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Value Added Tax: The Refund Mechanism

The Value Added Tax (VAT) Act 2010 has established certain mechanisms for VAT registered taxpayers to claim a VAT credit as well as a refund for their businesses. Registered businesses will be able to get a VAT credit and refund after VAT has been implemented as of 1st January 2013. The basic rule requires that input tax is claimed in the accounting period in which the tax relating to the relevant goods or services became taxable.

How does a VAT credit works for businesses?
A business has to offset an Input Tax against Output Tax to determine the tax liability (or tax due). The output tax is the VAT collected from customers on each taxable supply. The input tax allowed as credit is the tax paid on purchases and attributable to taxable supplies.

Where the output tax exceeds the input tax for the taxable period, the differences must be paid to the Seychelles Revenue Commission. If the input tax exceeds the output tax, a VAT credit occurs.

While credits are in most cases, carried forward on the next VAT return, they can be refunded if certain conditions are met.

What are the conditions for claiming a VAT refund?
The most likely source of credit claims for refunds will be in the case of businesses that are mostly engaged in zero-rated sales, which is typically the case for exporters. For exporters, any amount of input tax is potentially refundable. Exporters will receive a VAT refund in the same VAT period while a business exclusively engaged in export transactions does not collect VAT (output tax is zero -0), it is entitled to claim VAT credit on its inputs.

The following conditions should be met before a VAT registered business can claim for a VAT refund:
  1. The VAT taxpayer’s activity mainly consists of exports: a minimum of 85% of its total turnover is attributed to export sales;
  2. The VAT taxpayer’s activity mainly consists in zero-rated supplies (other than exports): a minimum of 85% of its turnover is attributed to zero-rated supplies;
  3. The VAT taxpayers (1 and 2 above) are able to justify with sufficient evidence and proper records the reality of the exports or zero-rated supplies upon request by SRC;
  4. The VAT taxpayer’s main activity consists of supplies other than zero rated and exempt supplies: The VAT credit reported on the (monthly or quarterly) VAT return must be at least equal to SR 10 000 after 3 consecutive months that the credit has been carried forward.
How does a business claim for a VAT refund?
In order to claim for a refund the taxpayer/business must fill in the corresponding box at the bottom of the VAT return and must indicate the amount to be refunded. This amount cannot be more than the credit calculated.

VAT refunds will be processed within a period of 45 days from the date the claim for a refund is made in accordance with the VAT Act, 2010. However, the given deadline may be extended in circumstances whereby:

(i) a filed VAT return is incomplete;
(ii) the taxpayer has outstanding tax returns;
(iii) the taxpayer has failed to respond within a reasonable period for verification enquiries; or
(iv) SRC suspects, on reasonable grounds that the VAT return is inaccurate and/or the taxpayer is engaged in fraudulent activity, in which case the taxpayer will be subjected to an audit and/or investigations.

Excess VAT credits should be primarily offset against VAT and other tax arrears, except where an outstanding amount is subject to a genuine dispute. This should be supported either by the taxpayer’s accounting documents and the debt management system.

VAT refunds can be made:
  • By cheque or;
  • Bank to bank transfer
For more information
You can contact Seychelles Revenue Commission on 4293745 or email us at for more information about VAT registration.
The Value Added Tax Act, 2010 is available here.

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