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Does a Business Supplying Zero-Rated Supplies Need to Register for VAT?

Under the Value Added Tax (VAT), 2010 all supplies within the scope of VAT are either taxable or exempted. An exempt supply is a supply which is not subject to VAT. A taxable supply is a supply which is chargeable to VAT at either the standard rate of 15% or zero-rated.

What are zero rated supplies?
Zero-rated supplies are taxable supplies but the rate at which VAT is charged is zero. In general, all goods which are exported are zero-rated. In addition, certain services in relation with international transport are also zero-rated.

VAT charged on inputs relating to the making of zero rated supplies can be claimed as an input tax credit. It is important to note that supplying zero-rated goods or services has different consequences than making exempt supplies. In the case of zero-rated supplies the input tax credit is claimable whilst in the case of exempt supplies no input tax credit is claimable.

What types of business activities are zero rated?
The following are some business activities which are zero rated under the Value Added Tax Act 2010:
  • Export
  • A supply of good imported to be manufactured and then exported
  • Service directly in connection with temporary imported goods
  • Service provided by a licensed, International Corporate Service Providers
  • A supply of telecommunications services to non-resident
  • A supply of certain services to a person outside Seychelles
  • A supply of international transport services
  • A supply of maritime service including maintenance and repair of vessel
  • A supply of goods made by a duty free shop
Do I need to register if supplying zero rated supplies?
The general requirement is that businesses making taxable supplies and whose annual turnover is within the VAT threshold of SR 5 million must register for VAT. This includes a business involved in the making of zero-rated supplies for example an exporter. On the other hand a business making taxable supplies whose turnover is below the threshold can also choose to register on a voluntary basis if it wishes to. However, the business must satisfy the following basic requirements:
  • has kept and will keep proper records;
  • is compliant with all other revenue laws; and
  • has a fixed place of doing business.
Please note, once a business is voluntarily registered, it must remain registered for at least 12 months. It must also maintain all its records for at least seven years, even after the business has ceased or the business has deregistered from VAT. The registered business has to comply with all conditions under the VAT Act, 2010.

In the case of businesses making zero-rated supplies especially exporters, it is advisable to register even if their business turnover falls below the VAT threshold for reasons described below.

What are the benefits of being VAT registered suppliers of zero –rated supplies especially to exporters?
A business making zero-rated supplies pays VAT on most of its inputs (imported goods, domestic purchases of goods and services) but also on its investments (equipments, construction, renovations, machinery, etc…). Only a VAT registered businesses can claim the VAT paid on all its inputs as a credit. If the input tax exceeds the output tax–which is generally the case for exporters where most of their outputs are zero-rated— the registered business can claim a refund. For exporters VAT credits are refundable on a monthly basis.

Therefore for exporters even those below the VAT threshold are encouraged to register for VAT to benefit from the input tax credit as explained above.

If those businesses choose not to register they will have to bear the VAT as a cost and they will not be able to claim it as an input tax credit.

For more information
You can contact Seychelles Revenue Commission on hotline number 4293745 or email us at vat@src.gov.sc for more information about VAT.
The Value Added Tax Act, 2010 and all VAT related information is available here.


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