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Frequently Asked Questions on VAT

1. What is VAT?
VAT is a broadly based tax on consumption. It applies to almost all goods and services that are imported, bought and sold for use or consumption in Seychelles. VAT is charged as a percentage of the price on the sale of goods and services and is borne ultimately by the final consumer.

2. How does VAT work?
Taxable persons act as VAT collectors on the behalf of Seychelles Revenue Commission (SRC). They charge VAT on their sales (output tax) and get a credit for the VAT paid (input tax) on their purchases so that they only have to remit the difference between the output tax and the input tax to SRC. In other words VAT is only paid on the value added at each stage of production and distribution.

3. How is VAT collected?
VAT is collected by registered persons from their customers on behalf of SRC. VAT is charged on invoices as a percentage of the sale price. VAT is also collected by Customs on imports at the first point of entry.

4. Will VAT replace the GST?
Yes. On July 1, 2012, the Value Added Tax (VAT) will replace the Goods and Services Tax (GST). GST will not apply anymore.

5. What does a taxable person mean?
A taxable person means a person who is registered for VAT.

6. Are all businesses (VAT) taxable persons?
No. All businesses are not taxable persons. To be a taxable person a business needs to be registered for VAT and to do so, his/her turnover must exceed a certain amount (called the VAT threshold). The VAT registration threshold is SR 5 million.

A person is mandatorily registered if his/her annual turnover reaches, or exceeds SR5 Million.

A person whose annual turnover is below the VAT threshold may however decide to voluntarily register if he/she thinks that he/she will draw some benefits from being registered and he/she will have the capability to comply with VAT requirements.

7. What are the benefits to be a VAT registered person for a business?
Under the VAT system, every taxable person can recover the VAT paid on his/ her purchases (input tax), providing that these expenses are made for the purpose of the business and are deductible (from a VAT point of view).
The deduction is made on the VAT return. VAT paid on purchases (input tax) is offset against VAT collected from customers (output tax). Only the difference is to be remitted to SRC.

8. VAT rates
There are two VAT rates: 15% (standard rate) on most supplies of goods and services, and 0% (zero-rate) on a specific list of transactions (principally exports but also a supply of goods by an individual farmer or fisherman and public utilities).

9. Will VAT be charged on every good and service sold or purchased?
No. Not all transactions are taxable. Certain goods and services will be exempted meaning that no VAT will be charged on these supplies. Exempt supplies are specifically enumerated in schedule I of the VAT Act 2010; they include educational, health and financial services as well as goods of first necessity such as rice, infant formulae, lentils, and so on.

It is important to note that VAT on the sale of goods and services will be charged only by VAT registered businesses.

For zero-rated goods, although in theory VAT is chargeable at 0%, effectively there is no VAT being charged on the sale of the goods or services.

Exports are taxable but are zero-rated (zero rate applies). That means that in practise no VAT is collected from exports.

10. Zero-rated and exempt supplies, what is the difference?
When purchasing a zero-rated supply or an exempt supply a customer does not have any VAT to pay. So what is the difference? When making taxable supplies, including zero-rated ones, a taxable person is entitled to reclaim input tax credit, because this type of transaction is taxable (meaning in the scope of the VAT) even though no VAT is levied in practice. On the other hand when making exempt supplies a business cannot claim any input tax credit, because exempt supplies are out of the scope of the VAT.

11. Is input tax always deductible?
Claim for input tax credit on some purchases will be denied unless they are directly related to the nature of the business activity. VAT is not deductible for passenger vehicle, spare parts or repair and maintenance services, petroleum products, entertainment, accommodation and any supplies used to provide membership or entrance for any person in a sporting, social or recreational club, association, or society.

12. How to determine a VAT inclusive and a VAT exclusive price?
When the price has been decided without VAT, the VAT needs to be added to the price, by multiplying it by 15% (or by 0.15), to get the VAT-inclusive price. SR 100 without VAT becomes SR 115 with VAT.
When VAT is calculated from a VAT inclusive price, the following fraction (price * 3/23) will be applied to find out the VAT amount. SR 115 * 3/23 = SR 15 and SR 115 - SR 15 = SR 100.


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