CHAPTER 11 - PAPER 3.4 (ADVANCED TAXATION).doc

8/13/2019 CHAPTER 11 - PAPER 3.4 (ADVANCED TAXATION).doc

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UNIT 3UNIT 3VALUE ADDED TAXVALUE ADDED TAX

L.3 Advanced Taxation Amendment Act 2006/07

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CHAPTER 11CHAPTER 11

VALUE ADDED TAXVALUE ADDED TAX

11.1 - INTRODUCTION

VAT is a broadly based tax on general consumer expenditure and is chargedupon the sale of goods and services made in the course of business by taxablepersons. The basic feature of the tax is that organizations must charge tax at thestandard rate (currently 17.5 ! on supplies of goods and services unless they

are the sub"ect of specific relief contained in the la#. The VAT Act 1$$5 providesfor t#o forms of relief% &ero rating e.g. boo's% children s clothes% and )xemption.Thus the legal basis of Value Added Tax in &ambia is to be found in the Value

Added Tax Act of 1$$5% supplemented by VAT *egulations made by the +inisterof ,inance by #ay of -tatutory nstruments and amended by subse/uent

Amendment Acts passed by the 0ational Assembly each year.

The ma"ority of organizations supply goods and services #hich are eitherstandard rated or zero rated2 in both cases they can recover the VAT that theyhave suffered on their purchases% so that the result is that they are both buyingand selling at prices that are net of VAT. This is because VAT is a Tax onTurnover% not on 3usiness 4rofits.

-ome organizations ma'e supplies #hich are VAT exempt #hich means thatthey cannot recover the VAT incurred on their expenditure on goods andservices the full cost including VAT% #ill therefore represent a charge to theirrelevant budgets. 3ut for 6ompanies #hich ma'e both Taxable and )xempt-upplies% a *elief 'no#n as partial exemption relief is given. e #ill loo' at thislater in this chapter.


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LEARNING OBJE TI!E"# After studying this chapter you should be able to understand:

Classification of Supplies Registration and Deregistration Group registration Accounting for Input and Output Tax Sale and Lease ac! Arrange"ents Repurchase Agree"ents Ad"inistration of #alue Added Tax


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11.2 MEANING OF SUPPLY

The starting point for any discussion of VAT should ideally be the scope of #hatthis Tax covers. 8ou must have learnt from $a%e& T.' Taxation % that VAT ischarged on taxable -upplies of goods and services made in the *epublic of&ambia by a taxable person in the course of furtherance of any business carriedon by him. t is also chargeable on goods imported into &ambia% #hether suchgoods are imported into &ambia for 3usiness or personal use. 8ou must havenoted that #e have not mentioned imported services because they are notsub"ect to VAT. -ervices rendered by a ,oreign -upplier are the sub"ect matterof #hat is conveniently called Re#erse $AT . 8ou can learn more on *everseVAT in 6hapter 19. e must therefore proceed to define #hat -upply is for VATpurposes.

Supply is the all embracing term given to the infinite variety of transactionsmet in the commercial #orld. n its ordinary meaning :-upply; means to :,urnishor -erve;. Thus a taxable supply is a supply of goods or services made in&ambia% other than an exempt supply. A taxable supply is either standard ratedor &ero rated. 3ut an exempt supply is not chargeable to VAT. 6ertain eventsare or may be deemed to be supplies

S!l" Suppl#!$ #here a person ac/uires or produces goods or doesanything for the purpose of that business #hich #ould be a supply of servicesif made for a consideration those goods or services are deemed to havebeen both supplied to and by him.

The private use or disposal of assets is deemed to be a supply of services orgoods respectively.


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supply of the goods for the purposes of the Value Added Tax Act2 but doesnot include an importation of the goods% or any dealing #ith the goods #hichthe +inister% by regulation% declares not to be a supply of the goods for thepurposes of the Value Added Tax Act.

Supply )" S!( # !$,-upply of a -ervice includes The provision of >oods on ?ease% =ire or ?oan. A Treatment of any >oods Any other activity #hich the +inister of ,inance% by regulation% declares to be

the supply of a service.

CLASSICATION OF SUPPLIES

E&!/p0 Suppl#!$The position of an exempt supply in the scheme of Value added Tax is as

follo#s 0o Tax is charged on it. t is not ta'en into account in determining #hether a trader is a taxable

person. nput Tax attributable to it is not normally available for credit.

As can be seen some supplies of goods and services (mainly services!are classified as :)xempt; from VAT. -uch supplies are outside the scopeof VAT and hence : nput Tax; suffered by the supplier in connection #iththe supply is not R! ) !(%'l!

@nder the first schedule to the VAT Act% the follo#ing items are exempt

from VAT.

F))+ %*+ L# !$0) Suppl#!$, Li#estoc! Ani"al products Dairy products %ish Agricultural products Infant food &esticides and %ertili'ers (ealth Supplies )ducational Supplies oo!s and *e+spapers Transport Ser#ices Con#eyance, etc of Real )state &roperty %inancial and Insurance Ser#ices Gold %uneral Ser#ices


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Ga"ing and etting Supplies Tra#eler-s effects. So"e agricultural &roducts.

!() R%0!+ Suppl#!$

The current rate of VAT is 17.5 but certain supplies are &ero *ated. Thismeans that


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!() - (%0!+ Suppl#!$ &ero rated supplies are taxable supplies The 4erson dealing in &ero rated supplies has the opportunity to reclaim

: nput Tax; on his purchases. ,or instance% most farmers have &ero rated supplies #hich means that in

most% if not all cases% : nput Tax; #ill exceed :


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Taxable turnover is expected to exceed either of the above limits in thesubse/uent 1G or J +onths respectively.


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E""! 0# ! D%0! )" R!4#$0(%0#)* 6EDR7

A/!*+/!*0 A 0 N).2 )" 199: ( nsertion! provides that the date #hen abusiness becomes registerable for VAT is as follo#s n the case of a NE; 3usiness The Kate of 6ommencement of trading. n the case of a C)*0#*u#*4 3usiness

i. 5ithin one 3onth of an application being "ade or fro" the Datethe application +as recei#ed by the Co""issioner General/ or

ii. If the application is not "ade +ithin one 3onth of the Taxableturno#er beco"ing due, on the Day follo+ing the first periodduring +hich the 6788 "illion Li"it +as )xceeded.

M!%*#*4 )" T%&%'l! Tu(*) !(

Taxable turnover means that part of the turnover of a business that is attributableto Taxable supplies.

