Taxable supplies and exempt supplies


02-September-2011

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.

Taxable supply
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.

How does VAT apply on a taxable supply?
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 the Seychelles Revenue Commission (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 R115, the customer actually pays R15 of Vat (R100 x 15% =15). The price without Vat (Vat exclusive) is R100.
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 the SRC.
For example when the sale price is R100, the customer will pay no Vat or (R100 x 0% =0).

Exempt supply
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.  

How does Vat apply on exempt supplies?
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. Consequently, 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.
For more information
You can contact Seychelles Revenue Commission on 4293737 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it. . The Value Added Tax Act, 2010 is available on the Seychelles Revenue Commission website (www.src.gov.sc).

Submitted by the Seychelles Revenue Commission

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