News

Reminder of the March 15  Tax deadline

  • Companies with fiscal years ending between 1 January and 30 September (both dates inclusive) are required to file a CIT return on or before 15 March in the year following the end of the fiscal period 

    Payment of tax

    • Companies with fiscal years ending between 1 January and 30 September (both dates inclusive) are required to make an installment of CIT for the income year in which the fiscal period ends on or before 15 September of that year. The installment is 50% of the net CIT payable for the preceding income year. The remainder of CIT due (if any) must be paid on filing of the CIT return by 15 March of the following year.

    • Companies with fiscal years ending between 1 October and 31 December (both dates inclusive) are required to make two installments of CIT for the income year in which the fiscal period ends on or before 15 December of that year and 15 March of the following year.

ICAB is led by a 15-member council. For more on this, click the image

The Government of Barbados has implemented a new Pandemic Contribution Levy, which is applicable to employed and self-employed persons. This PC Levy came into effect from April 1, 2022. So far, TAMIS filing for Employers (covering employed persons) has been accommodated, so we will talk about this filing process below.

Employers in TAMIS (the online Tax Administration system) should notice a new Pandemic Contribution Levy return in the list of possible returns to be filed. All employers should file the Pandemic Contribution Levy return monthly, showing information for employees who qualify to be charged the PC Levy. Employers who don’t have applicable employees (i.e. persons for whom a monthly PAYE return is filed) should submit a zero return (until otherwise stated by the Barbados Revenue Authority, or BRA).

How do you know if employees qualify to pay the Pandemic Contribution Levy? If your business has employees whose gross pay is BDS $6,250 per month or higher, they are obligated to pay the PC Levy every month, from April 2022 to March 2023. Note that pension income, benefits in kind (such as motor vehicles and other non-monetary benefits), interest on Government of Barbados Bonds and foreign-sourced dividend income are to be excluded from the gross amount taxable.

The rate of this PC Levy is 1% on the employee’s gross taxable income, and is to be deducted from their salaries/wages and paid in by the employer on behalf of the employee(s). Therefore, this results in a slightly lower net pay for the months April 2022 to March 2023.

Example

Let’s say that an employer has 5 employees:

  • Employees A, B and C have a gross taxable income per month of $3,500
  • Employee D earns $6,250 gross per month
  • Employee E earns $8,000 gross per month

The Pandemic Contribution Levy is therefore only applicable to Employees D and E.

$62.50 would therefore be Employee D’s additional tax deduction monthly, whereas Employee E’s PC Levy monthly is $80.

Therefore, the Pandemic Contribution Levy monthly return filed by the employer (in our example) should be as follows:

  1. The number of employees field should be 2 (not 5)
  2. The total wages/salaries paid (in any one month) should be $14,250 (the sum of gross pay for Employees D and E only).

Details on the monthly deduction for the Pandemic Contribution Levy, submitted by employers on behalf of their applicable employees, will be fed into the 3rd party information of the employed persons, both in the years 2022 (9 months – April to December) and 2023 (3 months – January to March). All taxpayers should check their 3rd party information relative to the year being filed, prior to filing any tax return, to verify the accuracy and completeness of data.

At the time of filing the final Pandemic Contribution Levy return (which should be due in April 2023 for up to March 2023), the total assessable income for each taxpayer will be considered (including any other assessable income from sources other than employment, such as business taxable income if the employed person also operates a business). If the total assessable income is BDS $75,000 or more for the year Apr 2022 to Mar 2023, then the total tax liability is calculated and then all the prepayments are subtracted, to show any final net liability or net overpayment/refund.  

Written by Dawn Williams, Managing Director of Resilia Accounting Services Inc. on June 27, 2022

Small business owners often struggle to identify and implement good business processes, or internal controls. Here are 6 good internal controls for businesses of any size, which might benefit you to consider and implement.

1. Inventory Measurement

If your business has inventory (i.e. goods, either finished, in-progress or raw materials) which moves considerably during the year (due to sales, purchases and manufacturing conversions), it is a good idea to measure or count your inventory at least once a year – or more often if you have major movement. Counting or measuring your inventory ensures that the value assigned to it on your balance sheet is more accurately reflected – especially if the count or measurement is performed close to the year-end.

