Current 15% VAT rate may rise by up to 2%
The Caribbean island nation of Dominica is considering a 1% or 2% rise in Value Added Tax.
The government is looking at ways to fund a reduction or even full elimination of income tax. This week, the Prime Minister confirmed this could include a VAT rise. There would be no change to the reduced, 10% rate on hotel and similar accommodation services.
Aside from cutting income tax, the Prime Minister, Roosevelt Skerrit, said he wanted to reduce corporate income tax.
The proposed tax structure seeks to shift the burden from income-based taxation to consumption-based revenue generation. This approach aligns with broader economic strategies aimed at fostering financial independence for citizens while maintaining government resources for critical national services.
The following goods are exempt:
- Medical Services
- Financial Services
- Day Care Services
- Educational Services
- Sale of locally produced bread
- Water supplied by DOWASCO
- Books and printed material
- Residential rent
- Most supplies used by farmers and fishermen in their work
- Domestic and International transportation of goods and passengers
Dominica VAT rules
Dominica’s Value Added Tax (VAT) system was introduced in 2006 to simplify taxation and improve revenue collection. The standard VAT rate is 15%, while a reduced rate of 10% applies to hotel accommodations and related services. Some essential goods and services, such as basic food items, healthcare, and education, are zero-rated or exempt from VAT.
VAT is administered by the Inland Revenue Division.
Businesses with an annual turnover above a certain threshold must register for VAT and file regular returns. VAT is a multi-stage tax, meaning it is applied at different points in the supply chain, with businesses able to claim input tax credits on purchases. Compliance is enforced through penalties for late filing, underreporting, and non-payment. The VAT system is a key component of Dominica’s fiscal policy, generating significant government revenue. Periodic updates and reforms aim to improve efficiency and reduce tax evasion while maintaining a balance between taxation and economic growth.
