Gambia Revenue Authority (GRA) VAT GUIDE 2014 Page 1 of 67
TABLE OF CONTENTS CHAPTERS CONTENTS PAGE CHAPTER 1 INTRODUCTION TO VAT 1.1.0 Introduction 6 1.2.0 What is VAT 6 1.3.0 Why VAT 6 1.4.0 Advantages of VAT 6 1.5.0 What is VAT Charged on 7 1.6.0 Who pays VAT 7 1.7.0 VAT Rates 7 1.8.0 Terminologies used in this guide 8 CHAPTER 2 HOW VAT WORKS 2.1.0 Introduction 9 2.2.0 How is VAT collected 9 2.3.0 Incidence of VAT 9 2.4.0 Charging Customers VAT 9 2.5.0 VAT Collection 10 2.6.0 Basic example 10 CHAPTER 3 REGISTRATION 3.1.0 Introduction 12 3.2.0 Who can register for VAT 12 3.3.0 Who can t register for VAT 12 3.4.0 What is Business 12 3.5.0 VAT Threshold 13 3.6.0 Registration procedures 13 CHAPTER 4 COMPULSORY AND VOLUNTARY REGISTRATION 4.1.0 Introduction 16 4.2.0 Compulsory registration 16 4.3.0 Forced Registration 16 4.4.0 Promoters And Auctioneers 16 4.5.0 Late registration penalty 16 4.6.0 Voluntary Registration 17 4.7.0 Effective date of registration 17 4.8.0 Responsibilities of Voluntary 17 registration CHAPTER 5 OBLIGATIONS 5.1.0 Introduction 18 5.2.0 Rights of a VAT registered trader 18 5.3.0 Obligations of a VAT registered trader 18 5.4.0 Pricing 18 5.5.0 VAT Inclusive price 19 5.6.0 VAT Invoice 19 5.7.0 Completion Of VAT 20 5.8.0 Taxable Period 20 5.9.0 Due date of filling 20 5.10.0 Record Keeping 20 5.11.0 Records which must be kept 20 Page 2 of 67
5.12.0 Allowing GRA Officer 21 5.13.0 Change of detail 21 CHAPTER 6 TAXABLE AND EXEMPT SUPPLY 6.1.0 Introduction 22 6.2.0 Taxable And Exempt Supply 22 6.3.0 Standard Rated Supplies 23 6.4.0 Zero Rated Supplies 23 6.5.0 Exempt Supply 23 6.6.0 Difference Between Zero Rated And 24 Exempt Supplies 6.7.0 Business Selling Both Taxable And 24 Exempt Supplies CHAPTER 7 IMPORTATION 7.1.0 Introduction 25 7.2.0 Import of Goods 25 7.3.0 Input VAT 25 7.4.0 Place of Supply 25 7.5.0 Time of Supply 25 7.6.0 Value of Supply 25 7.7.0 Importation of services 26 CHAPTER 8 INVOICING 8.1.0 Introduction 27 8.2.0 VAT Invoice 27 8.3.0 Detail In Tax Invoice 27 8.4.0 Simplified Or Abridged Tax Invoice 29 8.5.0 Change To Invoices 30 8.6.0 Lost Or Missing Invoice 30 8.7.0 Invalid VAT Invoices 30 CHAPTER 9 FILING OBLIGATIONS 9.1.0 Introduction 31 9.2.0 VAT Assessments 31 9.3.0 Completion Of VAT Return 31 9.4.0 Due Date For VAT Return 32 9.5.0 Extension to submit 33 9.6.0 Non Submission 33 9.7.0 Inaccurate VAT return 34 CHAPTER 10 VAT PAYABLE 10.1.0 Introduction 35 10.2.0 Output VAT 35 10.3.0 Input VAT 35 10.4.0 VAT Fraction 35 10.5.0 VAT Liability 36 10.6.0 Refund 38 10.7.0 Special Refund Procedures 38 CHAPTER 11 INPUT VAT 11.1.0 Introduction 39 11.2.0 Claiming Input 39 11.3.0 Pre-Registration Input VAT 39 Page 3 of 67
11.4.0 Instances 40 11.5.0 Partially Exempt Business 40 11.6.0 Steps In Recoverable Input VAT 41 11.7.0 Calculation Of Recoverable 42 CHAPTER 12 POST SALES ADJUSTMENTS 12.1.0 Introduction 44 12.2.0 Credit Notes 44 12.3.0 Debit Notes 44 12.4.0 Details To Be Reflected On 44 Debit\Credit CHAPTER 13 PAYMENT OBLIGATIONS 13.1.0 Introduction 46 13.2.0 Remitting the VAT 46 13.3.0 VAT Return 46 13.4.0 How And Where To PAY 46 13.5.0 Penalty For Non Payment 47 13.6.0 Interest For Late Payment 47 13.7.0 Payment Arrangements 47 13.8.0 Installment 47 13.9.0 Approval Conditions 48 CHAPTER 14 ENFORCEMENT AND DEBT MANAGEMENT 14.1.0 Introduction 49 14.2.0 Non Compliance 49 14.3.0 Collection From Third parties 49 14.4.0 Third Party Payment 49 14.5.0 Examples Of Third Parties 50 14.6.0 Seizure Of Assets And Business 50 Closure CHAPTER 15 AUDITS 15.1.0 Introduction 51 15.2.0 Audit Approach 51 15.3.0 Taxpayer Responsibility 51 15.4.0 Audit Process 52 15.5.0 Locations and Materials 52 15.6.0 Time Involved 52 15.7.0 Discussing Issues 52 15.8.0 Responding to Adjustment Proposal 52 15.9.0 Notice of Assessment and 52 Reassessment CHAPTER 16 OFFENCES AND PENALTIES 16.1.0 Introduction 53 16.2.0 Summary of Offences 53 CHAPTER 17 SPECIAL REQUIREMENTS 17.1.0 Introduction 55 17.2.0 Hospitality Industry 55 17.3.0 Goods for own use 55 17.4.0 Creditor sale debtor s asset 56 17.5.0 Sales of business as a going concern 56 Page 4 of 67
17.6.0 Business Assets 56 17.7.0 Sale of Shares 57 17.8.0 Non Resident Businesses 57 17.9.0 VAT Representative 57 17.10.0 Responsible Person 57 17.11.0 Public Financed Projects 58 17.12.0 Second Hand Goods 58 CHAPTER 18 OBJECTIONS AND APPEAL PROCESS 18.1.0 Introduction 59 18.2.0 Assessment 59 18.3.0 Objection to an assessment 59 18.4.0 Extension of Time 59 18.5.0 Objection decision 59 18.6.0 Tax Tribunal 60 18.7.0 Court of Appeal 60 18.8.0 Tax Liability 60 CHAPTER 19 DEREGISTRATION 19.1.0 Introduction 62 19.2.0 Deregistration 62 19.3.0 Instances and Process of 62 deregistration 19.4.0 Cancellation by GRA 62 19.5.0 Promoters and Auctioneers 63 19.6.0 Consequences of deregistration 63 FORMS Application for VAT Registration 64 Certification of Registration 65 Monthly VAT Return 66 Page 5 of 67
