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VAT - Time of Supply

When VAT takes effect as of 1st July 2012, VAT-registered businesses are required to examine each transaction to determine when to treat a supply as having been made, and when to report the supplies and account for VAT in their VAT return. It is thus very important to identify the time of supply or the “basic tax point”.

What is the Time of Supply for VAT purposes?
The time of supply, referred to as the “basic tax point”, is the date when a transaction takes place for VAT purposes. This date is not necessarily the date the supply physically takes place. Basically, you must pay or reclaim VAT in the VAT period in which the time of supply occurs. This means you will need to know the time of supply for every transaction, so you can insert it on the correct VAT Return.

What is the general time of supply or “basic tax point”?
A supply of goods: generally takes place when the goods are physically removed, sent, taken away and/or made available for the customer to use.

A supply of services: takes place when the service is performed, when all the work is completed.

What are the Special rules that do not coincide but override the “basic tax point”?
The VAT Act 2010 introduces a different event for determining when the tax is due and when to account for it. For VAT purposes, a specific tax point is different from the “basic tax point” which overrides it. For goods and services the tax point is the date the payment in respect of the supply is received.

What other options do businesses have? VAT on accrual (VAT on invoice)
Some businesses generally recognise sales based on invoice. This means that for transactions where the Basic Tax Points do not coincide with the invoice date, businesses will have to incur additional costs in order to fully comply with the time of supply rules for VAT purposes.

This is why, to facilitate compliance and to align the VAT rules with business practices, SRC may allow businesses that make a formal demand, to report VAT on invoices (Accrual). It is important to note that the invoices must be issued (available for the customer) within 28 days after the date the supplies take place. Otherwise the tax point will be considered as:
  1. The date the supplies have taken place
  2. The date the payment is received, whichever comes first
A supply is anything done for a consideration. Therefore, the term “payment” refers to the payment of anything that constitutes a consideration.

What are the different modes of payment?
There are various modes of payment:
  • Cash: payment is treated as received on the date the cash is received from the customer;
  • Bank transfer: payment is treated as received on the date a bank credits the money in SRC’s account;
  • Cheques: payment is stamped as received on the date it is submitted to the SRC’s Office – either directly to cashier or by mail. If a cheque is dishonoured by a bank then payment is treated as received when the cheque is re-represented to the bank and it is cleared or is replaced by cash.
Payment can also include payment by book entry, for example, the off-setting of supplies or mutual debts. The tax point is when the entry is made. If the payment by book entry is in the form of an adjustment in the annual accounts, the tax point is the date the accounts are approved, provided no previous tax point has occurred.

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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