VAT on the Tourism Industry


19-March-2012

As of July 1 2012, GST will no longer be applicable on these services because the GST Act 2001 and its subsequent regulations will be repealed and be replaced by the Value Added Tax (VAT). VAT at 15% will be levied on the sale of all goods and services, including services related to tourism.

 It is important to note however that not all tourism service providers will be charging VAT on the sale of their services as explained below.

Which tourism service providers should register for VAT?

A tourism service provider will have to register for VAT in order to charge VAT on their services. A tourism service provider can be registered for VAT either on a compulsory or voluntary basis. If it makes an annual sales turnover which is equal to or exceeding the VAT threshold of SR 5 million the VAT Act makes it a requirement to be VAT registered hence it will be registered on a compulsory basis.

If it’s annual sales turnover is less than SR 5 million the service provider can choose to register on a voluntary basis. In other words it is not mandatory for the business to be VAT registered.

Tourism service providers include hotels, guesthouses or self-catering establishments, cafés or restaurants, airline transport services, fixed rotary wing air transport services, domestic ferry services, boat or yacht charter services (including a liveaboard), car hire operators; underwater dive operators or dive centre; water sports operators; travel agents (own services); tour operators (own services), tour guides and or tourist guides; equestrian operators.
What will change for tourism service providers when VAT will replace GST?

1. Charging tax on sales:

GST is a turnover tax. All payments received by tourism service providers are liable to GST. The full amount is then remitted to Seychelles Revenue Commission (SRC) on a monthly basis (by the 21st of each month) by using the BAS form.
 
In contrast, VAT will be charged only by VAT registered tourism service providers.

Tourism service providers that do not register for VAT will not be able to charge VAT on their sales.

 Since VAT is a tax on the value added to a good or a service, the VAT registered tourism service provider will remit only the difference between output tax (VAT which has been charged on sales to customers) and input tax (VAT which has been paid to suppliers or to Customs) to SRC.

Whilst the payment will be remitted to SRC on a monthly basis by the 21st of each month, just as with GST, the registered tourism service providers will have to also submit a VAT return along with the BAS form.

2. Concessions:
 
Under  GST, all businesses with Tourism Incentives Act (TIA) certificates receive exemptions whenever they import goods to be used in their business and therefore they do not pay GST at the point of entry. However, the tourism service providers pay GST to their suppliers on domestic purchases and expenses such as on telephone bills, insurance, soft drinks, bottled water etc.

In contrast, under the VAT Act 2010, whilst VAT registered tourism service providers will pay VAT on their imports as well as on their local purchases and expenses; they will receive an input tax credit for all the VAT paid.

 The input tax credit mechanism under VAT will allow the tourism service providers to claim credit and potentially a refund on all the VAT paid to suppliers and Customs.

 This includes VAT on telephone bills, insurance, and local purchases such as soft drinks, bottled water etc.
VAT registered businesses will also be able to apply for a deferred payment when importing high-valued capital goods with a CIF value equal to or exceeding SR 100 000.

What are the differences between a VAT registered and a non-VAT registered tourism service provider?

Tourism Service Provider

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 Setychelles Revenue Commission

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