2. Document Scanning & Retention

Scanning physical documents provides a backup storage in case the physical documents become illegible (due to fading or other destruction). Scanned documents can still be used as relevant evidence of transactions. Documents (scanned and/or physical) should be retained for at least 5-7 years, in case of audits or legal action – and some documents should be retained for the duration of the business’ life.

3. Related Party Transaction Management

It is good practice to keep records of the following:

  • income or expenses received or paid by a business owner, director or employee
  • personal income or expenses received or paid by the business, which relate to a business owner, director or employee
  • shared expenditures, i.e. expenditures which may be used both for business and personal purposes

4. Systems Access Management

Not everyone should have access to all your business software or functions, such as your accounting systems or bank accounts. It is good practice to limit access to these areas by:

  • using passwords, 2-factor authentication and other program access controls and not sharing these access tools
  • limiting responsibility to certain persons for functions such as bank deposits, processing payments or receiving payments
  • getting an IT audit by a professional, to identify any flaws in your current system, and ways to improve

5. Electronic Online Banking

Online banking for both receipts and payments provides an independent record (by the bank) of your business’ cash activity, which you can use to validate your own accounting records if need be. It also provides an audit trail of transactions in case you need to corroborate, report or reverse any transaction quickly.

6. Banking All Sales

 

Depositing all sales proceeds – even if you have to do a withdrawal minutes afterwards – is a good business practice, as it allows you to maintain a banking record independently (with the bank) of your business activity which closely matches your actual transactions. This is useful if you want to apply for financing or other credit services in the future, because the bank is more accurately aware of your sales and expenses activity, as they all pass through the bank, rather than only depositing sales proceeds after taking out cash to spend. If the bank can vouch for your business activity, the easier it might be to obtain loans or credit facilities.

Written by Dawn Williams, Managing Director of Resilia Accounting Services Inc. 

Flashback…

Last edition we were educated in the rudiments of foreign reserves within the Barbadian context. A grim reality was factually articulated
by Mr. Damien Green and some very credible solutions were put forward to addressing the low state of our foreign reserves. Most recent economic statistics from the Central Bank of Barbados June 2018 press release indicate that International Reserves at end of June stood at $443 million or just over seven weeks of import cover, still well below the minimum operational target of twelve weeks. Let us remember that during this period, government suspended external debt payments which are settled with the use of foreign reserves and the international price of oil was on the decline.

From these statistics alone it is easy to summarize that our foreign exchange position is in dire straits and needs intervention. While not
debunking the use of austere measures and the help of the International Monetary Fund to help address this degeneration of reserves I believe that concept of entrepreneurship can positively impact our foreign exchange problem. Whilst it may sound like an obscure solution, this concept has some validity and we need all of the help we can get.

What is entrepreneurship?

There is an enormous body of literature defining the concept of entrepreneurship. One thing is clear, and that is, its definition is not as
limited as what Merriam-Webster dictionary offers. According to Merriam-Webster dictionary, an entrepreneur is defined as one who organizes, manages, and assumes the risks of a business or enterprise. However, a more modern and practical definition incorporates the fact that entrepreneurship can involve transforming the world by solving big problems. Like initiating social change or creating an innovative product or presenting a new life-changing solution. Further, Bruce Bachenheimer, clinical professor of management and executive director of the Entrepreneurship Lab at Pace University agrees with me in explaining entrepreneurship as a mindset- a
way of thinking and acting. He concludes by saying it is about imagining new ways to solve problems and create value. Fundamentally, entrepreneurship is about the ability to recognize and methodically analyze an opportunity, and ultimately, to capture its value.

The heartbeat of entrepreneurship is innovation, which can be defined as the development and intentional introduction of new and useful ideas by individuals, teams and organizations (Bledow, et al.,2009, p.305). In mathematical terms then, Innovation is equal to creativity plus exploitation [Innovation= Creativity + Exploitation] (O’Sullivan & Dooley, 2009, p.8).

