A look at new tax regulations -  the Value Added Tax Regulations 2016

Last week, we discussed the Income Tax Regulations, 2016 (L.I. 2244), which were made to bring clarity to the Income Tax Act, 2016 (Act 896). The second part in the series discusses the Value Added Tax Regulations, 2016 (L.I. 2243).

In brief

The Value Added Tax Regulations, 2016 (L.I. 2243), which came into force on August 3, 2016, revokes the Value Added Tax Regulations, 1998 (L.I. 1646). It clarifies certain rules and provides for some matters necessary for the effective implementation of the Value Added Tax Act, 2013 (Act 870). 

This publication will highlight some of the key changes provided for in L.I. 2243 (“the Regulations”).

In detail

Registration of taxable persons Compulsory registration.

A person (including companies) who qualifies to register may be required by the Commissioner -General (“C-G”) in writing to register within 30 days after notice. The C-G may issue a warrant to lock up or seal off the business premises if the notice is not complied with. 

Application for copies of Registration Certificates

A VAT registered person who operates in different branches is required to apply and pay for copies of VAT certificates. These certificates should be displayed at every branch of the person. 

In addition, a VAT registered person may apply for a copy of a VAT certificate (at a fee) where the certificate is lost, mutilated or destroyed. 

Registration of ministries, departments and agencies

Government entities are required to register for VAT when they carry on taxable activities, including auction, hiring of equipment, space rental or any activity conducted for profit.

Registration by non-resident person providing telecommunication services or e-commerce

The C-G may, in writing, permit a non-resident person providing telecommunication services or e-commerce to register for VAT, file returns or account for VAT by electronic means.

An agent, who acts on behalf of a non-resident person required to register for VAT, is mandated to register (if not already registered) in place of the non-resident where the non-resident fails to register for VAT.

Taxable Value

Discounts & rebates

In order for a discount or rebate to be considered in determining consideration, the discount or rebate must be non-discriminatory and available to every recipient of the supply.

Supply of Goods and Services

Indicative list of financial services

The Regulations provide an indicative list of financial services for which fees, commissions and similar charges imposed are subject to VAT.

Deduction of input tax and refunds

Non-deductible input tax

The Regulations provide clarity on entertainment expenses, which are non-deductible such as year-end lunches and parties, free meals provided at work canteens, business lunches, and complementary staff refreshments.

The Regulations provide that a sales receipt does not qualify for input tax deduction.

Relief supply

A person entitled to relief is required to pay the tax and apply for refund unless otherwise directed by the finance minister.

Denial of input tax

A taxable person is not required to charge VAT on the supply of goods and services for certain categories of goods and services on which input VAT was denied that person at the time of purchase.