"Revenue from the community
for the community"
Taxable Supplies
What is a taxable supply?

A supply of goods or services made by a registered person in Tonga in the carrying on of an enterprise. Taxable import is goods or services brought to the Kingdom of Tonga from another country.

Taxable supplies do not include:

  • supply of goods or services made outside Tonga
  • supply by a person not carrying on an enterprise
  • supply by a person carrying on an enterprise if the supply is not made in connection with the enterprise
Where is the place of the supply?

In order to be subject to CT, the supply of goods or services must take place in Tonga. A supply of goods and services takes place where the supplier makes them available to other traders and consumers.

If the goods have to be transported in order to be made available to the buyer, the place of supply of the goods is the place where they were located before being transported in order to be made available to the buyer, the place of supply of the goods is the place where they were located before being transported to the place where they are made available to the buyer.

When does a supply take place?

A supply takes place on the date the invoice for the supply is issued unless payment (including part payment) is made for the supply before the issue of the invoice, in which case the supply is made when the payment or part payment is made.

An ‘Invoice’ is the document that sets out the details of the amount due and the nature of the goods and services supplied or provided.

The ‘invoice’ issued by a registered person when goods or services are supplied to other registered customers will be the Consumption Tax Invoice.

What is an exempt supply?

An exempt supply is a supply of goods and services that are specifically exempted from CT by an Order made by the Minister of Revenue & Customs with the consent of Privy Council.  CT cannot be charged on these supplies, nor can the supplier claim an input tax credit for any CT paid on inputs to these supplies.  A person who only makes exempt supplies does not have to register for CT.

Exempt supplies include:

  • medical, dental or nursing services
  • a supply of prescription medicines
  • education services
  • financial services
  • public transport services (this does not include the transport of passengers by tour operators)
  • lease of residential land  for  purposes.

Exempt imports include:

  • an import of goods that, if supplied in Tonga, would be an exempt supply (see above)
  • goods not exceeding $500 in value accompanying a person arriving by sea or air in Tonga
  • an import of goods by a diplomatic or consular mission.

You shall check other Orders in Council to see if your supply is exempt from CT.

What is a zero rated supply?

A zero rated supply is a supply of goods or services that is subject to CT, but the rate of CT on that supply is zero %.  The supplier can claim an input tax credit for any CT paid on inputs to zero rated supplies.  The main zero rated supplies are:

  • international air/sea fares
  • electricity supplied for domestic purposes
  • the first 20 cubic meters of water per month supplied for domestic purposes.
  • the supply of goods as part of the transfer of a business, or part of a business, as a going concern.
  • exports.
What is the total value of my supplies?

The general rule is that the value of a supply is the consideration for the supply. Consideration for a supply is the total amount in money or kind paid or payable, directly or indirectly, for the supply. In calculating the consideration of a supply you must include any duties, levies, fees or charges paid or payable on or by reason of the supply. But remember that consideration is CT exclusive and in calculating the consideration for a supply the amount of CT paid on the supply must be excluded.

There is a special rule to calculate the total value of a supply where the consideration paid or payable for a supply is inclusive of CT and the separate amount of the price of the supply is not identified. The supply of goods or services is made for a tax inclusive amount. In such a case, the value of the supply is the price paid or payable reduced by an amount equal to the price multiplied by the tax fraction specified in the CT law.

The tax fraction formula is r/(100+r), where r is the rate of Consumption Tax applicable to the supply.

Example:

If a supply is made for a CT inclusive amount of $230 and the CT rate applicable is the standard 15% rate, then the value of the supply is calculated as follows:

$230 – ($230x 15/115) = $200

The consideration for the supply is $200 and CT payable is $30.

In order to calculate the total value of your taxable supplies for a period, you have to add the value of all taxable supplies that you have made in Tonga under each of your trading names used in your business enterprise. The calculation of your taxable supplies does not include the CT collected on sales to your customers. The value of supplies made outside Tonga, supplies that are not made in the course of carrying on your enterprise and exempt supplies are excluded from the calculation.

Improving the lives of Tongans through effective & efficient tax & customs administration