;8) $8)ul+ R!4#$0!(< All legal entities that deal in Taxable supplies can as a matter of fact register forValue Added Tax. These include the follo#ing ndividuals (-ole traders! 6ompanies 4artnerships Trusts >roups of companies2 and Loint ventures

P() !+u(! ")( VAT (!4#$0(%0#)* All VAT registration applications should be made using the official applicationform called !AT * obtainable from the VAT Advice 6enter or the nearest &*Aoffice. VAT registration is free. The application #ill be processed and a VATnumber allocated #ithin t#o #or'ing days from the date the application formreaches the VAT *egistration @nit% and a VAT 6ertificate #ill be issued #ithinfive #or'ing days from the date the VAT *egistration number is allocated.

P(! (!4#$0(%0#)* *! !$$#0#!$

3efore registering for VAT the ndividualB 3usiness must ensure that they are

registered for Tax 4ayer dentification 0umber 6TPIN7 before submitting theirapplication form. This 0umber is becoming increasingly important at &*A as theymove closer to the implementation of the ntegrated Tax administration -ystem6ITAS7 that #ill lin' all the Taxes.


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O'l#4%0#)*$ %"0!( R!4#$0(%0#)*

All -uppliers #ho have been registered for VAT are re/uired to do the follo#ing Kisplay their VAT registration 6ertificate -ubmit VAT *eturns and ma'e payments as re/uired 4rovide Tax nvoices +aintain sufficient records and retain them for a minimum of 5 years for VAT

purposes. Advise &*A of any change in business (name% address% telephone number%

o#nership% cessation of business% etc. Allo# roup or=olding company and such registration displaces any re/uirement under the VAT

Act for individual group members to apply separately.

O08!( 0yp!$ )" R!4#$0(%0#)*

P%(0*!($8#p$, here t#o or more individuals in partnership carry on abusiness involving the supply of goods or services% registration may beeffected in the name of the firm S.2: 627 )" 08! VAT A 0 .

Clu'$ %*+ )08!( u*#* )(p)(%0!+ )(4%*#>%0#)*$, ,or clubs% associations%and other unincorporated organizations% #hich carry on a business involvingthe supply of goods or services% registration may be effected in the name ofthe organization S.2: 637 VAT A 0 .

?(%* 8!$ @ D# #$#)*$, The registration of a 6ompany carrying on businessin several divisions may% if the 6ompany so re/uests and the 6ommissioner>eneral sees it fit% be effected in the name of those divisions% and suchregistration displaces any re/uirement under the VAT Act to apply for oreffect registration of the 6ompany S.2: 6 7 VAT A 0 .

E&%/pl!,

DANTINA CBINYANTA,

Kantina commenced self employment as a Tax consultant on 1.HC.HM. =isncome for the first 1G +onths of trading is forecast to be FGG5 million


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ANS;ER, DANTINA CBINYANTA

Kantina #ill become liable to compulsory or -tatutory VAT registration #henhis Taxable turnover during any 1G months period exceeds FGHH million. =e#ill also be liable to compulsory registration if his Taxable turnover exceedsF5H million in any consecutive three months. This #ill happen on G9 ,ebruaryGHHM #hen the taxable turnover is expected to exceed FGHH million% i.e.%11B1G N GG5%HHH%HHH O FGHM%GC$%$$$.$$

-ince this is a ne# business% the effective date of registration is the date ofcommencement of trading #hich is 1.HC.HM.

eneral.

A$$!0$ B!l+ )* D!(!4#$0(%0#)*

-toc' in trade% plant and other assets held by a taxable person #hen hederegisters are deemed to be supplied by him at that time. =e is thereforere/uired to pay VAT on the Value of any such -toc's because as far as the &*A

is concerned the person is in effect% ma'ing taxable supplies to himself as ane#ly unregistered business.


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11.= ACCOUNTING FOR OUTPUT TAX

As #e noted earlier% the tax chargeable on -upplies made is referred to as


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NON TAXA?LE SUPPLIES

6ertain supplies are not considered to be supplies for VAT purposes -ale of repossessed goods Transactions #ithin a VAT >roup of 6ompanies.

>oods lost or destroyed ho#ever% this does not cover the situation #herecash is stolen% as the supply #ill already have occurredI

The rescission of a voidable contract as in -B Lit e& and o. !1 E % annulsthe -upply. =o#ever% the disposal of stolen goods as in E !1 O ive& , or salesub"ect to the reservation of the title as in !e&mit&on !1 E , is considered tobe supplies.

TAX POINT

The obligation to account for VAT on a supply is determined by the

prescribed accounting period in #hich the Tax 4oint falls. The Tax 4oint isthe time #hen the taxable supplies are made.

The Tax 4oint is important because it is an indication of #hen the Taxbecomes payable to or recoverable from the &*A.

The Tax 4oint for goods is different from the Tax 4oint for -ervices. ,or VAT purposes the time #hen a supply of goods or services ta'es place

can% as indicated above% have far reaching effects not only because it maydetermine a personDs liability to registration% but also because it helps toindicate the amount of Tax (VAT! #hich must be paid in a particular period.=ence% the Tax 4oint is very important in Tax 4lanning circles.

T%& P)#*0 ")( G))+$

S! 0#)* 13 627 VAT A 0 stipulates that the time of supply of goods is the earliestof the follo#ing times

The time #hen goods are removed from the premises of the -upplier2 The time #hen the goods are made available to the person to #hom they are

-upplied2 The Time #hen payment for the -upply is received2 The Time #hen a Tax nvoice is issued.

T%& P)#*0 ")( S!( # !$S! 0#)* 13 6 7 VAT A 0 stipulates that the Time of supply of -ervices is theearliest of the follo#ing times

The Time #hen the payment for the services is received2 The Time #hen a Tax invoice is issued2 or The time #hen they are actually rendered or performed.


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T%& P)#*0 ")( P%(0# ul%( T(%*$% 0#)*$

D!p)$#0$+ost deposits serve primarily as advance payments and #ill create Tax 4oints#hen the supplier of the goods or services receives them. =o#ever% it must benoted that deposits #hich have the character of a ?ien% i.e. hich are not aconsideration for the supply% do not by themselves create a Tax 4oint% e.g. #hena deposit is ta'en as security to ensure the safe return of goods hired out and thedeposit is refunded #hen the goods are returned safely.

D(% #*4$f a person ta'es out goods for private purposes% the Tax 4oint is the time #hen

the goods are ta'en or set aside for this purpose.

S%l! )( R!0u(* C)*$#4*/!*0$

here a person supplies goods on sale or return agreement% the goods havenot been supplied or sold because that person still o#ns the goods until sucha time as the customer adopts them.

Adoption means the customer pays for them or other #ise indicates his #ishto 'eep them. @ntil the time of adoption% the customer has an un/ualified rightto return them at any time% unless a time limit has been agreed. The Tax4oint for these consignments is the earliest of the follo#ing Times

i. Date of Adoptionii. Date of pay"ent/ or iii. Date of in#oicing.

