Vat on accrual or payments received |09 July 2013

In other words when the tax is due, it is known as the “tax point”. It is thus critical to identify the time of supply.

Generally, the time of supply for a supply of goods takes place when the goods are physically removed, sent, taken away and/or made available for the customer to use. For a service the time of supply takes place when the service is performed and when all the work is completed.

In the Vat Act 2010, the event that determines when the Vat is due and when to account for it, is when the payment is made meaning when cash is received (cash basis).  However, it has been noted that some businesses account their sales when the invoice is issued (accrual basis). Therefore the Vat Act 2010 has introduced an option allowing businesses to report Vat on an accrual basis. Vat is due and has to be reported on the Vat return when invoiced.

Vat on an accrual basis (Vat on invoice)
To facilitate compliance and to align the Vat rules with business practices, the Seychelles Revenue Commission (SRC) may allow businesses that make a formal request to the Revenue Commissioner, to report Vat on invoices (accrual). These requests will be made early when businesses lodge their first Vat return.

Businesses that opt for the Vat on an accrual basis will have to stay in this regime for at least 12 months before moving to a cash basis.

It is important to note that invoices must be issued (available for the customer) within 28 days after the date the supplies take place. Otherwise the time of supply will be considered as:
• The date the supplies have taken place;

• The date the payment is received, whichever comes first.
It should be noted that a supply is anything done for a consideration. Therefore, the term “payment” refers to the payment of anything that constitutes a consideration.
Example:

On the Vat return for July 2013 ( which is due on  August 21, 2013), the business will report as output tax all sales on Vat-able transactions completed (goods sold and services completed) and invoiced between July 1 and 31 , 2013.

Vat on payment received (cash basis)
There are various modes of payment:
• Cash:  payment is treated as received on the date the cash is received from the customer;
• Bank transfer: payment is treated as received on the date a bank credits the money in SRC’s account;
• Cheques: payment is stamped as received on the date it is submitted to the SRC’s Office – either directly to a cashier or by mail;
• For a cheque that is dishonoured: payment is treated as received when the cheque is represented to the bank and it is cleared or is replaced by cash.

Payment can also include payment by book entry, for example, the off-setting of supplies or mutual debts. The tax point is when the entry is made. If the payment by book entry is in the form of an adjustment in the annual accounts, the tax point is the date the accounts are approved, provided no previous tax point has occurred.
Example:

On the Vat return for July 2013 (due by August 21, 2013), the business will report as output tax all payments received during the month of January in consideration of Vat-able transactions made between July 1 and 31.

For more information
You can contact Seychelles Revenue Commission on 4293745 or email us at vat@gov.src The Value Added Tax Act, 2010 and the Vat manual is available on the Seychelles Revenue Commission website (www.src.gov.sc).