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2012 VALUE ADDED TAX (VAT)

2012 VALUE ADDED TAX (VAT). 03 October 2012. VAT Act no 10 of 2000. Topics: Framework: How VAT works Administration of VAT Taxable activity and supplies Performing a supply or not Different supplies of goods and services Input tax and Importation Rules for claiming input tax

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2012 VALUE ADDED TAX (VAT)

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  1. 2012VALUE ADDED TAX (VAT) 03 October 2012

  2. VAT Act no 10 of 2000 • Topics: • Framework: • How VAT works • Administration of VAT • Taxable activity and supplies • Performing a supply or not • Different supplies of goods and services • Input tax and Importation • Rules for claiming input tax • Apportionment ratio • Import of Goods and Services

  3. VAT DIAGRAM TAXABLE SUPPLY EXEMPT SUPPLY ZERO RATED STANDARD RATE NO VAT APPLICABLE 0% 15% LISTED IN ACT ALL OTHER SUPPLIES (NOT ZERO OR EXEMPT) LISTED IN ACT

  4. AMENDMENTSyear 2010 • Indirect Tax: • Value-Added Tax - Zero rating of essential basic items: • Milk and Sugar • Medical Services • Cooking oil • Beans • Bread

  5. AMENDMENTSyear 2011

  6. Value Added Tax • Topics: Framework: • How VAT works • Administration of VAT

  7. VAT in Namibia How VAT works VAT is payable when: • -Supplies of good and services are made, • -By a registered person, • -In the course of a taxable activity, • Or • -Importation of goods and services are made. • Above events may result in a liability for VAT or may be exempt from VAT.

  8. VAT in Namibia How VAT works (continued) Output tax = Tax collected by registered person on the sale of goods and/or services Input tax = Tax paid by registered person on the local purchase or importation of goods and/or services VAT payable/(refundable) = Output tax – Input tax Total burden of VAT is borne by the final consumer

  9. VAT in Namibia How VAT works (continued) Example: Nike Ltd manufactures and sells sneakers. Street House buys and sells sneakers to the public Transaction: Nike sells sneakers to Street Housefor N$10 000, VAT excl Streethouse then sells the sneakers to Unam Students for N$30 000, VAT excl Let’s look at the Economic activity and VAT calculations

  10. VAT in Namibia How VAT works (continued) Example(continued): Transaction: NIKE sells sneakers to Streethouse for N$10 000, VAT excl. Street House then sells sneakers to Unam students for N$30000, VAT excl

  11. Per tax period 25 Submit VAT return Calc.VAT payable/ (refundable) Calc. input tax on expenses paid Calculate the output tax Value and time of supply Nature of supply

  12. VAT in Namibia Administration In Namibia, Commissioner of Inland Revenue administers VAT. Tax period = 2 months Ending either even (cat. A) or odd (cat. B) months Farmers may elect 2,4,6 or 12 month period VAT returns due 25th of month following tax period Import VAT returns due on goods: due 20th of every month Import VAT returns on services: due within 30 days of importation of service

  13. Records • The following records must be maintained in Namibia in the English language: • Original - tax invoices, - tax credit notes received - tax debit notes received • Copies - tax invoices - tax credit notes issued - tax debit notes issued • Customs documentation for imports and exports (e.g.SAD500) • Other records as the Commissioner may prescribe • Accounting records for at least 5 years after the related tax period

  14. Refund of VAT • Where: • The total amount of input tax > output tax; or • An excess amount of VAT was paid, a refund may be claimed • Refund payable not later than end of 2nd month following the date the refund was finalised • Interest at 11% p.a. is paid from date when refund is due (not from date when refund arose)

  15. VAT PAYABLE /REFUNDABLE • A vendor carries on a trade in Namibia and supplied goods and services for N$ 115 000(including VAT). • Required: Calculate VAT payable by or refundable to the vendor if he paid the following input tax on goods and service: • 7 000  • 16 000     CALCULATION OF VAT a) Output Tax 15,000 • Input Tax -7,000 • VAT liability 8,000 Payable • b) Output Tax 15,000 • input Tax -16,000 • VAT liability -1,000 Refundable

  16. LAYMAN’S CUCA SHOP • The Corner Shop is a registered vendor with effect from 01 July 2012 • The shop recorded the following transactions for 01 Jul 2012 • The industry mark up is 10% • Cash in the till 1,600 • Cheques and cash banked 1,000 • Cash taken for purchases 500 • Cash taken for own use 200 • Cash taken to pay wages 1,000 • Daily float 500 • Zero rated stock purchases 500 • Standard rated purchases 1,140 • Required: Calculate the total of the standard rated sales for 01 July 2012

