Alcohol and tobacco
The government recently enacted two revenue-increasing measures. One raises the tax on alcohol and tobacco and the other on hotel accommodation.
The Customs Management and Duties (Amendment of Schedule 4) Order 2016 raises the duty on alcohol and tobacco. The previous system, which was based on fixed fees per gallon, served to promote certain types of product (eg, beer) against others (eg, whisky). The new system is based on percentages of value. It does not differentiate between product types, raising the duty on all.
Previously, in broad terms, beers were taxed at US$1.10 per gallon, wine at US$1.20 per gallon, brandy and whisky at US$3.00 per gallon and rum, vodka and gin at US$2.30 per gallon. Now all alcohols are taxed at 25% of their value.
Similarly, raw tobaccos were previously taxed at US$0.50 per pound and prepared tobacco products (eg, cigarettes) at US$0.55 per pound. Now all tobaccos are taxed at 50% of their value.
'Value' is a flexible concept, but for these purposes it is the normal price (ie, the price which they would fetch) at the time when the charge to duty arises on a sale in the open market between a buyer and a seller independent of each other.
This measure has been published in the Official Gazette and is now in force.
The Hotel Accommodation (Taxation) (Amendment) Act 2016 seeks to increase the existing hotel accommodation tax from 7% to 10%. This brings the British Virgin Islands into line with other premier holiday destinations in the Caribbean, although the rate is still less than that in many US destinations.
The new measure took effect on February 1 2017. Any hotel reservations made on or after that date will be taxed at the new rate. Accordingly, reservations made before that date will be taxed at the old rate of 7%, even if the stay itself occurs after that date.
For further information on this topic please contact Sheila George or Johann Henry at Harneys by telephone (+1 284 494 2233) or by email ([email protected] or [email protected]). The Harneys website can be accessed at www.harneys.com.