Identify input Vat claimable as a credit as opposed to non-deductibility |10 June 2013

When a Vat-registered business purchases goods or services from another Vat-registered business, the Vat paid on these supplies received are called input Vat. It is Vat coming in to your business. Input Vat is the Vat the registered business can recoup.

What qualifies as input Vat?
To qualify as input Vat credit the following requirements must be met:
• The expenditure must be for the purpose of the business. Expenditures incurred for private or personal use will not qualify as an input Vat;
• Where purchases are partly for business and partly for private use, only the part used for business can be claimed;
• The expenditure must be directly used for the making of taxable supplies;
• The payment of the expense including the tax must be made.

What evidence is needed for claiming input Vat on local purchases?
Vat-registered businesses need valid evidence for claiming input Vat. Businesses should have received a taxable supply with the following document:
• A Vat invoice (and a debit note) issued by a Vat-registered person.

When is input Vat allowed as credit for an import?
Input Vat credits are allowed for a taxable import at the time of importation provided the tax has been paid and the importer holds all required documents issued under the customs legislation.

When is a business not allowed to claim input Vat credits?
There are a number of specific categories of expenditure upon which the Vat incurred by a Vat-registered business meets the definitions and requirements of input Vat but which may not be deducted due to the provisions of the Value Added Tax Act 2010. Vat does not automatically become input Vat credit simply because it has been incurred by a Vat- registered business.

Input Vat credit will not be allowed for the following taxable supplies, unless they are used for the making of taxable supplies related to the activity of the business:
• expenditure related to residential accommodation;
• pursuit of personal interests, e.g. sporting and leisure activities;
• expenditure for the personal benefit of company directors, proprietors etc;
• expenditure in connection with non-business activities;                                                                                                                                                                                                                                                                                                                                                                                                                                                          
• passenger vehicle, spare part or repair and maintenance for such vehicle unless the person’s business activities involve the dealing in or hiring of passenger vehicles;                                                                                                                                                                                                                                                                  
• entertainment including food, beverage, amusement or accommodation of any kind that is provided for employers, family, or associates for private and public purposes;
• free membership or entrance in any club.     
The above are not considered as business activities and therefore no deduction on such activities is allowed as input Vat.

For more information
You can contact the Seychelles Revenue Commission on hotline number 4293745 or e-mail us at vat@src.gov.sc. The Value Added Tax Act, 2010 and the Vat manual are available on the Seychelles Revenue Commission website: www.src.gov.sc