or exceed the threshold of $180,000 in the previous twelve months or less; or
is reasonably expected to meet or exceed the threshold at the beginning of any period of three hundred and sixty five days (365).
Additionally, businesses must register if in the first three months of trading their taxable supplies exceed Forty five thousand dollars ($45,000.)
B. Promoters of public entertainment, licenses and proprietors of a place of public entertainment must within 48 hours of the event, if with a period of twelve or fewer months their annual taxable supplies is reasonably expected to exceed $180,000.00.

C. A person who is an auctioneer is required to apply for registration on the date the person becomes an auctioneer.

The VAT Threshold

To avoid the imposition of a VAT burden on small businesses, the Government has decided that only persons whose turnover of taxable supplies meet or exceed the threshold need to register.

The threshold is set at $400,000 in any period of 12 months.

You must not attempt to avoid registration by artificially separating business activities to reduce your turnover.

Changes In Names & Addresses

Your VAT registration is based on information supplied to Inland Revenue Department (IRD) when you completed the VAT Registration Form. A registered taxpayer must notify the IRD in writing within twenty-one days (21) days of:

Any change in the particulars of the business provided in the application for registration; or
The closure of the business.
You must also inform the IRD when there is a:

• Change of name or trade name or address;
• Change of place of business;
• Change of constitution;
• Change of nature of principal activity; or
• Any change in circumstances if the person ceases to operate or closes on a temporary basis.

Contract or Withholding: Which is It?

Contract tax is levied on income earned from a contractor. A contractor is anyone who is a resident of Saint Lucia who provides or supplies independent personal services in exchange for compensation.

Withholding Tax, while similar to contract tax can encompass a lot more situations. The withholding tax is an income tax that “withheld” from the earning of short-term employees, which is then paid directly to the Department.

Additionally, withholding tax is charged on benefits obtained from pension funds and insurance policies. 10% Withholding tax should be deducted on any cash benefits to members who have withdrawn from an approved pension fund or an insurance policy that is less than ten (10) years old.

Withholding tax is also levied on certain payments of an income nature – e.g. royalties, management charges, commissions, fees – at a rate of 10% to local residents; 15% to regional residents belonging to CARICOM states; and, 25% to non-residents.

Contractor Defined

A “contractor” is anyone who provides or supplies independent personal services in exchange for compensation. A contractor is not considered an employee and is also not any of the following:

• accountants, auditors or tax consultants
• business or management consultants
• lawyers
• doctors, dentists, pharmacists or nurses
• engineers
• funeral undertaking services

An independent contractor, however, generally has several clients. A contractor also has his or her own tools and sets his or her own hours. Furthermore, a contractor invoices for the completed work while an employee receives a periodic wage or salary.

In St. Lucia, a contractor is taxed based on one fixed rate, which is 10% of gross earnings, an employee is taxed based on a tax code, which is determined by a declaration of deductions and allowances.

Paye As You Earn

Employee Defined

An “employee” is any person who, in respect of employment, receives remuneration from an employer, and includes any person to whom remuneration accrues:

• as a director of a company;
• from a former employer or trustee of a pension fund, as a consequence of a former employment; or
• as a dependent of a deceased person where such remuneration accrued to that dependent as a consequence of the former employment of the deceased.

An employee typically performs duties dictated or controlled by company superiors (managers and supervisors) and, in many cases, an employee is provided training to do the job.

Annual Employer Submissions

For more on the Annual Employer submissions, visit our Business Taxation page with all the information on Annual Employer Declarations.