The Trinidad and Tobago based Caribbean Court of Justice (CCJ) on Friday ruled that two tour operators in Belize were entitled to a tax refund.
The court said that Cruise Solutions Ltd and Discovery Expeditions Ltd should be repaid all general sales tax (GST) assessed, charged and collected by the relevant tax authority, from February 2007 to present, plus interest of 6 per cent per annum.
The tour operators entered into contracts with international cruise lines that visit Belize to provide tours for their passengers.
The court stated that previously, the cruise lines would have contracted with their passengers to supply the service of arranging tours for them with local tour operators.
However, passengers were not charged the GST for this service as part of their package holiday since it was considered part of the supply of the “international transport” of the passengers and therefore exempt under the GST Act.
Under the Belize General Sales Tax Act, ‘a supply of services that are provided directly in connection with the operation or management of a ship or aircraft engaged in international transport’ is zero-rated for GST purposes.
As a result, the cruise lines did not pay GST to the tour operators, alleging that the tour operators’ services of supplying tours were zero-rated, taking account of the fact that the cruise lines had not collected any GST from their passengers against which they could offset any GST payable by them. They believed themselves intended to fall outside the net of GST. However, the GST Commissioner insisted that GST was chargeable and the tour operators had to pay this charge.
Both tour operators filed a claim in the High Court of Belize seeking a declaration that their services were zero-rated. They also argued that they had been unlawfully charged GST and should be refunded all monies paid to the relevant tax authority with interest. However, they received an unfavourable ruling in the High Court and the Court of Appeal.
In a majority decision delivered by the Mr. Justice Hayton, the CCJ said that those courts had taken too narrow an approach to the interpretation of matters covered by the “management or operation” of a ship engaged in international transport. The operators of cruise shops as part of their operation or business provided holidays which for most passengers included the experience of having on-shore tours arranged for them by the cruise lines as an integral part of their holiday.
The regional court said that services supplied by the tour operators to the cruise lines for the passengers should therefore be considered zero-rated as a supply of services that were “provided directly in connection with the operation of a ship engaged in international transport.”
But CCJ President Justice Adrian Saunders did not agree with the majority.
In his opinion, after passengers safely disembarked the ship, any domestic transportation that they hire is their personal business and not connected to the ship’s operations.
Based on the majority’s decision, however, the CCJ ordered the repayment of all GST paid by Cruise Solutions and Discover Solutions including interest as well as their legal costs.
It would appear the President has not taken a cruise before!