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2012 VALUE ADDED TAX (VAT). 03 October 2012. VAT Act no 10 of 2000. Topics: Framework: How VAT works Administration of VAT Taxable activity and supplies Performing a supply or not Different supplies of goods and services Input tax and Importation Rules for claiming input tax

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vat act no 10 of 2000
VAT Act no 10 of 2000
  • Topics:
  • Framework:
  • How VAT works
  • Administration of VAT
  • Taxable activity and supplies
  • Performing a supply or not
  • Different supplies of goods and services
  • Input tax and Importation
  • Rules for claiming input tax
  • Apportionment ratio
  • Import of Goods and Services
vat diagram
VAT DIAGRAM

TAXABLE SUPPLY

EXEMPT SUPPLY

ZERO RATED

STANDARD RATE

NO VAT APPLICABLE

0%

15%

LISTED IN ACT

ALL OTHER SUPPLIES (NOT ZERO OR EXEMPT)

LISTED IN ACT

amendments year 2010
AMENDMENTSyear 2010
  • Indirect Tax:
    • Value-Added Tax - Zero rating of essential basic items:
      • Milk and Sugar
      • Medical Services
      • Cooking oil
      • Beans
      • Bread
slide6

Value Added Tax

  • Topics:

Framework:

  • How VAT works
  • Administration of VAT
how vat works

VAT in Namibia

How VAT works

VAT is payable when:

  • -Supplies of good and services are made,
  • -By a registered person,
  • -In the course of a taxable activity,
  • Or
  • -Importation of goods and services are made.
  • Above events may result in a liability for VAT or may be exempt from VAT.
how vat works continued

VAT in Namibia

How VAT works (continued)

Output tax = Tax collected by registered person on the sale of goods and/or services

Input tax = Tax paid by registered person on the local purchase or importation of goods and/or services

VAT payable/(refundable) = Output tax – Input tax

Total burden of VAT is borne by the final consumer

how vat works continued1

VAT in Namibia

How VAT works (continued)

Example:

Nike Ltd manufactures and sells sneakers.

Street House buys and sells sneakers to the public

Transaction:

Nike sells sneakers to Street Housefor N$10 000, VAT excl

Streethouse then sells the sneakers to Unam Students for N$30 000, VAT excl

Let’s look at the Economic activity and VAT calculations

how vat works continued2

VAT in Namibia

How VAT works (continued)

Example(continued):

Transaction:

NIKE sells sneakers

to Streethouse for

N$10 000, VAT excl.

Street House then sells

sneakers to Unam

students for N$30000,

VAT excl

per tax period
Per tax period

25

Submit

VAT return

Calc.VAT

payable/

(refundable)

Calc. input tax on

expenses paid

Calculate the output tax

Value and time of supply

Nature of supply

administration

VAT in Namibia

Administration

In Namibia, Commissioner of Inland Revenue administers

VAT.

Tax period = 2 months

Ending either even (cat. A) or odd (cat. B) months

Farmers may elect 2,4,6 or 12 month period

VAT returns due 25th of month following tax period

Import VAT returns due on goods: due 20th of every

month

Import VAT returns on services: due within 30 days of

importation of service

records
Records
  • The following records must be maintained in Namibia in the English language:
    • Original - tax invoices,

- tax credit notes received

- tax debit notes received

    • Copies - tax invoices

- tax credit notes issued

- tax debit notes issued

    • Customs documentation for imports and exports (e.g.SAD500)
    • Other records as the Commissioner may prescribe
    • Accounting records for at least 5 years after the related tax period
refund of vat
Refund of VAT
  • Where:
  • The total amount of input tax > output tax; or
  • An excess amount of VAT was paid, a refund may be claimed
  • Refund payable not later than end of 2nd month following the date the refund was finalised
  • Interest at 11% p.a. is paid from date when refund is due (not from date when refund arose)
vat payable refundable
VAT PAYABLE /REFUNDABLE
  • A vendor carries on a trade in Namibia and supplied goods and services for N$ 115 000(including VAT).
  • Required: Calculate VAT payable by or refundable to the vendor if he paid the following input tax on goods and service:
  • 7 000 
  • 16 000    