M!0!(!+ Suppl#!$here )lectricity% #ater or any other commodity measured by meter is supplied%

the Time of supply is the earliest of the follo#ing Kates The Time #hen the meter is next read after consumption of the commodity%

except to the extent that payment is sooner made2 or The Time a Tax nvoice is sooner issued% in respect of the supply.

P()p!(0y %*+ L!%$!8)l+f a person receives periodic payments of rent or ground rent% the Tax point is

that prescribed by the contract% i.e.% #hen the -ervice is performed% or the date#hen he receives the payment% or the date of the Tax invoice% #hich everhappens first.


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SECTION 1 OF TBE VAT ACT VALUE OF SUPPLY

A preliminary principle concerning the value of supplies is that VAT is charged onthe Taxable Value of the -upply% at the prescribed rate of Tax. This is the-tandard rate of 17.5 .

S! 0#)* 1 617

here goods or -ervices are supplied for a monetary consideration% theamount by #hich that consideration exceeds the Tax payable in respect ofthe -upply shall be the Taxable Value of the goods or -ervices.

This means that the Taxable Value represents the TraderDs Tax )xclusiveselling price less the amount of any cash discount offered to the buyer.

S! 0#)* 1 627

here goods or -ervices are supplied oods or -ervices.


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I*pu0 T%& )* I/p)(0$ hen goods are imported into &ambia% VAT together #ith any import duties

is payable at importation. VAT is chargeable on all imports except &ero ratedor exempt goods.

here goods are removed from an approved bonded #arehouse% form 6) GH

is used. >oods in bond do not attract VAT% but VAT is payable #hen goodsare removed from bond. VAT on importation is chargeable and payable as if it #ere a 6ustoms Kuty.

I*pu0 T%& /u$0 (!l%0! 0) T%&%'l! Suppl#!$4urchases or business expenses on #hich VAT nput credit is claimed mustal#ays relate to Taxable and not -uppliers. 3usinesses that deal only in exemptsupplies are not eligible to register for VAT and therefore get no opportunity toreclaim any nput Tax.

I*pu0 T%& E& lu+!+ "()/ (!+#0nput Tax on the follo#ing goods and -ervices is excluded from credit% that is% to

say that VAT cannot be reclaimed

T!l!p8)*! ?#ll$,nput Tax credit is not allo#ed on telephone bills except on

nterconnection fees and services provided by another telephone serviceprovider.

Telephone services provided by a hotel% lodge and similar establishment to itsclients if such an establishment accounts for


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E&%/pl!,

MARY N OLE

+ozi#ood 4lc is to provide +ary 0'ole a long time serving director #ith a ne#5HHH cc 6ompany 6ar that #ill cost FGG5 million. The 6ar #ill be used for bothbusiness and private mileage on a 7H JH basis.

+ozi#ood 4lc has also underta'en to pay for all the annual running costs of the+otor 6ar as follo#s

Kiesel 1G%JJ7-ervicing and *epairs 5%G97

nsurance and *oad Tax 7%5HH

+ary 0'ole #ill not at any time be re/uired to reimburse +ozi#ood 4lc for thecost of private fuel.

The above figures are inclusive of VAT #here applicable.

ANS;ERMARY N OLE

M)0)( C%( The Vat incurred on the purchase of the +otor 6ar #ill be computed as follo#s

17.5 B 117.5 O 7BC7 x GG5%HHH%HHH O FJJ% 51H%MJ9.JH. This VAT cannot be

reclaimed because the /uestion has not specified that +ozi#ood 4lc is a 6arKealer. =o#ever% +ozi#ood 4lc can still claim capital allo#ances based on theVAT inclusive amount of FGG5 million.

D#!$!lnput Tax suffered on the purchase of Kiesel is claimable. +ozi#ood 4lc #ill

therefore be allo#ed to claim the nput VAT suffered but only to the extent thatthe Kiesel is used for business mileage. The total nput Tax may be computed asfollo#s

7BC7 x 1G%JJ7%HHH O F1% 9J7%CGM. 3ut not all of it can be claimed because of theJH private use. Therefore only 7H x F1% 9J7%CGM O F1% G9M%1$9.GH can be

claimed.

S!( # #*4 %*+ R!p%#($+aintenance and *epairs to +otor 6ars used solely for business purposes canbe claimed. 3ut in cases #here a +otor 6ar is partly used for both private andbusiness purposes as in this case VAT incurred on +otor vehicle repairs must beapportioned and only that part #hich directly relates to the business can beclaimed. The total VAT suffered on -ervicing and *epairs may be computed as


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follo#s 7BC7 x F5% G97%HHH O F797% CGM but only 7H x F797% CGMO F551% 1$9.GH may be claimed by +ozi#ood 4lc.

I*$u(%* ! %*+ R)%+ T%&These are not sub"ect to Value Added Tax.

Note ,5hen co"puting the ad9usted Taxable &rofits, 3o'i+ood &lc +ill use the net of$AT figure.

?u$#*!$$ E*0!(0%#*/!*0 3usiness entertainment is defined as entertainment% including hospitality of

any 'ind% provided in connection #ith a business. This includes the supply ofmeals% drin's% entertainment at clubs and the provision of recreationalfacilities.

nput Tax may not be reclaimed on business entertainment. =o#ever% nput Tax can be claimed on business hotel accommodation as

from 1st

Luly 1$$$ but not the Tax incurred on the supply of any food%beverages% transportation or hospitality of any 'ind.

I*pu0 T%& I* u((!+ ")( 08! '!*!"#0 )" D#(! 0)($H E/pl)y!!$ !0 .VAT incurred on any food% beverages% transportation or hospitality of any 'ind% orgoods provided for Kirectors% +anagers% 4artners% 4roprietors% )mployees%6ustomers or potential 6ustomers etc. cannot be claimed e.g. the VAT onfurniture.

E&p)(0 )" G))+$The second schedule section 15(1! of the VAT Act provides that )xport of goods

from &ambia by or on behalf of a Taxable supplier #here evidence of suchexportation is produced /ualifies to be &ero rated. The documentary evidencere/uired to support exportation includes 6ommercial nvoice 6ertified copies of documents presented to &ambian customs at exportation%

bearing a certificate of shipment provided by the &*A. 4roof of payment by foreign customer for the goods.

P%(0#%l E&!/p0#)*

n principle% input tax incurred on purchases used to ma'e taxable supplies isdeductible% but input tax incurred on purchases that are used to ma'e exemptsupplies is not. The -tandard method is a simple #ay of calculating ho# muchinput tax incurred on purchases used to ma'e both taxable and exempt supplies(residual input tax!% can be attributed to taxable supplies and deducted. tapportions residual input tax in proportion to the values of taxable and exemptsupplies made in the period in #hich it is incurred.

