First Published: April 7, 2020 – Updated: June 1, 2020
The novel Coronavirus COVID-19 (‘COVID-19’) pandemic continues to ravage countries across the globe and has even been cited as being the worst crisis since World War II. Almost one month has elapsed since the first COVID-19 case was confirmed in Trinidad and Tobago, yet shrouds of uncertainty and concern remain as it relates to how long businesses can reasonably weather this storm and the landscape of the country post-COVID-19.
Over the last few weeks, the Government of Trinidad and Tobago (the ‘Government’) was tasked with the unenviable task of attempting to balance the fight against the spread of COVID-19 through restrictions on movement and business, with ensuring sustained economic stability. To this end, while restrictions have been steadily implemented, the Government has also promised various categories of relief to both individuals and businesses during this period.
Amongst the relief provisioned, the Government promised to expedite the payment of outstanding value added tax (‘VAT’) refunds owed to eligible VAT registered persons. Persons with VAT refunds of up to TT$250,000 will receive repayment by way of cheques; refunds exceeding TT$250,000 but not exceeding TT$500,000 may also receive repayment by way of cheques (based on cash flow); while refunds exceeding these amounts will be paid by virtue of the issuance of bonds in the value of the outstanding amount.
The VAT refund relief is consistent with the Government’s 2020 Budget Statement (delivered on the 7th October, 2019) wherein it indicated that it intended to address the long-standing VAT refund issue (approximately TT$4.5 billion owed to VAT registered persons) by offering interest bearing Government bonds to all eligible VAT registered persons.
To this end, the Government passed 3 legislative instruments to provide for the necessary framework required to effect the VAT refunds by way of the issuance of the bonds. These instruments were: (i) The Miscellaneous Provisions (Heritage and Stabilisation Fund, Government Savings Bonds and Value Added Tax) Act, Act No. 9 of 2020 (the ‘Act’); (ii) The Value Added Tax (Bond-Payment Refund) Regulations, 2020 and (iii) The Value Added Tax (Fiscal Agent) (Designation) Order, 2020.
By the legislative instruments, the Government increased the proposed aggregated bonds to be issued to the sum of TT$6 billion, while some of the terms to which each issued bond will be subject to are as follows: (i) A maturity date 3 years from the date of issue; (ii) Bear simple interest at the rate of 3.3% per annum; (iii) Interest is payable every 6 months commencing from the date of issue to the date of maturity; (iv) Transferable to any financial institution; (v) Cannot be cashed before the date of maturity; and (vi) Payable in Trinidad and Tobago dollars.
The Government has recently amended the relevant VAT legislative provisions by expanding the category of persons to whom the VAT bonds are expressly transferable to include, not only financial institutions, but also: (i) The Unit Trust Corporation; (ii) The National Insurance Board; (iii) any insurance company registered under the Insurance Act; (iv) any entity dealing in mutual funds or securities that are regulated under the Securities Act; and (v) any credit union registered under the Co-Operatives Societies Act.
The issuance of the VAT bonds as repayment of outstanding VAT refunds represent a welcomed respite particularly at a time where businesses have operated in the face of a seemingly imminent peril. It represents another attempt to balance competing interests whereby it secures an investment for businesses that intend to retain the bonds until maturity on one hand, while on the other, the nature of its transferability leaves the possibility that it can be sold for cash by way of a transfer. What remains to be seen however, is the discount rate that the financial institutions will offer for the purchase of the bonds.