CALCULATION OF VAT

a) Output Tax 15,000

  • Input Tax -7,000
  • VAT liability 8,000 Payable
  • b) Output Tax 15,000
  • input Tax -16,000
  • VAT liability -1,000 Refundable
layman s cuca shop
LAYMAN’S CUCA SHOP
  • The Corner Shop is a registered vendor with effect from 01 July 2012
  • The shop recorded the following transactions for 01 Jul 2012
  • The industry mark up is 10%
  • Cash in the till 1,600
  • Cheques and cash banked 1,000
  • Cash taken for purchases 500
  • Cash taken for own use 200
  • Cash taken to pay wages 1,000
  • Daily float 500
  • Zero rated stock purchases 500
  • Standard rated purchases 1,140
  • Required: Calculate the total of the standard rated sales for 01 July 2012
let s see layman
LET’S SEE LAYMAN
  • Cash in the till 1,600
  • Add
  • Cheques and cash banked 1,000
  • Cash taken for purchases 500
  • Cash taken for own use 200
  • Cash taken to pay wages 1,000
  • Less Daily float -500
  • Total DGT 3,800
  • Zero rated purchases 500
  • Industry mark up (500*10%) 50
  • Total zero rated sales 550
your standard sales
YOUR STANDARD SALES
  • Daily Gross takings 3,800
  • Less: Zero rated sales -550
  • Total Standard rate sales 3,250
cost of non compliance penalties and interest
Cost of Non-CompliancePenalties and Interest
  • Penalties for not submitting a return:
  • N$ 100 per day
  • Penalties for not paying any VAT due:
  • 10% of the amount of VAT due per month, limited to the VAT amount
  • Interest:
  • 20% per annum on amounts due
cost of non compliance
Cost Of Non-Compliance
  • Example:
  • Output VAT not declared on a supply of N$1 550 000, after 18 months
  • VAT due:
  • N$1 550 000 x 15/115 = N$ 202 173.91
  • Penalties:
  • N$202 174 x10% = N$ 202 174 (limited to 100%)
  • Interest:
  • (N$202 174 x 20%)+((202 174 x 20%) x ½) = N$60 652.20
  • Total liability = N$ 465 000
slide21

Value Added Tax

  • Topics:

Taxable activity and supplies

  • Performing a supply or not
  • Different supplies of goods and services
supply of goods and services
Supply of goods and services

Introduction

On what is VAT levied?

VAT is levied on:

Every taxable supply by a registered personof goods or

services for a consideration in the course or furtherance

of any taxable activity and, unless an exempt import, on

importation of goods and on the importation of services, to

the extent not for the rendering of taxable supplies.

supply of goods and services1
Supply of goods and services

What is not a supply?

  • Services rendered by employee to employer by reason of employment
  • Provision of goods on consignment, or to representative
  • Money
  • Taxes or levies under any act of parliament, e.g. Transfer duty
  • Registration/licenses by registering authority
  • Payment of a subsidy, grant or bursary
  • Dividends
supply of goods and services2
Supply of goods and services

Consideration

Example

A retailer operates a scheme whereby, after a customer has

purchased

10 calculators, he or she will be entitled to another calculator

free of charge.

What is the consideration for VAT purposes?

The consideration is on the 10 calculators.

The 1 extra calculator was given for free.

Therefore no consideration.

supply of goods and services3
Supply of goods and services

Taxable activity

Any activity carried on continuously or regularly

In Namibia or partly in Namibia

Whether or not for profit

Involving the supply of goods or services

To any other person &

Any activity of a local authority that involves the supply of

goods or services for consideration

supply of goods and services4
Supply of goods and services

Not a taxable activity:

Private recreational pursuit or hobby

Making exempt supplies

Activity carried on by branch outside Namibia

Registration of or issuing of license by registering authority

supply of goods and services5
Supply of goods and services

Registered person

The supply has to be made by a registered person before it

attracts VAT.

The word “person” includes;

  • Regional or local authority;
  • Natural person;
  • Company;
  • Partnership; and
  • Board or trust.
supply of goods and services6
Supply of goods and services

Registered person

VAT registration – Who must register?

Any person (includes natural and juristic persons)

Who carries on any taxable activity

And

Taxable supplies for any 12 month period exceed or are

likely to exceed –

N$ 200 000

Note: taxable supplies

Exclude once-off transactions

Provision also made for voluntary registration

what is the difference between exempt and zero rated
What Is the Difference Between Exempt and Zero-rated?
  • Zero-rated supplies:
    • Deemed to be subject to VAT – though at 0%
    • Taxable supply
    • You may claim back input VAT paid in the course of making the taxable supply
  • Exempt supplies:
    • Not a taxable supply / activity (see imposition rule)
    • May not claim back input VAT paid in the course of making an exempt supply
time of supply when vat must be accounted for
Time of Supply: When VAT Must Be Accounted for
  • General rule

Earlier of:

    • Issue of invoice; or
    • Receipt of any payment
  • Imports
    • Time of physical entry into Namibia; or
    • Goods transferred into a bonded warehouse: when entered for home consumption
value of supply amount on which vat must be calculated
Value of Supply: Amount on Which VAT Must Be Calculated
  • Basic rule:
      • Value of supply = consideration received
      • Normally, consideration would be market value

Imports

      • greater of FOB value, plus 10% uplift, or
      • open market value
rules for claiming input tax tax invoices
Rules for Claiming Input Tax – Tax invoices
  • May only claim back input VAT on local purchases if in possession of a valid tax invoice
  • A registered person making a taxable supply to another person is required to provide a tax invoice on request
    • Except: If the supply is in cash and less than N$100
  • Only one tax invoice shall be issued per taxable supply, same as for tax debit notes and tax credit notes
  • Where the tax document is lost, a copy may be provided, clearly marked “copy
denial of input tax deduction
Denial of input tax deduction
  • Entertainment (food, beverages, tobacco, accommodation amusement, recreation or hospitality of any kind),

except

Sport, social & recreational club subscriptions

Passenger vehicles, (no matter if for business use)

except

tour operators,

entertainment business,

part of transport service

dealers, tour operators,

rental companies,

short-term insurers,

charitable organisations

calculation of import vat on goods
Calculation Of Import VAT on goods

Value of import of goods =

  • The greater of
  • FOB value + 10%
  • Open market value
  • Value of import of services
  • Consideration of import
  • Unless connected persons => market value
payment of import vat goods
Payment of Import VAT: Goods
  • Import VAT may be paid by either the importer or an agent
  • You can import and pay import VAT even though you do not have a VAT import account
  • Import VAT is then paid at the border
  • Entities should not allow their import VAT number to be used by someone else
  • Imports can now be checked against Asycuda
claiming of import vat goods
Claiming of Import VAT: Goods
  • Import VAT may only be claimed back if used for taxable supply
  • Importer must be in possession of a supplier invoice and a stamped original bill of entry (NA500 / SAD500) or other documentation as approved
  • Must ensure that freight agent provides you with the original documentation
  • No import VAT may be claimed back if prohibited by Act, e.g. on passenger vehicles
example payment of imports
Example: Payment of Imports

A company imports computer equipment from RSA. The invoice price is N$ 2 000. The open market value is N$ 2 005.

Calculate the import VAT payable.