This section #ill attempt to loo' at ho# -uppliers ma'ing both exempt andtaxable supplies can claim their VAT incurred on taxable supplies as determinedby the VAT ?a#. e #ill then proceed to demonstrate this by #ay of a #or'ed


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example. t is perhaps obvious that a person may only recover nput Tax #here itrelates to Taxable supplies. A proportion of the nput VAT may therefore not berecoverable #here a person ma'es both Taxable and )xempt -upplies.

VAT registered suppliers ma'ing both taxable and exempt supplies are referredto as partially exempt suppliers. To deal #ith this situation% there are severalpartial exemption methods that #e #ill discuss in this section.

To enable partially exempt suppliers reclaim nput Tax on their 4urchases and)xpenses that correspond to the proportion of their -ales (outputs! that aretaxable% four methods are available #hich they can use to claim the rightproportion of nput tax

,or consistence purposes% partially exempt suppliers are re/uired to choose amethod of their choice for one accounting year after #hich they may decide tochange to a different method (accounting year ends on JHth Lune for thispurpose!.

At the end of each accounting year a supplier using any partial exemptionmethod is also re/uired to determine the attribution in respect of supplieseffected during the accounting year and on the next return (Luly *eturn! ad"ustany difference in input tax previously attributed to taxable supplies during thataccounting year.

P%(0#%l E&!/p0#)* M!08)+$

M!08)+ 1

S0!p 1 6alculate the value of the taxable supplies made in theaccounting period.

S0!p 2 6alculate the value of all supplies made in the accountingperiod

S0!p 3 6alculate the amount of nput tax payable on 4urchasesin that accounting period.

S0!p = Kivide the Amount obtained in -tep 1 by the amountobtained in -tep G% i.e. T%&%'l! $uppl#!$ #* p!(#)+ @ %ll $uppl#!$ #*p!(#)+

nput tax that can be claimed in the accounting period is the product obtained bymultiplying the amount obtained in step J by the amount obtained in step C.

Taxable Supplies in &eriod All supplies in period ;< $AT on purchases=


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E&%/pl!,

SARA CBANSA MA A?U

-araDs input tax and supplies made in the /uarter to J1 Kecember GHH5 areanalyzed as follo#s

nput tax #holly re taxable supplies GJ%G5Hnput Tax #holly re exempt supplies 1C%HHH

0on attributable input taxG9%HHH Value ()xcluding VAT! of taxable supplies

G5H%HHH Value of exempt supplies1HH%HHH

6alculate the deductible input tax assuming that -ara uses method 1 of

attributing input tax.

ANS;ER

SARA CBANSA MA A?U

S0!p 1 6alculate the value of the taxable supplies made in theaccounting period O FG5H% HHH%HHH

S0!p 2 6alculate the value of all supplies made in the accounting

period O FG5H% HHH%HHH P F1HH% HHH%HHH O FJ5H% HHH%HHH.

S0!p 3 6alculate the amount of nput tax payable on 4urchases inthat accounting periodO FGJ% G5H%HHH.

-tep C Kivide the Amount obtained in -tep 1 by the amountobtained in -tep G% i.e. G5H%HHH%HHH B J5H%HHH%HHH O H.71C

nput tax that can be claimed in the accounting period is the product obtained bymultiplying the amount obtained in step J by the amount obtained in step C.

O H.71C N GJ%G5H%HHH O F1M% MHH%5HH


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M!08)+ T )

S0!p 1 Kivide input tax for the accounting period into 6ategories

nput tax directly attributed to taxable supplies This is #holly available for

6redit. nput tax directly attributable to exempt supplies This Tax is #holly

disallo#ed for 6redit.

nput tax that is paid for the purposes of the business but is notdirectly attributable to either taxable or exempt supplies. This is famouslycalled 0on attributable nput Tax. t is usually incurred on overheads suchas )lectricity and nternet costs etc. The amount available for 6redit isfound by using the fraction in -tep C belo#.

S0!p 2 6alculate the value of taxable supplies made in the accounting period.

S0!p 3 6alculate the value of all supplies made in that period.

S0!p = Kivide the amount obtained in -tep G by the amount obtained in -tep J%i.e. T%&%'l! $uppl#!$ #* p!(#)+ @ %ll $uppl#!$ #* p!(#)+

,or -implicity% 0on attributable Tax is deemed to be attributable to taxablesupplies and may be claimed as a deduction #ith the amount of tax in 6ategory 1above.

E&%/pl!,

n the )xample of -ara 6hansa +a'abu above% calculate the value of deductibleinput tax assuming that -ara uses method G of attributing input tax.

A*$ !(

S0!p 1 Kivide input tax for the accounting period into 6ategories

nput tax directly attributed to taxable supplies This is #holly available for6redit O FGJ% G5H%HHH

nput tax directly attributable to exempt supplies This Tax is #hollydisallo#ed for 6redit O F1C% HHH%HHH

nput tax that is paid for the purposes of the business but is not

directly attributable to either taxable or exempt supplies. This is famouslycalled 0on attributable nput Tax. t is usually incurred on overheads suchas )lectricity and nternet costs etc. O FG9% HHH%HHH. The amountavailable for 6redit is found by using the fraction in -tep C belo#.

S0!p 2, 6alculate the value of taxable supplies made in the accountingperiodO FG5H% HHH%HHH.


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S0!p 3, 6alculate the value of all supplies made in that period OFG5H% HHH%HHH P F1HH% HHH%HHH O FJ5H% HHH%HHH.

S0!p =, Kivide the amount obtained in -tep G by the amount obtained in-tep J% i.e.

G5H%HHH%HHH B J5H%HHH%HHH H.71C

Therefore the amount available for credit can be found as follo#s(H.71C N G9%HHH%HHH! P FGJ% G5H%HHH O FCJ% GCG%HHH.

M!08)+ T8(!!

S0!p 1 6alculate the value of taxable supplies made in allaccounting periods in the accounting year.

S0!p 2 6alculate the value of all supplies made in that period.

S0!p 3 6alculate the amount of tax payable on supplies made to thesupplier.

S0!p =, Kivide the amount obtained in -tep 1 by the amount obtainedin -tep G. T%&%'l! $uppl#!$ /%+! #* p!(#)+$ #* % )u*0#*4 y!%(

All $uppl#!$ /%+! #* % )u*0#*4 y!%(.

nput tax that can be claimed as a deduction or credit in the prescribedaccounting periods is the product obtained by multiplying the amount obtained in-tep C% less the amount already reclaimed in earlier accounting periods in thataccounting year.