CHAPTER 1 INTRODUCTION 1.1.0 Introduction This guide provides basic knowledge and guidance to the general public and in particular to the business that must register and collect Value Added Tax (VAT). It describes the procedures governing VAT registration, filling, payments and refunds. It also provides basic understanding of taxpayers right and obligation with regards to VAT. VAT was introduced in The Gambia effective 1 st January 2013, following the enactment of the Income and Value Added Tax Act 2012. This guide sets out very briefly the laws and procedures of VAT in this Act. This work is not intended to replace the laws in the Act and it does not exhaustively cover all the facts contained in the Act. 1.2.0 What is Value Added Tax Value Added Tax is an indirect tax that is charged on most goods and services that VAT registered business provide in The Gambia. It is also charged on goods and services that are imported from outside The Gambia. VAT is charged when a VAT registered business provides taxable supplies to customers. These customers include registered and non registered businesses and the general public. When VAT registered businesses have bought good or services and paid VAT, they are generally able to claim from GRA the VAT they have paid. This is because VAT is not an additional cost to registered businesses,. However, if a business is not VAT registered then it cannot claim the VAT that is paid when it purchases goods and services. 1.3.0 Why VAT VAT is a modern indirect form of tax based on consumption of goods and services. It has been introduced to fulfil the Gambia s commitment to the tax reforms embarked by ECOWAS member states. In its effort to harmonise tax in all member countries, ECOWAS protocol has been issued to replace Sales Tax with VAT. VAT is a more broad base tax than Sales Tax and more competitive for both domestic and international businesses. 1.4.0 Advantages of VAT VAT has the following advantages: - VAT has a wider base by involving all business sectors and supply chain of the economy, and hence a greater sharing mechanism. Page 6 of 67
- The input tax credit mechanism gives registered businesses back the VAT paid on local purchases and imports used for making taxable supplies, and as a result avoids the 'tax on tax' characteristic of Sales Tax. - VAT offers a possibility for businesses to claim input tax credit on taxable business inputs, and therefore many qualifying businesses prefer to register for VAT. - As a result of increased tax compliance brought about by the self assessment nature of VAT, there is an increased benefit to those who comply with VAT laws, as oppose to non-complying registrants. This is reinforced by strong penalties and effective control policies. - VAT is a secure source of Government Revenue that enables the government to provide vital social services. 1.5.0 What is VAT Charged On VAT registered businesses must charge VAT on any goods and services that are provided in the Gambia and taxable for VAT. VAT is charged on the full selling price, including the intended margin, even if goods are accepted in part exchange or through barter instead or paying money. The VAT-inclusive price must be used as the selling price. 1.6.0 Who pays the VAT Everyone has to pay the VAT on the importation of goods and services and on purchases of taxable supplies of goods and services from a registered trader. This includes purchases by registered and non registered businesses, and the general public. It also includes Government departments, local Government, foreign missions, diplomats and international organizations purchasing from registered businesses or traders. 1.7.0 Rates of VAT There are two rates of VAT, depending on the goods or services the business provides. These are: - Standard rate, charged at 15 per cent - Zero- rate, charged at 0 per cent There are some goods and services that are not subject to VAT and therefore VAT is not charged on the supply of these goods and services. They include goods that are: - Specifically exempted from VAT - Outside The Gambia VAT system altogether Page 7 of 67
