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20th September 2012
VAT and the Registered Business

Responsibilities of VAT Registered Business:
* Must display the VAT certificate prominently.
* Must issue VAT invoices to other VAT registered businesses and VAT sales receipts to other customers;
* Must file VAT returns monthly and account for the tax collected;
* Must keep proper business records;
* Also has income tax obligations and must file returns every year;

The diagram above explains the accounting cycle of registered taxpayers. The Importer, a VAT Registered Taxpayer paid $60 for the goods purchased overseas. At Customs he pays $9 VAT ($60.00 x 15%). The importer now prices his goods for sale to a Wholesaler who is also a VAT Registered Taxpayer, he takes the cost of the good ($60.00) without the VAT paid and add his markup of $40 then he adds on the VAT, making his price now $115 vat inclusive. He sells to the Wholesaler and collects the output VAT of $15. He retains his original input VAT of $9 which was paid at Customs and remits $6 ($15 – $9) to the Inland Revenue Department with his returns at the end of the tax period.
 
 

The Wholesaler’s cost is $100 (exclusive of the input VAT of $15) he adds his markup of $20 and sells the good for$138 inclusive of $18 VAT (120 x 15%) The Wholesaler sells to the unregistered retailer and collects the output VAT of $18. He retains his input VAT of $15 and remits $3 (18 – 15) VAT to the IRD with his returns.

The retailer’s cost is $120 (again exclusive of the $18 vat he paid the wholesaler). He adds his markup of $80 and sells the goods for $230 inclusive of $30 output vat ($200 x 15%). He retains his input VAT of $18 and remits the $12 excess to IRD with his returns.

For more information the VAT Implementation Project Office can be contacted at telephone number 468-1420 or at vatcoordinator@vat.gov.lc or vatinfo@vat.gov.lc.
VAT Simplifying the collection of Tax.

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