Last week I was invited to share my thoughts on the scheduled implementation of VAT in Suriname and its possible implications related to the oil and gas sector with the 4th Operators Forum in Suriname.
The participants to this Forum comprised giant operators such as Petronas, Tullow, Kosmos, Apache, Statoil and ExxonMobil together with Staatsolie and other stakeholders.
I felt very honored with the invitation and considered this as an acknowledgement of the expertise of our firm (ShyamnarainAssociates) in providing tax and legal services to the oil and gas sector in Suriname.
Although my presentation primarily focused on the implications of the scheduled implementation of VAT in Suriname, I also briefly paid some attention to the Law on Maritime Zones (Wet Maritieme Zones), which was enacted in March this year and the draft for a General Tax Law (Algemene Wet Belastingen).
Wet Maritieme Zones is a law pertaining national jurisdiction over the adjacent maritime zone of the Republic of Suriname and describes four maritime zones: Territorial Zone, Contiguous Zone, Exclusive Economic Zone (EEZ) and the Continental Shelf. It further establishes the borders of each of the zones and the sovereign rights Suriname is entitled to in these zones.
As a consequence of establishing the border of its Continental Shelf, the total maritime zone over which Suriname may execute certain sovereign rights, officially has been extended with up to 150 miles beyond the border of its 200 miles EEZ.
Algemene Wet Belastingen intends to define the general principles and formal aspects of taxation in Suriname and will apply alike to all applicable taxes in Suriname and its entire maritime zone.
This law among others will extend/establish tax jurisdiction for applicable taxes in Suriname to its entire maritime zone, because the law provides for that all Suriname taxes will be applicable to “the territory of the Republic of Suriname and all the waters over which Suriname, based on international law, is entitled to execute certain sovereign rights with regard to the exploration and exploitation of natural resources”.
It is unclear yet when this draft law will be brought to Parliament for approval and its subsequent implementation.
Suriname currently has no VAT, but instead has a Sales tax/Turnover tax. Sales tax actually (in general) only applies if the supply of a taxable good or a taxable service occurs in Suriname.
For Sales tax purposes “Suriname” is defined as “the territory (mainland) of the Republic of Suriname and its territorial waters.” Consequently the 200 miles EEZ is not included in Suriname’s Sales tax jurisdiction.
From a perspective of offshore oil and gas Operators and Contractors the Sales tax has relatively little impact on activities in the Suriname offshore area.
Unlike with the current Sales tax, the tax jurisdiction for VAT purposes will not be limited to the territory of Suriname and its territorial waters, but will be extended to the area beyond Suriname territorial waters.
For VAT purposes “Suriname” is defined as “the territory of the Republic of Suriname and all the waters over which Suriname, based on international law, is entitled to execute certain sovereign rights with regard to the exploration and exploitation of natural resources.”
Also unlike the current Sales tax, VAT will apply to all goods and services, unless exempt by the law.
If a service is performed in Suriname for the account of a foreign based client, the client (in general) will become liable for Sales tax, if it has a PE in Suriname.
The proposed general rate is 17.5%. However, exports will be taxed at a zero rate (0%).
The main conclusions from my presentation on the VAT were the following: