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How does VAT registration work?

VAT registration is the process of registering your business and the registration threshold of SR 5million will determine whether a business must be registered for VAT or not. A taxable business is a registered business or one that is liable to register for VAT and it is conducting taxable operations on all or some of its business activities. A VAT registered taxpayer is a person whose business has compulsorily registered for VAT as it falls within the prescribed VAT threshold or voluntarily registered as it falls below the VAT threshold.

Early in January 2012, SRC will send a letter to all existing businesses so that they can confirm whether their 2011 turnover is above or below the VAT threshold of SR 5million. With this declaration, businesses that fall within the threshold will have to be compulsorily register for VAT. Taxpayers, whose annual turnover is below the VAT threshold, can opt for voluntary registration.

The threshold applies to the business turnover rather than profit. When determining the threshold, the annual turnover is exclusive of taxes. The sales of capital assets and sales of a whole or part of a person’s enterprise are not considered when determined the threshold.

How will VAT registration apply to new Business or transfer of business?
New business - When applying for registration a person starting a business may be unable to determine its annual turnover with sufficient precision. In this case, it will need to be estimate its turnover based on its best judgment. Based on the estimated turnover, the business will either be compulsorily or voluntarily registered.

Transfer of business for a sole trader and partnership : A person taking over a VAT-registered business from someone else has to register the business including registration of VAT if the turnover of the business was more than SR 5 Million for the previous 12 months, or if the sum of the two businesses was more than SR 5 million for the previous 12 months.

Consequently, in both cases where the estimated turnover falls below the VAT threshold a business can opt for voluntary registration.

What are the measures to prevent frequent registration or de-registration?
A registered business has 21 days to inform SRC of any changes in status and must notify the Revenue Commissioner, in writing of such changes including any change in the name (including business name), address, place of business, or nature of business ( business activity).

It may happen that a business when starting and applying for registration, over-estimates or under-estimates its turnover. This could result in unnecessary registration. If this is the case, this situation will need to be communicated to SRC. However to prevent frequent registration /de-registration by the same business the following rules must be applied:
  • A non-registered business whose turnover crosses the threshold (even though a financial year or substituted financial year has not been completed) will be registered for VAT upon his statement or declaration.
  • A registered business whose turnover has dropped below the threshold will have to maintain registration for at least 12 months following its declaration or statement.
  • A voluntarily registered business will not be allowed to de-register before the end of a 12 months period following its registration.
Furthermore, it is also good to note that any registered business will need to register for at least a minimum period of 12 months, unless determined otherwise by the Revenue Commissioner.

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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