Vat credit and refund mechanism


14-December-2012

Registered businesses will be able to get a Vat input tax credit and refund after Vat has been implemented as from January 1, 2013. The basic rule requires that input tax is claimed in the accounting period in which the tax relating to the relevant goods or services became taxable.

How does a Vat credit work for a business?
A business has to offset an input tax (expenditure) against output tax (sale) to determine the tax liability (or tax due). The output tax is the Vat collected from customers on each taxable supply (including zero-rated ones). The input tax allowed as credit is the tax paid on purchases and attributable to taxable supplies.

Where the output tax exceeds the input tax for the taxable period, the differences must be paid to the Seychelles Revenue Commission (SRC). If the input tax exceeds the output tax, a Vat credit occurs.
While credits are in most cases carried forward on the next Vat return, they can be refunded if a certain number of conditions are met.

What are the conditions for claiming a Vat refund?
The following conditions should be met by a business before claiming for a Vat refund:
• The Vat taxpayer’s activity mainly consists of exports: a minimum 85% of its total turnover is attributed to export sales;

• The Vat taxpayer’s activity mainly consists in zero-rated supply (other than exports), a minimum of 85% of its turnover is attributed to zero-rated supplies;

• The credit reported on a (monthly or quarterly) Vat return must be at least equal to SR10,000 or more;

• Credits lower than SR10 000 are not refundable in the same Vat period. The credit will be carried forward on the next Vat return. Refund will be due only when that credit has been carried forward for a period of three months;

• The Vat taxpayer is able to justify with sufficient evidence and proper records the reality of exports or zero-rated supplies upon SRC’s request.

When can a business get a refund?
The most likely source of credit claims for refunds will be in the case of businesses that are mostly engaged in zero-rated sales, which is typically the case for exporters. While a business exclusively engaged in export transactions does not collect Vat (output tax is 0), it is entitled to claim Vat credit on its inputs.

For exporters, any amount of input tax is potentially refundable. Exporters will receive a Vat refund in the same Vat period because exporters are mostly engaged in zero-rated sales.

How does a business claim for a Vat refund?
To claim a refund the taxpayer/business must fill in the corresponding box at the bottom of the Vat return and must indicate the amount to be refunded. This amount cannot be more than the credit calculated (line 11B of the Vat return).

Vat refunds will be processed within a reasonable period of 45 days from the date the claim for refund is made.

What are the special circumstances that the deadline can be extended?
However, the given deadline may be extended in special circumstances, where:

(i) a filed Vat return is incomplete;
(ii) the taxpayer has outstanding tax returns;
(iii) the taxpayer has failed to respond within a reasonable period for verification enquiries; or
(iv) SRC suspects, on reasonable grounds that the Vat return is inaccurate and/or the taxpayer is engaged in fraudulent activity, in which case the taxpayer will be subjected to an audit and/or investigation.

Excess Vat credits should be primarily offset against Vat and other tax arrears, except where an outstanding amount is subject to a genuine dispute. This should be supported either by the taxpayer accounting documents and the debt management system.
 
Vat refunds can be made:
• By cheque or;
• Bank to bank transfer

For more information
You can contact Seychelles Revenue Commission on 4293745 or e-mail 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

Send your comment :

Name *

Email *

Comment *