The underlying principle which governs the reverse charge mechanism is that it seeks to shift the liability to account for the VAT on specified imported services from the supplier to the customer. The general purpose is to reduce the administrative burden for the supplier to register for VAT in a jurisdiction in which it has not established business.
In countries where the Reverse Charge Mechanism exists, the purchaser will be required to account for the VAT on the value of the supplies made to him. The purchaser will treat the imported supply as a supply made to himself and therefore will account for the output VAT. Since the supply is also a supply made to him, he is allowed to treat the same VAT as input tax and will deduct it in arriving at his VAT liability/refundable for that period.
The Reverse Charge Mechanism generally applies to imported services within many of the Caribbean countries.
Below is a summary of the countries where the Reverse Charge Mechanism is applicable:-
| Country | Reverse Charge Mechanism for VAT/Sales Tax on imported services | RCM apply on what type of supplies? | |
| 1 |
Antigua and Barbuda |
Yes |
Services supplied by a non resident person to a taxable person in AB, other than through a resident agent and the supply is not a taxable supply but would have been a taxable if it was made by a VAT registered resident and the supply is not zero rated. The supply should be used to make exempt supplies for private or domestic use, or a use that would be private or domestic if the recipient were an individual, or to provide entertainment, to-
(i) an associate or employee, or (ii) any other person other than in the course of a taxable activity of providing entertainment. |
| 2 | Barbados | No | |
| 3 | Belize | No | |
| 4 | Dominica | Yes | Import of services other than an exempt import into Dominica |
| 5 | Grenada | No | |
| 6 | Guyana | Yes | Import of services other than an exempt import into Guyana |
| 7 | Jamaica | Yes | Import of services into Jamaica |
| 8 | Montserrat* | No – to be confirmed | |
| 9 | St Lucia | Yes | Import of services other than an exempt import into SLU |
| 10 | St Kitts and Nevis | Yes | Import of services other than an exempt import into SKN |
| 11 | St Vincent and the Grenadines | Yes | Services supplied by a non resident person to a taxable person in SVG, other than through a resident agent and the supply is not a taxable supply but would have been a taxable if it was made by a VAT registered resident and the supply is not zero rated. The supply should be used to make exempt supplies for private or domestic use, or a use that would be private or domestic if the recipient were an individual, or to provide entertainment, to-
(i) an associate or employee, or (ii) any other person other than in the course of a taxable activity of providing entertainment. |
| 12 | Trinidad and Tobago | No | |
| * | Montserrat does not have a Value Added Tax System in place | ||