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Taxable Supplies and Exempt Supplies
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VAT is generally applied on the supply of goods and services locally consumed. There are two kinds
of supplies in a VAT system, the taxable and the exempt supplies.
Below is an example of the concept of supply in a VAT system.
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Taxable Supply
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For VAT purposes, a taxable supply can be defined as a sale of taxable goods and/or a delivery
of taxable services. An importation of taxable goods is also a taxable supply. Taxable means
that VAT is applied on these transactions.
There are two VAT rates: the standard rate at 15% applied on most of goods and services imported and sold
in Seychelles, and the zero rate at 0% mainly applied on exports and a specific list of items as per Schedule
2 of the Value Added Tax Act, 2010.
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How does VAT apply on a taxable supply?
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VAT on standard rated supplies - When making taxable supplies, VAT-registered businesses collect VAT
from their customers - on their sales - and have to remit it to SRC. In practice, VAT is included in the
sale price payable by the customer and shown on the VAT invoice issued by the VAT business.
For example when the sale price is SR115, the customer actually pays SR15 of VAT (SR100 x 15% = 15). The price
without VAT (VAT exclusive) is SR100.
VAT on zero-rated supplies - A VAT registered business making zero-rated supplies will charge VAT at 0% on
the selling price. Technically, there is no VAT charged on the invoice, no VAT will be collected from the
customer and remitted to Seychelles Revenue Commission.
For example when the sale price is SR100, the customer will pay no VAT or (SR100 x 0% = 0).
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Exempt Supply
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An exempt supply is a sale of good or delivery of service which is not taxable, no VAT is
charged on such supply. Exempt supplies are enumerated schedule I of the VAT Act 2010; they include
educational, health and financial services as well as goods of first necessity such as rice, infant
formulae, lentils, and so on.
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How does VAT apply on exempt supplies?
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At first glance on a VAT invoice one can see a similarity between zero-rated and exempt supplies, in that no
VAT is charged on. However there is a substantial difference. Zero-rated supplies are taxable ones and thus in
the VAT scope. Exempt supplies are out of the scope of the VAT. Consequences, while a VAT registered business is
entitled to claim a credit on input VAT incurred in the making of zero-rated supplies, exempt supplies do not
open any deduction right. Businesses that exclusively make exempt supplies should not be registered.
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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. The
Value Added Tax Act, 2010 is available here.
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