  17. LET’S SEE LAYMAN • Cash in the till 1,600 • Add • Cheques and cash banked 1,000 • Cash taken for purchases 500 • Cash taken for own use 200 • Cash taken to pay wages 1,000 • Less Daily float -500 • Total DGT 3,800 • Zero rated purchases 500 • Industry mark up (500*10%) 50 • Total zero rated sales 550

  18. YOUR STANDARD SALES • Daily Gross takings 3,800 • Less: Zero rated sales -550 • Total Standard rate sales 3,250

  19. Cost of Non-CompliancePenalties and Interest • Penalties for not submitting a return: • N$ 100 per day • Penalties for not paying any VAT due: • 10% of the amount of VAT due per month, limited to the VAT amount • Interest: • 20% per annum on amounts due

  20. Cost Of Non-Compliance • Example: • Output VAT not declared on a supply of N$1 550 000, after 18 months • VAT due: • N$1 550 000 x 15/115 = N$ 202 173.91 • Penalties: • N$202 174 x10% = N$ 202 174 (limited to 100%) • Interest: • (N$202 174 x 20%)+((202 174 x 20%) x ½) = N$60 652.20 • Total liability = N$ 465 000

  21. Value Added Tax • Topics: Taxable activity and supplies • Performing a supply or not • Different supplies of goods and services

  22. Transactions within a business

  23. Supply of goods and services Introduction On what is VAT levied? VAT is levied on: Every taxable supply by a registered personof goods or services for a consideration in the course or furtherance of any taxable activity and, unless an exempt import, on importation of goods and on the importation of services, to the extent not for the rendering of taxable supplies.

  24. Supply of goods and services What is not a supply? • Services rendered by employee to employer by reason of employment • Provision of goods on consignment, or to representative • Money • Taxes or levies under any act of parliament, e.g. Transfer duty • Registration/licenses by registering authority • Payment of a subsidy, grant or bursary • Dividends

  25. Supply of goods and services Consideration Example A retailer operates a scheme whereby, after a customer has purchased 10 calculators, he or she will be entitled to another calculator free of charge. What is the consideration for VAT purposes? The consideration is on the 10 calculators. The 1 extra calculator was given for free. Therefore no consideration.

  26. Supply of goods and services Taxable activity Any activity carried on continuously or regularly In Namibia or partly in Namibia Whether or not for profit Involving the supply of goods or services To any other person & Any activity of a local authority that involves the supply of goods or services for consideration

  27. Supply of goods and services Not a taxable activity: Private recreational pursuit or hobby Making exempt supplies Activity carried on by branch outside Namibia Registration of or issuing of license by registering authority

  28. Supply of goods and services Registered person The supply has to be made by a registered person before it attracts VAT. The word “person” includes; • Regional or local authority; • Natural person; • Company; • Partnership; and • Board or trust.

  29. Supply of goods and services Registered person VAT registration – Who must register? Any person (includes natural and juristic persons) Who carries on any taxable activity And Taxable supplies for any 12 month period exceed or are likely to exceed – N$ 200 000 Note: taxable supplies Exclude once-off transactions Provision also made for voluntary registration

  30. What Is the Difference Between Exempt and Zero-rated? • Zero-rated supplies: • Deemed to be subject to VAT – though at 0% • Taxable supply • You may claim back input VAT paid in the course of making the taxable supply • Exempt supplies: • Not a taxable supply / activity (see imposition rule) • May not claim back input VAT paid in the course of making an exempt supply

  31. Time of Supply: When VAT Must Be Accounted for • General rule Earlier of: • Issue of invoice; or • Receipt of any payment • Imports • Time of physical entry into Namibia; or • Goods transferred into a bonded warehouse: when entered for home consumption

  32. Value of Supply: Amount on Which VAT Must Be Calculated • Basic rule: • Value of supply = consideration received • Normally, consideration would be market value Imports • greater of FOB value, plus 10% uplift, or • open market value

  33. Rules for Claiming Input Tax – Tax invoices • May only claim back input VAT on local purchases if in possession of a valid tax invoice • A registered person making a taxable supply to another person is required to provide a tax invoice on request • Except: If the supply is in cash and less than N$100 • Only one tax invoice shall be issued per taxable supply, same as for tax debit notes and tax credit notes • Where the tax document is lost, a copy may be provided, clearly marked “copy