F)u(08 M!08)+

S0!p 1 Kivide input tax for the prescribed accounting year into categories

nput tax that is directly attributable to taxable supplies

nput tax that is directly attributable to exempt supplies

nput tax that is paid for the purpose of the business that is notdirectly attributable either to taxable or exempt supplies.

S0!p 2, 6alculate the value of taxable supplies made in the prescribedaccounting year.

S0!p 3 6alculate the value of all supplies in that year.

S0!p = Kivide the amount obtained in -tep G by the amount obtained in-tep J% i.e. T%&%'l! $uppl#!$ #* p!(#)+ @ All $uppl#!$ #* p!(#)+

A proportion of input tax in 6ategory J above% e/ual to the proportion mentionedin -tep C% is deemed attributable to taxable supplies and may together #ith theamount in 6ategory 1 be claimed as a deductible or credit for the prescribedaccounting year% to the extent that it exceeds any amounts already deductible orcredited in earlier prescribed accounting periods in that accounting year.


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E&%/pl!,

MANDE ;AMUNDILA

P%(0 A+ande amundila has a mar'et stall in 0dolaDs 0orth rise% and sells mostly fruitsand vegetables and a small amount of other foodstuffs and groceries. -hestarted trading on 1 Kecember GHH5 and she is positive that her turnover #ill ta'ethe follo#ing pattern

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ANS;ER,

MANDE ;AMUNDILA

P%(0 AVAT R!4#$0(%0#)*@nder the &ambian VAT la#s a supplier must apply to register if the value oftaxable supplies in the course of business exceeds or is li'ely to exceed FGHHmillion in any 1G months. ,or +andeDs business it #as becoming rather obviousby the end of the Lune GHHM /uarter that the F1HH million threshold #as going tobe exceeded. f in that /uarter the value of the taxable supplies #as F1$M millionit #as more than li'ely that in the next three months the FGHH million mar' #asgoing to be reached and perhaps even exceeded. -trictly spea'ing there/uirement to register falls in the /uarter ending JH -eptember GHHM #hen thevalue of taxable supplies exceeds the FGHH million threshold.

+ande started trading on 1 Kecember GHH5. Therefore this is not a continuingbusiness but rather a ne# business. The date #hen a business becomesregisterable for VAT for a ne# business% if the turnover threshold is li'ely toexceed FGHH million% is the date of commencement of trading i.e. 1 KecemberGHH5.

P%(0 ?D!+u 0#'l! I*pu0 T%&

S0!p 1 Kivide input tax for the prescribed accounting year into categories

nput tax that is directly attributable to taxable supplies O FGG% JCH nput tax that is directly attributable to exempt supplies O FJ% 5HH

nput tax that is paid for the purpose of the business that is not directlyattributable either to taxable or exempt supplies O FJ5% HHH

S0!p 2, 6alculate the value of taxable supplies made in the prescribedaccounting 8ear O F15H% HHH P FJ9H% HHH O F5JH% HHH

S0!p 3 6alculate the value of all supplies in that year. O F5JH% HHH P GH%HHHP C5%HHH O F5$5% HHH.

S0!p = Kivide the amount obtained in -tep G by the amount obtained in

-tep J% i.e. 5JH%HHH B 5$5%HHH O H.9$

Therefore the deductible input tax available for credit can be computed as(H.9$ N J5%HHH O FJ1% 15H! P FGG% JCH O F5J% C$H


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I/p)(0!+ G))+$

mported goods are liable to VAT. This is to ensure that manufacturers in &ambiaare not placed at a disadvantage as compared to foreign suppliers. ?i'e 6ustomsKuty% VAT is chargeable on certain Vatable goods. VAT on imported items iscomputed on the total cost of the item in /uestion% that is% the 6 , P Kuty.

hen goods are imported into &ambia% VAT% together #ith any import duties ispayable at importation to &*A s 6ustoms Kivision. VAT is chargeable on allimports except zero rated or exempt goods. There are also some exceptions forgoods imported under *egulations M% 7% $% 11% 1J% 1C% 15 and 1M of the 6ustomsand )xcise *ebates% *efunds and *emissions >eneral *egulations.

here goods are removed from an approved bonded #arehouse form 6) GH isused. >oods in bond do not attract VAT% but VAT is payable #hen goods areremoved from bond.

11.K VAT IMPLICATIONS OF LEASING TRANSACTIONS

A leasing agreement is essentially a hiring agreement in #hich o#nership of anasset may never pass to the lessee.


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F#*%* ! L!%$!This is a lease that transfers substantially all the ris's and re#ards incident too#nership of an asset. Title may or may not eventually be transferred. =ence% itmight be said that the ?essor purchases an asset #ith the sole intention ofleasing the asset% #ith finance charges% to an end user (?essee!% for agreedregular payments% over an agreed period of time.

Op!(%0#*4 L!%$! An operating lease is a lease other than a finance lease. t runs for significantlyless than the useful life of the asset. An operating ?ease is therefore% a derivativeof the ,inance ?ease designed to remove the lease liability from the lesseeDsbalance sheet.

The ?essor places a *esidual Value on the asset and rents the net value of theassets to the ?essee over an agreed period. The residual Value is never payableby the lessee and it is therefore deemed that the lessor ta'es substantially all ofthe ris' and re#ard associated #ith o#nership of the asset. 3ecause of this% theasset is not captilised on the 3alance -heet of the lessee for accountingpurposes. This is 'no#n as


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The lessor #ill purchase an asset and claim the input VAT as per the VATinvoice.

The lessor leases the asset to the ?essee and levies VAT on each lease rental#hen due or received% including rentals received under secondary leases. Theexemption of VAT on interest andBor other exempt services% previously allo#ed%is no longer applicable.

f the asset is sold at any time during or after termination of the lease% the lessor#ill levy VAT on the selling price.

##7 here the lessee #ould normally have /ualified for VAT input credit if he hadpurchased the asset% he is allo#ed to reclaim the input tax levied on leaserentals. Therefore% input tax incurred on the lease of a motor car% or any asset notmeant for business use% is non deductible.

S%l! %*+ L!%$!'%

The t#o components of a -ale and ?easebac' transaction #ill be treated asfollo#s

#7 T8! S%l!This is a normal sale transaction and VAT #ill be levied% #here applicable% at the-tandard VAT *ate% on the value of the asset sold.

##7 T8! L!%$!The lease is as previously described and the VAT treatment is identical to that ofany other lease.

I*$0%ll/!*0 S%l! A4(!!/!*0

#7 T8! S!ll!( The seller #ill purchase an asset and claim the input VAT as per the VAT

nvoice.

