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Input Tax Credit: Recovering Your VAT

Under the VAT system, every taxable person (a business registered for VAT) can recover the VAT paid on his/ her purchases (including imports) (input tax) by claiming an input tax credit, provided that these expenses are made for the purpose of the business and are deductible (from a VAT point of view).

Can every business claim an input tax credit?
Only taxable persons can claim an input tax credit. A person is taxable if its business is registered for VAT which means that the business’s annual turnover either exceeds or is expected to exceed SR 5 million (compulsory VAT registration) or the business has voluntarily registered for VAT (for those whose annual turnover is below the SR5 million threshold).

How can a taxable person recover VAT paid as input tax?
A taxable person can recover VAT incurred on his/her purchases when the following conditions are met:
  • These expenses are deductible and
  • These expenses are used in the process of making taxable supplies.
What deductible means for VAT purpose?
Deductible means that VAT incurred on these purchases can be claimed back as input tax credit. Input credit will not be allowed for the following taxable supplies unless they are used for the making of taxable supplies specific to the activity of the business:
  • passenger vehicle, spare parts or repair and maintenance services
  • petroleum products
  • entertainment
  • accommodation
  • any supplies used to provide membership or entrance for any person in a sporting, social or recreational club, association, or society...
Expenses are made in the process of making taxable supplies
A taxable supply is a supply of taxable goods or services (other than exempt), made for payment by a taxable person in the course of his/her enterprise in Seychelles. Taxable supplies are charged at 15% (standard rate) or 0% (zero-rate). Most goods sold or the services made in Seychelles are taxable and charged at the standard rate, exports are typically zero-rated. Adversely, an input tax credit cannot be given if the taxable purchase is used to make an exempt supply. Exempt supplies are strictly enumerated by the 1st schedule of the VAT ACT 2010.

VAT deduction mechanism
The deduction is made on the VAT return. VAT paid on purchases (input tax) is offset against VAT collected from customers (output tax). Only the difference is to be remitted to SRC.

Example: A VAT registered manufacturer purchases cement for SR 10 000 (VAT inclusive), VAT paid (input tax) is SR 1 304.35 so that the input tax credit received is SR 1 304.35.

Then, the manufacturer sells the bricks to a building contractor for SR 100 000 (VAT inclusive), collecting SR 13 043.45 of VAT (output) from the contractor. The manufacturer’s VAT return will reflect the following:
  1. Output tax: SR 13 043.45
  2. Input tax: SR 1 304.35
  3. Tax due SR 11 741.1
For more information
You can contact Seychelles Revenue Commission on 4293737 or email us at The Value Added Tax Act, 2010 is available here.

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