  34. Denial of input tax deduction • Entertainment (food, beverages, tobacco, accommodation amusement, recreation or hospitality of any kind), except Sport, social & recreational club subscriptions Passenger vehicles, (no matter if for business use) except tour operators, entertainment business, part of transport service dealers, tour operators, rental companies, short-term insurers, charitable organisations

  35. Calculation Of Import VAT on goods Value of import of goods = • The greater of • FOB value + 10% • Open market value • Value of import of services • Consideration of import • Unless connected persons => market value

  36. Payment and Claiming of Imports: Goods

  37. Payment of Import VAT: Goods • Import VAT may be paid by either the importer or an agent • You can import and pay import VAT even though you do not have a VAT import account • Import VAT is then paid at the border • Entities should not allow their import VAT number to be used by someone else • Imports can now be checked against Asycuda

  38. Claiming of Import VAT: Goods • Import VAT may only be claimed back if used for taxable supply • Importer must be in possession of a supplier invoice and a stamped original bill of entry (NA500 / SAD500) or other documentation as approved • Must ensure that freight agent provides you with the original documentation • No import VAT may be claimed back if prohibited by Act, e.g. on passenger vehicles

  39. Example: Payment of Imports A company imports computer equipment from RSA. The invoice price is N$ 2 000. The open market value is N$ 2 005. Calculate the import VAT payable. FOB+upliftment = N$ 2 000+10% = N$ 2 200 Market value = N$ 2 005 Greater of the 2 = N$ 2 200 VAT at 15% = N$ 330

  40. Claiming of Input Tax: Apportionment • If registered person renders taxable and exempt supply • Inputs not directly connected with a taxable or exempt supply must be apportioned • Calculated on last year’s financial statements • Calculated annually

  41. Claiming of Input Tax: Apportionment • Apportionment formula: Taxable supplies 0% + 15% ------------------------- = --------------------------- Total supplies exempt + 0% + 15%

  42. Example: Apportionment Supplies rendered by registered person: Public transport services 100 000 Consulting fees 20 000 Rental of commercial property 10 000 Direct exports 50 000 Calculate the apportionment formula for input tax

  43. Example: Apportionment (Cont’d) Supplies rendered by registered person: Public transport services 100 000 Consulting fees 20 000 Rental of commercial property 10 000 Direct exports 50 000 Step 1: Determine what is taxable and what is exempt Public transport services Exempt Consulting 15% Rental of commercial property 15% Direct exports 0%

  44. Example: Apportionment (Cont’d) Supplies rendered by registered person: Public transport services 100 000 Consulting fees 20 000 Rental of commercial property 10 000 Direct exports 50 000 Step 2: Calculate apportionment formula (0% + 15%)/ (Exempt+0%+15%) = (50 000+10 000+20 000) / (100 000+20 000+10 000+ 50 000) = 44.44%

  45. CLASS QUIZZTRUE OR FALSE • Definition : Output tax • Is the tax payable on purchases by a registered person • Is the tax charged on supplies by a registered person. • Open market value • Is the money which a similar supply would generally fetch • Can be determined by any method approved by the commissioner

  46. CLASS QUIZZ • Taxable Activity •  T/A means any activity carried on continuously in Namibia that involves the supply of goods or services, but excludes hobbies and exempt supplies. • The levying of taxes under any act of parliament • Imposition of VAT • It is levied for the benefit of the university of Namibia • It is levied for the benefit of the office of the prime minister

  47. CLASS QUIZZ • Time of supply • Is the earlier of invoice or payment • Is only when an invoice is issued by a registered vendor • Value of supply • Shall always be the selling price minus discount minus any pocket money. • Shall always be the selling price plus any discount plus any pocket money. • Zero rating • A supply of telecommunication services to a residential account • A supply of livestock other than game

  48. CLASS QUIZZ • Exempt supply • Is a taxable supply in terms of section 10 of the ACT. • A supply of medical services by a medical doctor is an exempt supply. • Registration • Any person who carries on a taxable activity with an annual turnover less than N$ 200 000 is liable to be registered • Every regional or local authority that carries on a taxable activity becomes liable to be registered.

  49. CLASS QUIZZ • Calculation of tax payable • Output tax less input tax • Input tax less output tax • Rules relating to input tax • No input tax may be claimed on a passenger vehicle by a supermarket • No input tax may be claimed on entertainment by a tour operator.

  50. CLASS QUIZZ • Tax period • Always a period of 2 months • Category A, Category B, Category C and Category D • Returns • Due on or before the 25th day of the month following the end of the period • Due on or before the 20th day of the month following the end of the period

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