The seller then on sells the asset under the finance agreement and levies VATon the invoice amount. The subse/uent payments made #ithin time ofagreement #ill not attract VAT.

n the event that the buyer does not fulfill all the payments #ithin the time ofagreement% additional charges #ill be levied #hich #ill attract output VAT.

##7 T8! ?uy!(The 3uyer #ill be able to claim an input VAT invoice if he is entitled to input taxcredit.

TAX POINT

,or VAT purposes% the time #hen leasing services are supplied #ill be theearliest of the follo#ing times


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hen the payment of lease rental is received from the lessee. hen the lessor issues a tax invoice. hen the lease payment falls due% or hen the leasing services are rendered.

SUPPLIERS NOT REGISTERED FOR VAT

here the ?essor ac/uires the asset from a seller #ho is not obliged to levyVAT2 for example% parties that are not registered for VAT% then the lessor #ill notbe entitled to an input VAT but #ill still be re/uired to levy output VAT on allrentals as they fall due #ith the exception being #here the lessee is a donor ordonor agency #ho is in possession of a valid ?ocal 4urchase order.

TERMINATION OF LEASE ?Y DEFAULT

n the event of default the lease can be terminated at the option of the ?essor% in

#hich case the lessee returns the asset that #as the sub"ect of the lease to thelessor. -uch transfer of asset and any financial loss associated #ith suchtransfers #ill not constitute a supply for VAT purposes.

DISPOSALS OF ASSETS

A disposal of assets recovered from a defaulting lessee is a taxable supply andthe lessor has to account for VAT on the disposal. The taxable value of suchdisposals is the sale proceeds. f the asset being disposed of is a motor car%normal VAT rules on resale of motor cars #ill apply.

L!%$! R!*0%l A((!%($ R! !# !+f the lessor receives any lease rental arrears after termination of the lease% this

#ill attract VAT and the lessor #ill account for such VAT.

O08!( E&p!*$!$ I* u((!+VAT incurred on expenses by the lessor in recovering or reselling the asset% suchas legal expenses and expenses to restore the asset to a saleable condition etc.%is reclaimable as input tax.

BIRE PURCBASES

The VAT treatment under =ire 4urchase Agreements is the same as that of alease.

11.: REPURCBASE AGRREMENTS

*epurchase agreements (*4s or *epos! are commonly used as ,inantialnstruments in +oney +ar'ets. The more accurate and descriptive term is -ale

and *epurchase Agreement% since #hat transpires is sale of securities no# forcash by party A (the cash borro#er! to party (the cash lender!% #ith the


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promise made by A to of repurchasing those securities later (#ith A paying there/uisite implicit interest to at the time of repurchase the implicit interest rateis 'no#n as the repo rate !. ,rom a financial theory perspective% there is nothingthat prevents any security from being employed in a repo2 therefore % treasury or>overnment bills% and stoc's B shares% may all be used as securities involved ina repo.

A repo is similar to a secured loan% #ith the lender of money receiving securitiesas collateral to protect him against default by the borro#er. The legal title tosecurities passes from the seller to the investor. The one providing the cash isreferred to as an RinvestorR2 the provider of the collateral is the RsellerR. 6ouponsthat are paid out on the securities during the life of the loan are transferred to theoriginal o#ner of the security% by means of altering the cash paid at the end ofthe agreement (#ith interest #here appropriate!.

t should be mentioned that there is a concomitant credit ris' #ith engaging in arepo.


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The nature of the repurchase provision is there an unconditionalcommitment by both parties or does either or both possess optionsconcerning repurchase arrangementsE

The initial sale price and the repurchase price do these loo' li'e artificialprices designed to operationalise a financing arrangement or are they theactual mar'et prices at one or both datesE f the figures used at each dateare mar'et prices% the arrangement begin to loo' more li'e a normal salein #hich ris's and re#ards are transferred% particularly if either or bothparties en"oy appropriate options% e.g. the purchaserD has the option toretain the asset rather than resell it to the initial vendor.

The location of the asset and the right of the seller to use the asset #hilstit is o#ned by the buyer. here the asset remains on the vendorDspremises or the vendor retains a right of access to the asset% thetransaction #ould appear not to possess the characteristics of a normalsale.

E&%/pl!

A #his'y blending company contracts to sell part of its stoc' of #his'y to a ban'for F1H million on 1 Lanuary GHH7. The agreement ma'es provision for the#his'y company to buy bac' the #his'y t#o years later for F1G.1 million. The#his'y remains located at the #his'y blending companyDs premises.

The mar'et rate of interest for an advance to a #his'y blending company is'no#n to be 1H .

R!Ju#(!+

)xplain the substance of this transaction and ho# it should be accounted for inthe boo's and accounts of the #his'y company.

S)lu0#)*

An examination of the purpose of this transaction reveals it to be a financing

arrangement rather than a normal sale. The #his'y company has transferred noris's and re#ards of o#nership to the ban' and has merely borro#ed money onthe security of an appreciating asset.

The stoc' should remain in the balance sheet of the #his'y blending company% atthe date of the initial advance (1 Lanuary GHH7! at F1H million% #ith the cashreceived from the ban' sho#n as a liability.


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n the accounts for GHH7% there should appear in the profit and loss account afinance charge of F1 million% representing 1H of the amount of the effectiveadvance. The amount of the loanD #ill be sho#n in the balance sheet for J1Kecember GHH7 at F11 million F1H million initial advance and F1 millioninterest accrued and unpaid.

,or GHH9% the finance charge should be F1.1 million2 the original advance #asF1H million and the interest for year 1 of F1 million has not yet been paid and sothe total advance for the duration of year G is F11 million (therefore% F11 million x1H O F1.1 million interest!. The recorded value of the advance is increased toF1G.1 million and #ill be deleted from the balance sheet #hen repayment ismade on 1 Lanuary GHH$.

=ad the transaction instead been accounted for as a normal sale% stoc' #ouldhave been reduced by F1H million and cash #ould have been increased by F1Hmillion in the #his'y blending companyDs balance sheet at 1 Lanuary GHH7. nsuch a case the financing arrangement #ould remain off balance sheet and theassets of the company #ould also be understated.

11.5 ADMINISTRATION OF VAT

R! )(+$ %*+ A )u*0$*ecords and accounts must be 'ept of all goods and services received andsupplied in the course of a business. 0o particular form is specified but they mustbe sufficient to allo# the VAT *eturn to be completed and to allo# the &*A tochec' the *eturn. *ecords must be 'ept up to date and retained in the 6ompanyfor -ic 8ears. Thus *ecords 'ept might include the follo#ing

6opies of all Tax nvoices ssued in a particular Tax 4eriod.

*ecords of all eneral may in aparticular case determine by notice.