1.8.0 Terminologies used in this guide Terminology Person Taxable Person/Registrant Supply Taxable supply Standard Rated Supply Zero Rated supply Exempt supply Input VAT Output VAT Place of supply Time of supply Tax period Creditor Debtor Meaning A Person includes Individuals, Partnerships, companies and other entities involved in business VAT registered taxpayer or any business entity that is required to be registered for VAT (individuals or sole traders or partnerships, companies etc). Selling of goods and services (selling or otherwise providing goods or services including free provision and leasing or hiring of or services) All goods and services sold or supplied by a registrant which are taxable at standard or zero rate. This is the default rate of VAT, charged at 15%. All supplies are standard rated except where specifically identified otherwise as zero- rated or exempt. This is supply of goods or service where VAT is charged at zero percent (i.e. 0%) This is a supply on which on VAT should be charged. The supply of such goods is outside the scope of VAT. The VAT paid by registrants for the purchase of goods and services including imports The VAT charged by registrants for the supply of goods and services. The country in which a supply of goods or services must be accounted for VAT The date a supply is seen to have occurred. The reporting period for which a VAT return must be submitted; usually one calendar month. A person to whom money is due from another person A person who is in debt or under a financial obligation to another person Page 8 of 67
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CHAPTER 2 HOW VAT WORKS 2.1.0 Introduction VAT is a tax on consumer spending where registered traders charge VAT on business transactions. It is not a tax on profits and is not borne by the registered businesses. The final burden falls on the consumer of the goods and services. VAT registered businesses charge VAT on the goods and services they supply. This is called output VAT. Likewise when VAT is paid by registered businesses on purchases made from other registered suppliers, they can claim from GRA. The VAT that is paid on the purchase of these goods and services used in the business is called input VAT. The difference between the output VAT charged and the input VAT that can be reclaimed is the VAT payable or claimable. 2.2.0 How is VAT collected VAT is collected by Customs at the time of import, and directly from VAT registered traders at the time of their supply of goods and services within the country. Generally, each trader in the supply chain, from importers and manufacturers through to retailers, charges VAT on sales. The registered traders are collecting agents for the GRA, and benefit through the VAT system, as they are entitled to deduct from this amount the VAT paid on their purchases. Therefore, the VAT paid on purchases by registered businesses is not considered as a cost to them. 2.3.0 Incidence of VAT The registered traders act as collecting agents on behalf of the GRA by collecting VAT at each stage of distribution and then subsequently submitting it to GRA by way of a monthly return. The effect of offsetting VAT on purchases against VAT on sales is to give the credit for the input VAT. The VAT becomes by no means a cost to the registered business but the final consumer instead. Therefore VAT is borne by the final consumer of the goods or services, and to businesses that are not registered for VAT. 2.4.0 Charging customers VAT A business will be liable to pay VAT on all supplies it makes from the date of registration, or the date it is required to register, rather than when registration is complete. As soon as VAT registration is required (see Chapter 3 on Registration for details) an application should be made to GRA to initiate and start the registration process. Registration forms are available from GRA offices, and can be downloaded from the GRA website at www.gra.gm. Once a trader is registered for VAT, it will be required to charge VAT on the supply of taxable goods and services. It will have to comply with the pricing requirements of the VAT Act and reflect it in the prices accordingly. More details on pricing can be found in later chapters. Page 10 of 67
2.5.0 VAT Collection Registrants are collecting agents for GRA. The VAT so collected is not a trading income or profit. It is collected on behalf of GRA, and as such businesses are accountable to GRA for it. This is done by registered businesses submitting a VAT return each month to account for the VAT so collected from customers on behalf of GRA. If the output tax (on sales) is greater than the input tax (on purchases) the difference must be paid to GRA. If input tax exceeds output tax then the result is a credit balance and GRA will make a refund of VAT to the business, subject to certain condition This can therefore be represented by: Total Output Tax Total Input Tax = VAT Liability or Credit. Where total input tax exceeds total output tax a credit is due to the taxpayer. This credit is first carried forward to the next tax period and offset against liabilities. When a taxpayer remains in a credit position for three consecutive months, then the taxpayer will be entitled to claim a refund. 