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Palau Goods and Services Tax (PGST)

PGST tax reform

From January 01, 2023 most goods and services sold or consumed in Palau are subject to 10% Palau Good and Services Tax, or PGST.

Generally, businesses registered for PGST:

  • include PGST in the price they charge for their goods and services
  • claim credits for the PGST included in the price of goods and services they buy for their business.

Businesses collect PGST for the government whenever they sell goods and services and then pay this revenue to the Bureau of Revenue and Taxation (BRT). The government then distributes the PGST collected to pay for public services and infrastructure such as hospitals, roads, and schools.

Registration for PGST automatically registers you for Business Profits Tax (BPT). BPT replaced Gross Revenue Tax for all businesses registered for PGST from January 01, 2023.

When to register

Do not delay. Register now.

You must complete registration by December 31, 2022 if you are within the compulsory registration categories.

If your yearly taxable supplies are between $50,000 – $300,000 you can voluntarily apply to be registered for PGST at any time.

If you do not register

If you are not registered on Jan 1, 2023 (and were required to), you will be:

  • deemed to be PGST registered from that date and your tax office records updated to reflect this
  • issued with a PGST registration certificate
  • liable to pay the BRT 10% PGST on any taxable supplies you made even if you didn’t include PGST in the price of those sales. You will be able to recover this amount from the recipients of the supplies you made without charging PGST, if you can.
  • able to claim PGST input tax credits on creditable acquisitions made from other PGST-registered businesses

Penalties and interest may also apply.

How to register

You can register for PGST by completing the relevant registration forms:

Use one of these options to lodge the forms:

Bank account information will need to be submitted in person at the BRT office.

Compulsory registration

You are required to register for PGST if you meet any of the following:

  • you have an average annual taxable supply of more than $300,000 (see PGST registration guide for more information)
  • you hold a Foreign Investment Approval Certificate (FIAC), even if you are below the registration threshold amount
  • you are one of the following State-owned enterprises:
    • Palau Public Utilities Corporation
    • Palau National Communications Corporation
    • Belau Submarine Cable Corporation.

See also:

Exemptions

You are exempt from compulsory registration if you are:

  • a person operating a public or private hospital
  • a person operating a public or private medical clinic
  • a not-for-profit education institution
  • the Palau Community College
  • a government entity of a type different to those listed under compulsory registration
  • a non-profit corporation.

Voluntary registration

If you are not required to register for PGST, you can apply for voluntary registration if you meet the following requirements:

  • you are making, or intend to make taxable supplies
  • you conduct your business from a fixed location
  • you have commenced conducting business, and:
    • you have kept proper records of your business operations
    • you have complied with your tax obligations
  • you understand you will need to comply with your PGST reporting and record keeping obligations
  • it is reasonably expected the annual value of taxable supplies made by the person will equal or exceed $50,000.

If you voluntarily register for PGST you can:

  • claim back the PGST you pay on purchases, including capital items used to make taxable supplies
  • claim back PGST you pay on business set-up costs.

Some businesses may prefer to purchase from PGST registered businesses, so they are able to claim back the PGST they pay.

See also

Record keeping requirements

Record keeping is essential and will help you to pay the correct amount of tax.

The purpose of record keeping is to ensure that you can explain how you worked out your PGST returns. Records are also important to explain your business profits tax transactions as well as keeping track of your business performance generally.

Record keeping requirements will help you understand:

  • Records to keep for PGST
  • Records to keep for BPT
  • How long to keep your records
  • How to keep, archive, and retrieve records
  • Tips for good record keeping practices

Filing and paying PGST returns

You will need to file a PGST return and pay any amounts owing on that return monthly. The PGST Return form will be available through the Tax Filing Application, due on the 30th day following the end of the PGST period.

See 2023 key dates calendar for a full list of due dates for PGST returns.

Completing the PGST return

Use the information from your record keeping to complete all mandatory fields in the PGST return. This will include the PGST you charged and collected on behalf of the government (output tax credits), and the amount of PGST you paid on goods and services you are entitled to claim (input tax credits).

If the amount of PGST you collected on behalf of the government (output tax) is greater than the amount of PGST credits you are entitled to claim for purchases and expenses, then you have tax payable. You pay this amount to the BRT.

If the amount of PSGT credits you claim for purchases and expenses (input tax) is greater than the amount of PGST you collected on behalf of the government (output tax), then you receive a tax credit.

PGST credits

If your PGST filing results in a credit, you can claim it against the next two months’ PGST you have to pay. You can apply for a refund two months after the due date for the PGST period that resulted in the credit. Where your business has an ongoing entitlement to refunds, you may be able to apply to the Director to obtain an immediate refund.

You have up to 12 months to request a refund, starting from the due date for the PGST period that resulted in the credit.

Apply for a refund by completing the relevant form and filing with the BRT.

PGST does not impact Business Profits Tax (BPT)

When you are PGST registered, the gross revenue you report in BPT filing does not include:

  • any output tax you receive (PGST you collect on behalf of the government) on taxable supplies you make
  • any PGST refunds you receive when you file your PSGT return.

You cannot claim a deduction in your BPT filing for PSGT on any amounts that result in a credit in your PGST return.

Help and support

We understand you are still learning this new tax system. We are here to help.

If you are unable to file or pay on time, we can offer support measures to help you stay on track. We can set you up with a manageable payment plan to assist you in paying your debt via installments spread over a fixed period of time, or work with you to help get your filings up to date.

Don’t wait. Speak to us today, or visit palaugov.pw/taxreform for more information about the help and support we can provide.