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Palau Goods and Services Tax – Types of supplies

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Types of supplies

Types of supplies for Palau Goods and Services Tax (PGST) fall into several categories.

Taxable supplies

Taxable supplies is a term widely defined to include most supplies (supply of goods, supply of services and anything else other than an tax exempt supply) you make in Palau when conducting a business.

The value of taxable supplies is generally the amount you charge for the supply.

Supply of goods

Supply of goods is a term defined to mean a sale, exchange or other transaction involving the transfer of ownership of goods, and the right to dispose of goods as the owner.

Supply of goods includes:

  • sale of goods (most common)
  • exchange of goods via barter, gift, or donation
  • installment sale
  • pledge.

The value of the supply of goods is generally the amount you charge for the supply.

Supply of services

A supply of services, is a supply that is not a supply of goods or money. In general, it is anything that adds value and does not fall under the definition of supply of goods.

Supply of services includes:

  • provision of services, such as a meal in a restaurant, car repairs, or a haircut
  • provision of utilities such as electricity, water, sewage and gas
  • telecommunications such as phone, internet, and digital downloads
  • grant, assignment, or surrender of any right to use property by way of lease or license (any lease of real or personal property).

The value of the supply of goods is generally the amount you charge for the supply.

Exempt supplies

Supplies are considered exempt supplies when they are related to financial services. Financial Services are services related to:

  • loans
  • deposits
  • investments deriving interest through financial instruments
  • securities (e.g. shares)
  • managed funds
  • insurance
  • retirement savings
  • credit under an installment sale agreement
  • guarantee indemnity and security
  • arranging for any related services.

The value of exempt supplies is generally the price you charge for the supply.

Exempt supplies are not taken into account when determining whether you are required to register for PGST.

Zero-rated supplies

Some taxable supplies are subject to a 0% PGST tax rate, and these are referred to as Zero-rated supplies.

Although Zero-rated supplies are subject to a 0% PGST rate they are still taxable supplies (taxed at 0%) accordingly, you can claim input tax credits in respect to supplies of this type.

The following supplies are Zero-rated supplies:

  • goods for export
  • aircraft or ship stores, including the fishing vessel for use or consumption outside of Palau
  • goods supplied to repair temporary imports
  • services connected with temporary imports
  • exported services
  • international transport services (i.e. transport of goods or passengers by sea or air)
  • international telecommunication services
  • transfer of a business as a going concern
  • prescription medicine made to a pharmacy, medical clinic, or hospital licensed to operate in Palau
  • plastic pellets intended solely for use in the manufacture of bottled water in Palau, provided the manufacturer is registered for Excise purposes
  • empty glass bottles or empty aluminum cans intended solely as containers for alcohol manufactured in Palau, provided the manufacturer in registered for Excise purposes.

Zero-rated supplies are taken into account when determining whether you are required to register for PGST.