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VAT on the Retail and Wholesale Industry

Value Added Tax (VAT) is a tax charged on the sale of goods or services and is included in the price of most products and services that we use every day. VAT will come into effect as of 1st July 2012 and will replace the Goods and Services Tax (GST).

It is a fundamental principle of the VAT law that VAT on a supply of goods should be calculated on the price paid less the VAT itself. If other taxes or duties have been paid on the goods, they will be reflected in the price paid. There are a number of taxes and duties which have to be paid on goods before they reach the retail stage and which are reflected in the retail selling price. These duties/taxes tend not to be identified separately at the point of sale but, if already paid, they do form part of the value on which VAT is charged.

Who charges VAT?
VAT is a tax on consumer spending so everyone who pays for goods and services pays VAT. When you are buying certain items such as computers, electrical appliances, professional services etc, you should see the amount of VAT increased and the rate at which you are being charged on your bill.

How VAT is charged by retailers and wholesalers?
VAT is charged at every stage of sale where the cost of an item is increased. The standard rate of VAT in the Seychelles is 15%. The 15% VAT collected must be remitted to the Seychelles Revenue Commission (SRC).

For example:

A manufacturer sells a television set to a wholesaler for SR1000 and charges him VAT on that amount at 15%. Therefore, the wholesaler pays SR1150 for the television. The wholesaler goes on to sell the television to a retailer for SR2000. He adds on VAT at 15%, so the retailer pays a total of SR2300. The wholesaler must pay the VAT (SR300) to SRC but he can reclaim the SR150 VAT he has already paid to the manufacturer, leaving SR150, to be remitted to SRC.

When the retailer comes to sell the television to a consumer, he must also add on VAT to his selling price. He sells the television for SR3000, plus VAT at 15%, making a selling price of SR3450 for the consumer. The retailer must pay the VAT to SRC but he can claim back the SR300 VAT that he paid to the wholesaler, leaving SR150 to be paid to SRC.

SRC will receive a total of SR450 on the price paid for the television by the consumer.

What happens if the importer is the wholesaler?
If the importer is the wholesaler, the importer will pay 15% VAT (input tax) on the imported goods at Customs. When he/she sells the goods to the retailer, the importer will incur only 15% VAT (output tax).
  • If the output tax exceeds input tax the VAT return shows a VAT payable. The VAT payable is remitted to SRC.
  • If the input tax exceeds the output tax the VAT returns show a VAT credit. There are two options in this case:
    • The credit is carried forward to the next tax period or
    • A VAT refund is claimed.
  • If the input tax is equal to the output tax no VAT is to be remitted to SRC. In this case the business cannot claim any credit or refund from SRC.
For more information
You can contact Seychelles Revenue Commission on 4293737 or email us at advisory.center@src.gov.sc.
The Value Added Tax Act, 2010 is available here.


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