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Taxable and Non-Taxable persons in the VAT system
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There are traditionally two types of actors in a VAT chain: the taxable persons and ”others”.
The taxable persons generally act as VAT collectors on the behalf of the tax authority. They charge VAT on
their sales (output tax) and get a credit for the tax incurred in their businesses expenses (input tax). It is
only the net between the output tax and the input tax that the taxable persons have to remit to the tax authority.
In other words this net corresponds to their value added.
The“others”, businesses or households will be treated as final consumers. They ultimately bear the tax burden.
Below is a typical example of a VAT chain:
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What is a taxable person?
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A taxable person under the VAT Act 2010 means a person who is registered for VAT.
Mandatory registration — A person is registered for VAT if he/she conducts taxable operations as part of
his/her business and if his/her annual sales turnover reaches, or is expected to reach, the threshold
of SR5 Millions.
Voluntary registration — In some cases a person whose sales turnover is below the VAT threshold may decide
to register on a voluntary basis if he/she thinks that he/she will draw some benefits from being registered;
for example, the right to claim a VAT credit on business expenses is one of them.
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What is the role of a taxable person?
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As mentioned above, VAT registered persons collect the VAT from their customers when supplying taxable
goods or services, and are responsible to remit it to the tax authority — the Seychelles Revenue
Commission.
To do so, they have to report for each taxable period — let us say every month — the amount of VAT collected (output tax),
and they will off-set it against the VAT paid on their business expenses (input tax), so that only the excess of output
tax will be remitted to the SRC. If the input tax exceeds the output tax they will carry this credit forward on their
next return or claim a VAT refund.
For example, if SR100 is incurred on input tax and SR200 is collected on output tax, then the SR100 input tax
is offset against the SR200 output tax. The difference between the two (SR200 – 100 = SR100) is to be remitted to
the Seychelles Revenue Commission.
To summarize
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Registered taxpayer
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Not registered taxpayer
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Receive a VAT certificate from the SRC and will have to display it
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Will not receive any VAT certificate
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Charge VAT on its sales (if supplies are taxable goods and services)
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Does not charge VAT on its sales(even if supplies are of taxable goods and services)
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Will maintain proper VAT records including VAT invoices
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Will have to comply with accounting rules but will not issue VAT invoices
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Can deduct input tax from its output tax (unless not deductible)
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Cannot deduct any input tax
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Gets a VAT credit and refund
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Cannot get any credit or refund
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Is a person, whose business is making zero-rated supplies, taxable or non-taxable?
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It can happen that a VAT registered taxpayer’s main business consists of making zero-rated supplies,
and a typical example is an exporter. Exports are zero-rated, but not exempted. While they will
never collect VAT, they will get a credit for the input tax attributable to their exports.
A person whose main business is to make non-taxable supplies should not be registered, because his/her activity
is out of the scope of the VAT.
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For more information
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You can contact Seychelles Revenue Commission on 4293737 or email us at advisory.center@src.gov.sc.
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