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VAT Policy#11 : VAT and Charitable Organisations (Revised March 15, 2023)

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VAT Policy#11 : VAT and Charitable Organisations (Revised March 15, 2023)

March 22, 2023

The following forms the guiding principle with respect to Charitable Organisations. These organisations are exempt for the purposes of VAT in keeping with Section 18 of the Value Added Tax Act, Chapter 81:05, which provides for all services listed in Schedule II to be an exempt supply.

According to Section 2 of the VAT Act, Chapter 81:05, “charity” means an association not for gain, including an institution of religious worship, a charitable organisation, or any other society, association, or organisation, whether incorporated or not, that–

(a) is carried on otherwise than for the purposes of profit or gain to any proprietor, member, or shareholder; and
(b) is, in terms of its memorandum, articles of association, written rules, or other document constituting or governing its activities–
(i) required to use any assets or income solely in the furtherance of its aims and objects; and
(ii) prohibited from transferring any portion of its assets or income directly or indirectly so as to profit any person other than by way of (1) the provision of charitable assistance, or (2) the payment in good faith of reasonable remuneration to any of its officers or employees for any services actually rendered to it; and
(iii) upon its winding-up or liquidation, obliged to give or transfer its assets remaining after the satisfaction of its liabilities to another society, association or organisation with objects similar to those of the first-mentioned society, association, or organisation.”

Schedule II, Paragraph 2(e) of the VAT Act, Chapter 81:05, provides for the exemption of “a supply of any goods or services by the State, a local authority, or a charity where the consideration for the goods or services is nominal in amount or not intended to recover the cost of such goods or services.”

Therefore, where a charitable organisation supplies goods and services for which consideration is nominal in amount or not intended to the recover the cost of the goods and services, those goods and services are exempt from VAT under Schedule II, Paragraph 2(e) of the VAT Act, Chapter 81:05. This means that the persons that the good or service is being supplied to will not be required to pay VAT.

Moreover, where an organisation is exempt for VAT purposes, that organisation cannot be registered for VAT. As a consequence, claims for input tax credits cannot be made, and VAT incurred would be a cost to the organisation, VAT on goods and services acquired will have to be paid by the organisation.

Further, Schedule II, Paragraph 9 of the VAT Act, Chapter 81:05 states that, “Exempt for the purposes of Section 18 are supplies of items, as approved by the Commissioner, (excluding motor vehicles and all-terrain vehicles), imported or acquired for use by charitable organisations or non-governmental organisations or for free distribution to the less fortunate.

Therefore, persons importing items for free distribution to the less fortunate are required to send an application with a list of items to the Tax Exemption Processing and Verification Division and when approval is granted by the Commissioner-General the charitable organisation will be issued a tax exemption letter.

Contact Us:
Tax Advisory Services Section
Communications & Tax Advisory Services Division
Guyana Revenue Authority
200 -201 Camp Street
Tel: 227-6060 | 227-8222 Ext: 8000
Email: taxadvisory@gra.gov.gy | eservices@gra.gov.gy
Website: www.gra.gov.gy