A prescribed accounting period is the +onth next succeeding the+onth in #hich the Trader #as registered for VAT and then eachsucceeding calendar month% unless the 6ommissioner >eneral% bynotice in #riting% determines another accounting period for a particular-upplier.


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A$$!$$/!*0 )" T%&here% in the eneral% a Taxable -upplier has

failed to pay any of the Tax payable by him by reason of =is failure to 'eep proper boo's of account% records of documents as

re/uired under the VAT Act% or the incorrectness or inade/uacy of anysuch boo's% records or documents2 or

=is failure to ma'e% or delay in ma'ing% any return re/uired under theVAT Act or the incorrectness or inade/uacy of any such *eturns2

The 6ommissioner >eneral may assess the Tax Kue and any nterest payablethereon. The Tax payable is to be paid not later than JH days from the date of the

Assessment 0otice.


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P%y/!*0 )" T%& )( C(!+#0 A taxable -upplier #hose Tax liabilities in respect of a particular prescribedaccounting period are not exhausted by allo#able deduction is re/uired #ithinthe time allo#ed for lodgement of his Tax *eturn for that period% to *emit the Tax

Amount due to the &*A. This means that the Tax *eturn must be accompaniedby a payment che/ue.

T%& R!"u*+here% in respect of a particular accounting period% beginning on or after 1 April

1$$9% a registered -upplierDs allo#able credits exceed #hat #ould have been hisTax liabilities% if any% for the period% the &*A is re/uired #ithin JH Kays after the*eturn #as submitted% to remit to the -upplier the amount to #hich he stands incredit by reason of the excess.

TAX DEDUCTIONS AND CREDITThe nput Tax that may be deducted by or credited to a registered -upplier is

The #hole of that Tax if all the supplies effected by a -upplier in thecourse of his business are indeed taxable2 or

A proportion of that Tax #hich is attributable to taxable supplies ifsome but not all of the supplies effected by a -upplier in the course ofhis business are taxable.

nput Tax is not to be deducted% credited or claimed unless theregistered supplier% at the time of lodgement of the Tax *eturn in#hich the deduction or credit is claimed% is in possession of a Tax

nvoice% or other evidence satisfactory to the &*A% relating to thegoods or services in respect of #hich the Tax is claimed% or in thecase of mported goods% such documentary evidence of the paymentof Tax as the 6ommissioner >eneral may% by administrative rule%prescribe.

nput Tax may not be deducted or credited after a period of eneral.

PENALTIES AND INTEREST

L%0! Su'/#$$#)* )" T%& R!0u(* A Taxable -upplier #ho fails to lodge a *eturn #ithin G1 Kays after the end ofthe prescribed accounting period to #hich it relates is re/uired to pay additionaltax consisting of


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L%0! P%y/!*0 )" T%& A Taxable -upplier #ho has correctly lodged a Tax *eturn but has not

paid the Tax due on the *eturn #ithin the time allo#ed% is re/uired topay additional Tax of one and half of one percentum of the Taxpayable in respect of the prescribed accounting period covered by the*eturn for each day follo#ing the day #hen the *eturn #as lodged tothe date that payment of the Tax is made.

This additional Tax is payable G1 Kays after the date on #hich it isincurred.

L%0! R!4#$0(%0#)* A -upplier #ho being re/uired to apply or *egister for VAT fails to do so #ithin


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EXAMINATION TYPE UESTIONS ;ITB ANS;ERS


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The VAT returns submitted to the &*A sho# the follo#ing activities out the year.

N)*- )(! C)(! I0!/$ I0!/$.

M MAp(#l G% JJ7%CHH G% J5M%777%HJ5M%y M% 7H9%CHH J% 9JH%5CM%$CC

u*! 7C% CC1%GHC C% 1$C%9$G%7JCuly 7$% 751%C$5 C% 79J%JGG%H1G

Au4u$0 $5% JJJ%H5J J% J7%51G%91GS!p0 C7% HM1%19M 5% C55%1HH%J11O 0 55% HM5%177 1% M1H%75H%$G9N) $5% 17G%J51 J% HH7%717%MC7D! 1% 115%$J1 J% MCG%9GG%71C

%* 19% 5$J%1M7 J% 77M%9CC%$MMF!' 17%999%HHH J% 999% 999%999M%(

MARCB 2 K OUTPUT

M-tandard *ated MJ%9H1%$MG%7$H.HH-ales *eturns 0 ?&ero *ated 1J%GMH%CJ$%CMH.5$)xempt -ales JHJ%HG7%G$5.99

All the amounts are VAT inclusive #ere applicable.

RE UIRED,a! 6ompute the VAT for the month of +arch GHH7.b! *econcile the VAT in the companyDs >eneral ?edger to the &*A VAT returns.c! -ho# ho# any ad"ustment arising from VAT *econciliation #ill be treated in

the +arch VAT computation.d! )stimate any potential penalties arising throughout the year.


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ANS;ERCBISOM?OLE APULU

6%7 Ou0pu0 VAT

G()$$ VAT N!0-tandard rated MJ%9H1%$MG%7$H $%5HGC1$%$$H 5C%G$$%5CG%9HH-ales *eturns H H H&ero *ated 1J%GMH%CJ$%CM1 H 1J%GMH%CJ$%CM1)xempt -ales JHJ%HG7%G$M H JHJ%HG7%G$M

::H3K H=29H =: 9H 2H=19H99 K:H5K3H 9H :

P%(0#%l E&!/p0#)* R!l#!",M

)xempt -ales JHJ%HG7%G$M

G()$$ S%l!$,-tandard *ated MJ%9H1%$MG%7$H&ero *ated 1J%GMH%CJ$%CMH)xempt -ales JHJ%HG7%G$M

::H3K H=29H =:

Total nput VAT M%117%119.17

R!l#!" O )xempt -ales N Total nputs

>ross -ales

O JHJ%HG7%G$M N M%117%119.17

77%JM5%CG$%5C7

O 23H 9K

Total nput VAT O FM% 117% 119.17 FGJ% $MHO KH 93H1 5.


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6 7 the end of the year it has been revealed that an amount of F1%H$5%7CJ%15M hasbeen over declared to the &*A.

The VAT computation for the month of +arch GHHM sho#s that the business mustpay F$% C$M%JGM%9JG. Thus the over declaration needs to set off against the VATpayable.

UESTION II

PRECIOUS MU UM?UTA

4recious has o#ned ?uhanga 3eat -ugar 4lc #hich produces approximatelyCHH%HHH tons of -ugar 6ane from its o#n agricultural operations and aboutCH%HHH tons of sugar on an annual basis. The beat sugar is sold principally todomestic and preferential mar'ets as #ell as to the #orld mar'et. Approximately5H of the sugar produced is sold on the domestic mar'et for both industrial andhome consumption and about 1H is exported to the )uropean @nion underpreferential trade agreements. The company also produces a range of sugarbased special products and other non sugar products.

