President Surangel Whipps Jr. warns businesses not to raise prices up 10% from current rates using the Palau Gross Service Tax (PGST) as a reason.  He said that this is illegal under the PGST law.

I’ve heard from businesses talking about PGST… If a business is raising prices, that is illegal. Why? You are already paying 4% tax, so you can only increase by 6%.

“We need to remind businesses not to take advantage of the people because under the PGST law, this is prohibited,” added Whipps.

Current law charges a 4% tax on all receipts regardless of the company’s size, allowing a deduction of 100% of salaries of local and foreign employees up to $3000 per quarter. It also charges 3% on all imports except for food and medicine.  There are additional taxes on alcohol and tobacco as well as fuel tax.

All imports are assessed a 10% tax under the new tax law, and that 10% cascades through the system.  Excise tax on alcohol and tobacco, the hotel room tax, and a carbon tax -replacing what is now a fuel tax, will remain.  Under the PGST, certain business expenses can be deducted before taxes, such as salary, utilities, leases, and loan expenses.

The implementation of the new tax law, moving from Gross Receipt Tax to Value-added tax – PGST, commences on January 1, 2023.   It is mandatory for all businesses with $300,000 in gross sales annually and businesses with Foreign Investment Approval Certificates (FIAC) to comply with this new tax regime. Companies with annual sales below $300k will remain on the Gross Receipt Tax (GRT) system or may choose to be PGST-registered businesses.  Businesses with $50,000 or less in annual sales will not pay taxes but file quarterly and pay a $25 fee.

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