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TGCA tax

on turnover

The system of value added tax (VAT) that exists within the European Union is not applicable to Saint-Martin.

There is however a tax on turnover, namely the TGCA “

Taxe générale sur le chiffre d’affaires

”, whose rates are

very low (2% or 4%), and which is levied in practice on the retail sale of goods as well as all types of services.

This tax is neutral for companies working in retail sales (which alone are taxable). Companies collect the tax

from their customers and return it to the

Collectivité

of Saint-Martin.

The same applies for services invoiced to individuals. In contrast, firms that use service providers (accountants,

telephone operators...) or that acquire fixed assets, pay the TGCA invoiced by their suppliers. The rate is

however very low (2% or 4%) and it is deductible from taxable income subject to corporate tax (in the form

of expense or allowance for depreciation).

1.

Scope

A.

TAXABLE TRANSACTIONS

General rules

The TGCA is levied in principle on all supplies of goods,

namely the sale of goods and services provided in exchange

for payment within the territory of the

Collectivité

of Saint-

Martin by persons that act independently as producers,

traders or persons supplying services.

Transactions excluded from the scope of the

TGCA

The following operations are outside the scope of the

TGCA:

uu

imports of goods into

Collectivité

territory;

uu

deliveries to taxable persons of goods produced in

Saint-Martin. Considered as production activities are

those operations related to the manufacturing or pro-

cessing of goods, except those leading to the delivery

of electricity, water, gas, heat or cold distributed via

a network. Also regarded as production activities are

mining operations, agriculture, fishing and aquaculture;

uu

supplies of goods for resale or supplies to be used by

the company, either for purchase / resale transactions,

or for the purposes of providing a service.

In contrast, the supply of services other than those

specifically exempt (see below) are systematically subject

to TGCA.

The buyer, if it is a company, can of course include in its

deductible expenses from taxable income the tax-included

price of the services that it has received for the perfor-

mance of its business.

Exemptions

The following are exempt in particular:

uu

exports, in other words, the supply of goods to buyers

domiciled or based outside Saint-Martin or St. Maarten;

uu

road, air or sea transport services;

uu

health services;

uu

education services;

uu

most banking and financial transactions.

u

Purchases of goods from wholesalers are therefore

not subject to the tax as long as the goods are to be sold

as is or to be used to provide services (catering sector,

construction sector...).

This rule avoids the accumulation of taxes on the supply of

goods and ensures the neutrality of the TGCA tax whatever

the distribution network may be (whether or not there

are intermediaries). The tax burden lies only on the sale

to the final user.

32

BUSINESS TAXATION

DOING BUSINESS IN SAINT-MARTIN