Identifying our problem

One of our major problems is that we import more than we export and there continues to be deficit on the external current account of the balance of payments.  In other terms we spend more foreign exchange than we are able to generate. It is true that we have no natural resources like other countries do but neither are we barren. We have resources available to us and we do have a strong intelligent human capital component. I believe that these two attributes coupled with the mindset of entrepreneurship are to be exploited for the benefit of our nation.

Where does entrepreneurship fit in? 

In our exploration of this concept we can logically conclude that:

Entrepreneurs create jobs–  With the growing concern on the size of our government and the fact that we have been involved in borrowing to pay our wage bill which was been consistently reported as 2% of GDP over the last three periods, job creation outside of government can be seen as a welcomed aide. As the entrepreneurs’ businesses grow, even more jobs are created. Thus reducing the reliance on government, to keep its citizens employed, while helping people feed their families.

Entrepreneurs give to society: Entrepreneurs make more money and thus pay more in taxes which helps fund social services and reduces the government’s need to borrow externally to fund its activities.          

Entrepreneurs can create change through innovation: Entrepreneurs dream big so naturally some of their ideas can make worldwide change, and this is what is required. This can be the catalyst for foreign exchange generation.  They might create a new product that solves a burning problem or take on the challenge to explore something never explored before or improve upon it. Take for instance;

   vThe Cotton that is produced in Barbados is world renowned for its superior quality and viability yet very little is done with this industry. If the problem is picking the cotton manually then is their room for creating a machine or process that can aide in the reaping of it? There is potential in this industry for the earning of foreign exchange.

   vOur rum is aged to perfection and its superior quality is well known across the globe. Molasses is an integral component in the manufacture of rum and is also a byproduct of sugarcane. It is also true that molasses because of its shortage must be imported by our rum manufacturers. Is there an opportunity for us to satisfy the molasses quota locally to save foreign reserves?

   v The Black Belly sheep is said to be indigenous to Barbados. Its mutton is of a superior quality to its alternatives. Is there an opportunity where this meat can be exported at premium price in order to generate foreign exchange?

  v Coconut water is in abundance on the island all year around yet foreign exchange is used in its importation. The properties in Coconut water naturally matches it up to the most popular sports drink on the market. Is there an opportunity for coconut water to be a foreign exchange earner?

          v We are blessed with sunshine and depending on the season a variety of fruits for example mangoes, golden apples, five fingers, gooseberries. Is there an opportunity to explore the drying (preservation) of these fruits and make ready for export to those markets who
aren’t as privileged whilst generating precious foreign exchange? After all we do import sweet tamarind.

          v Barbados like Costa Rica is known as a tourist destination with their white sandy beaches and crystal clear water, breathtaking views and panoramic landscapes. Costa Rica like Barbados is listed as a developing country with similar climatic conditions. Costa Rica back in
2015 managed to generate 100% of its electricity from renewable energy sources for 299 days. In 2016, it ran for 271 days on everything but fossil fuel. Most recently, in 2017, it ran 100% off renewable energy for 300 days. How far behind is Barbados in achieving such a feat? Isn’t there opportunity in the renewable energy sector to save Barbados precious foreign exchange from the importation of crude oil?

  

How do we inculcate this mindset?

The debate can forever be argued; can entrepreneurship be taught or is it a God given ability. What is certain is that the environment must be right in order for it to be forged. This means our educational system from as early as elementary school through to Tertiary level must be structured in such a way that through its curriculum creativity is not stifled but praised and thinking outside the box is not labelled as “duncy”.

The proverbial reference “Math and English” must not be seen as the only determining tool of brilliance and success. Thus being the only things rewarded with scholarships and prestige. BMEX, NIFCA and the like are great platforms for showcasing and encouraging creativity but similar programs and structures are needed at the elementary level and every stage thereafter. 

In Conclusion, it will take a paradigm shift in our educational system and in our thinking if we are to truly exploit the principles of entrepreneurship for our benefit.