The follo#ing is a summary of activities for the month of Lanuary GHH7

SALES M3eat -ugar GG%H9H%GCG%MHJ.J5+olasses 97%1GC%M5H.$9-pecials MM% GMM%7$5.5C-yrup 15%595%G75.11Transport GC%G$H%9$9.7M-undry -ales (note 1! J5%9C7%15M.J7,oreign -ervices (note G! 15J%1H7%M11.G5

22H=K2H=K=H911.3K

OTBER SALES)xport to 6


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SUPPLIER CURRENCY AMT RATE M GROSS

-elina &A* $%$51 9HM 9%HGH%5HM $%CGC%H$C.556hanfya &A* JM%$CH 9H$ G$%99C%CMH J5%11C%GCH.5H6hanfya &A* 1C%H7H 7$M 11%1$$%7GH 1J%15$%M71.HH6hanfya &A* 1C%H7H 9HM 11%JCH%CGH 1J%JGC%$$J.5H6hanfya &A* CC%5GM 9HM J5%997%$5M CG%1M9%JC9.JH6hanfya &A* 1C%H7H 9HM 11%JCH%CGH 1J%JGC%$$J.5H6hanfya &A* G9%H79 9HM GG%MJH%9M9 GM%5$1%GM$.$H

3oth +#eni and 6hanfya are domiciled and resident in the republic of -outh Africa and provide services to ?uhanga 3)AT -ugar 4lc on a monthly basis. Allpayments are made in *ands and the t#o suppliers have not yet appointed a Tax

Agent in &ambia for the management of *everse VAT on foreign services. ,ormsfor the appointment of Keloitte and Touche as &ambian Tax agents have alreadybeen circulated.

N)0! 3 F)(!#4* S!( # !$

SUPPLIER CURRENCY AMOUNT RATE AMOUNT0goi &A* G%M$5 9HM G%17G%17H.HH6hilando &A* 7H%J7M.55 9HM 5M%7GJ%C$$.JH

The F59%9$5%M$$.JH is VAT )xclusive 3oth 0goi and 6hilando have already appointed Keloitte and Touche as their

&ambian Tax Agents for the management of *everse Tax.

N)0! = Komestic inputs for the month of Lanuary GHH7 amount to F1H%519%1C1%$J1.MM (VAT exclusive!.

N)0! - I/p)(0$The company imported a number of agricultural items used in the factoryincluding process chemicals amounting to F1%MHM%JGM%15H.71 (a gross value! allof #hich is sub"ect to both custom duties and import VAT.

N)0! KThe company made no cane purchases from its out gro#er schemes as it hadenough from its cane fields to meet the monthDs production target.


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N)0! : P%(0#%l E&!/p0#)*The company has selected to use

)xempt -ales N Total nputs

Total >ross -ales

,or its partial exemption #or'ings.

RE UIRED,

a! 6ompute the VAT payableBrefundable for the month of Lanuary GHH7 givingsufficient explanations #here appropriate.

b! hat is the due date for the payment of the VAT for ?uhanga 3eat -ugar4lcE

c! Advise ?uhanga 3eat -ugar on any tax planning points you thin' necessary.The advice should be restricted to their business scope and activities andmust be VAT related.

d! hat penalties may be levied for late submission of the VAT *eturn and forlate payment of the VAT liabilityE

ANS;ERPRECIOUS MU UM?UTA

6%7 OUTPUT VAT

GROSS VAT NETS0+ R%0!+,-ugar GG%H9H%GCG%MHJ.J5 J%G99%5CM%77H.71 19%7$1%M$5%9JG.MC+olasses 97%1GC%M5H.$9 1G%$7M%H11.95 7C%1C9%MJ$.1J-pecials MM%GMM%7$5.5C $%9M$%5GG.7C 5M%J$7%G7G.9H-yrup 15%595%G75.11 G%JG1%G11.1$ 1J%GMC%HMJ.$GTransport GC%G$H%9$9.7M J%M17%7$?.JJ GH%M7J%1H5.JJ-undry -ales J5%9C7%15M.J7 5%JJ9%$J9.19 JH%5H9%G19.1$

rr. VAT 15J%1H7%M11.G5 GG%9HJ%GM1.G5 1JH%JHC%J5H.HH 22H=K2H=K=H991.3K 3H3= H=:3H 9.3 19H11KH991H=52. 1OOOOOOOOOOOOOO OOOOOOOOOOOOO OOOOOOOOOOOOOO

rr O denotes rrecoverable VAT


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!() R%0!+

)xport to 6*A0K Tross

0goi &A* GM$5 9HM G17G17H J9H1G$.75 G55GG$$.756hilando &A* 7HJ7M.55 9HM 5M7GJC$$.9H $$GMM1G.J9 M5M5H111.M9

599$5MM$.JH 1HJHM7CG.1J M$GHGC11.CJOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

The 17.5 is directly applied on the net amounts paid to 0goi and 6hilando%as the /uestion states that these are VAT exclusive amounts.


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Su//%(y )" VAT P%y%'l! M%( 8 2 :

VAT 6laimed on sales (output! J%JC5%C7J%5H$.J5VAT 6laimed on Komestic inputs (1%9C1%1C$%$CG.CH!VAT 6laimed on imports (GJ$%GCH%HM5.HH!

1H2K H 53H .OOOOOOOOOOOOOO

6'7 VAT Du! D%0!

?uhanga beat -ugar #ill be re/uired to pay the +arch GHHM VAT liability on G1+ay GHH7.

6 7 VAT A+ # !The most note#orthy point is that ?uhanga 3eat -ugar 4lc has on its ,oreign-uppliersD list t#o suppliers #ho have not appointed a &ambian Tax Agent for themanagement of *everse Tax. The company has had F15J% 1H7%M11.G5 paid toforeign suppliers being disallo#ed from the VAT input schedule. The associatedloss is that the company has lost a VAT amount of F1H% JHM%7CG.1J #hich couldhave been claimed as input VAT thus reducing the overall VAT liability. This#aste of money can be avoided by simply urging both -elina and 6hanfya toappoint Keloitte and Touche as their &ambian Tax Agents for the management oftheir *everse VAT on foreign services.

6+7 VAT P!*%l0#!$

L%0! L)+4/!*0 )" R!0u(*$ 6P%(0 III S1: 6#7 VAT A 07f ?uhanga 3eat -ugar 4lc fails to lodge a VAT return #ithin the time allo#ed (G1

days! they shall pay additional tax consisting of 1%HHH penalty units i.e. F19H%HHH

CHAPTER 11 - PAPER 3.4 (ADVANCED TAXATION).doc

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