FOB+upliftment = N$ 2 000+10% = N$ 2 200

Market value = N$ 2 005

Greater of the 2 = N$ 2 200

VAT at 15% = N$ 330

claiming of input tax apportionment
Claiming of Input Tax: Apportionment
  • If registered person renders taxable and exempt supply
  • Inputs not directly connected with a taxable or exempt supply must be apportioned
  • Calculated on last year’s financial statements
  • Calculated annually
claiming of input tax apportionment1
Claiming of Input Tax: Apportionment
  • Apportionment formula:

Taxable supplies 0% + 15%

------------------------- = ---------------------------

Total supplies exempt + 0% + 15%

example apportionment
Example: Apportionment

Supplies rendered by registered person:

Public transport services 100 000

Consulting fees 20 000

Rental of commercial property 10 000

Direct exports 50 000

Calculate the apportionment formula for input tax

example apportionment cont d
Example: Apportionment (Cont’d)

Supplies rendered by registered person:

Public transport services 100 000

Consulting fees 20 000

Rental of commercial property 10 000

Direct exports 50 000

Step 1: Determine what is taxable and what is exempt

Public transport services Exempt

Consulting 15%

Rental of commercial property 15%

Direct exports 0%

example apportionment cont d1
Example: Apportionment (Cont’d)

Supplies rendered by registered person:

Public transport services 100 000

Consulting fees 20 000

Rental of commercial property 10 000

Direct exports 50 000

Step 2: Calculate apportionment formula

(0% + 15%)/ (Exempt+0%+15%)

= (50 000+10 000+20 000) / (100 000+20 000+10 000+ 50 000)

= 44.44%

class quizz true or false
CLASS QUIZZTRUE OR FALSE
  • Definition : Output tax
  • Is the tax payable on purchases by a registered person
  • Is the tax charged on supplies by a registered person.
  • Open market value
  • Is the money which a similar supply would generally fetch
  • Can be determined by any method approved by the commissioner
class quizz
CLASS QUIZZ
  • Taxable Activity
  •  T/A means any activity carried on continuously in Namibia that involves the supply of goods or services, but excludes hobbies and exempt supplies.
  • The levying of taxes under any act of parliament
  • Imposition of VAT
  • It is levied for the benefit of the university of Namibia
  • It is levied for the benefit of the office of the prime minister
class quizz1
CLASS QUIZZ
  • Time of supply
  • Is the earlier of invoice or payment
  • Is only when an invoice is issued by a registered vendor
  • Value of supply
  • Shall always be the selling price minus discount minus any pocket money.
  • Shall always be the selling price plus any discount plus any pocket money.
  • Zero rating
  • A supply of telecommunication services to a residential account
  • A supply of livestock other than game
class quizz2
CLASS QUIZZ
  • Exempt supply
  • Is a taxable supply in terms of section 10 of the ACT.
  • A supply of medical services by a medical doctor is an exempt supply.
  • Registration
  • Any person who carries on a taxable activity with an annual turnover less than N$ 200 000 is liable to be registered
  • Every regional or local authority that carries on a taxable activity becomes liable to be registered.
class quizz3
CLASS QUIZZ
  • Calculation of tax payable
  • Output tax less input tax
  • Input tax less output tax
  • Rules relating to input tax
  • No input tax may be claimed on a passenger vehicle by a supermarket
  • No input tax may be claimed on entertainment by a tour operator.
class quizz4
CLASS QUIZZ
  • Tax period
  • Always a period of 2 months
  • Category A, Category B, Category C and Category D
  • Returns
  • Due on or before the 25th day of the month following the end of the period
  • Due on or before the 20th day of the month following the end of the period
slide51

Supply

  • Does not include any sale of goods
  • Includes the right to use any goods under any rental agreement
  • Tax invoices
  • A registered vendor shall issue only one tax invoice for each taxable supply.
  • A request for a tax invoice shall be made within 60 days after the date of supply
slide52

Cancellation of registration

  • You shall notify the commissioner within 21 days of stopping trading
  • Any notification to the commissioner can be verbal