|
|
|
|
VAT on Accrual or Payments Received
|
A VAT-registered business is required to examine each transaction carried out to determine when to
treat a supply as having been made which is called the “time of supply”, and when to report the
supply and account for VAT in the VAT return. In other words when the tax is due, it is known as
the“tax point”. It is thus critical to identify the time of supply.
Generally, the time of supply for a supply of goods takes place when the goods are physically removed,
sent, taken away and/or made available for the customer to use. For a service the time of supply
takes place when the service is performed and when all the work is completed.
In the VAT Act 2010, the event that determines when the VAT is due and when to account for it, is
when the payment is made meaning when cash is received (cash basis). However, it has been noted
that some businesses account their sales when the invoice is issued (accrual basis). Therefore the
VAT Act 2010 has introduced an option allowing businesses to report VAT on an accrual basis. VAT is
due and has to be reported on the VAT return when invoiced.
|
VAT on an accrual basis (VAT on invoice)
|
To facilitate compliance and to align the VAT rules with business practices, SRC may allow businesses
that make a formal request to the Revenue Commissioner, to report VAT on invoices (Accrual). These
requests will be made early when Businesses lodge their first VAT Return.
Businesses that opt for the VAT on an accrual basis will have to stay in this regime for at least
12 months before moving to a cash basis.
It is important to note that invoices must be issued (available for the customer) within 28 days
after the date the supplies take place. Otherwise the time of supply will be considered as:
-
The date the supplies have taken place
-
The date the payment is received, whichever comes first
It should be noted that a supply is anything done for a consideration. Therefore, the term “payment”
refers to the payment of anything that constitutes a consideration.
Example:
On the VAT return for July 2013 (which is due on August 21st, 2013), the business will report as
output tax all sales on VATable transactions completed (goods sold and services completed) and
invoiced between the 1st and the 31st of July, 2013.
|
VAT on Payment Received (cash basis)
|
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 credit’s 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 a cashier or by mail;
-
For a cheque that is dishonoured: payment is treated as received when the cheque is 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.
Example:
On the VAT return for July 2013 ( due by August 21, 2013), the business will report as output
tax all payments received during the month of January in consideration of VATable transactions
made between the 1st and the 31st of July.
|
For more information
|
|
You can contact Seychelles Revenue Commission on 4293745 or email us at vat@src.gov.sc.
The Value Added Tax Act, 2010 and the VAT Manual are available here.
|
Website Published Date: 9th July 2013
|
|
|