2.6.0 Example showing how VAT is collected and credited: MN Trading Ltd. is a VAT registered business. It supplies building materials including bathrooms fixtures. On the 20 th of September 2013, one of its customers, Fine Fittings Ltd., buys bathroom fixtures from MN Trading Ltd. at a price of D23,000, and installs them in Mr. Taal s new home. As MN Trading Ltd. is VAT registered, the D23,000 sale is made up of D20,000 for the fixtures and D3,000 VAT collected on behalf of the GRA, i.e. Fine Fittings Ltd. has paid the VAT of D3,000 to GRA through MN Trading Ltd., who will report this amount when filing their VAT return for September 2013. Fine Fittings Ltd. is also VAT registered and installed the bathroom in Mr. Taal s home on the 27 th September 2013. Fine Fittings Ltd. charged D34,500 for the bathroom. This includes the charge for their labour as well as for the bathroom fittings. As Fine Fittings Ltd. is VAT registered the price charged is inclusive of D4,500 VAT. When Fine Fittings Ltd. completes their September 2013 VAT return, their output tax will include the D4,500 of VAT charged to Mr. Taal. Fine Fittings Ltd. will be able to claim as input tax the D3,000 in VAT paid to MN Trading Ltd. for the purchase of bathroom fixtures. Therefore it will only pay to GRA D1,500 of the VAT collected; the other D3,000 was paid to MN Trading Ltd., who will in turn pay GRA that portion of the VAT collected. Page 11 of 67
This example illustrates that although VAT is collected in every stage throughout the supply chain by VAT registered businesses, it is a tax on consumption and finally it is the end consumer that is paying the VAT. The input VAT paid on purchases is credited to the trader. Overall, neither Fine Fittings Ltd. nor MN Trading Ltd. bears the cost of the VAT amounts charged. While these two businesses have collected the VAT on behalf of GRA, it is Mr. Taal who pays the D4,500. It is important to remember that VAT is a tax on end users, and is collected by businesses on behalf of GRA. The VAT amounts collected by Registrants are in trust for the GRA, and the penalties for not properly collecting, reporting and remitting the VAT can be severe. Page 12 of 67
CHAPTER 3 REGISTRATION 3.1.0 Introduction Before a business can charge or collect VAT, it must first register with GRA. A trader, following the completion of the registration process, becomes known as a taxable person under the VAT Act. However, a trader is also a taxable person when required to be registered in conducting a business operation, even if not actually registered. 3.2.0 Who can register for VAT? A business can only register for VAT when it is a resident in the Gambia and in business, with taxable turnover above the VAT threshold. A non-resident carrying on business through a permanent establishment in The Gambia is also required to register. A registrant for VAT may be an individual or a sole trader, partnership, company, club, association, charity and any other organisation or group of people acting together under a particular name. 3.3.0 Who can t register for VAT? One cannot register for VAT if not in business, or if only selling goods or services that are exempt from VAT. Non-resident businesses without a permanent establishment in The Gambia cannot generally register for VAT. Business has a specific definition under the VAT Act, as detailed below. 3.4.0 What is business? Business is defined as an economic activity involving getting paid for providing goods or services. The payment for the goods or services may be in money or other payments in kind. The activity will be business if there is reasonable expectation of making a profit, not necessarily if profit is actually made or not. This means the business must be for the purpose of gaining a profit. However, the incurrence of losses does not mean someone is not in a business activity or undertaking. One is considered in business when they earn an income by carrying on a trade, vocation or profession, by being self-employed, or through another entity such as partnership or a limited company. To be in business, these activities must have a degree of frequency and scale and be continued over a period of time. Even if the activities have some or all the characteristics of a business, they may not be considered a business for VAT purposes if they are essentially a recreation or hobby. Where an individual makes occasional taxable supplies, and the value of the supplies is minimal, then registration for VAT may not be required even though the individual is involved in a business activity. The one-off or infrequent sale of personal belongings would fall into this category. However, buying goods for resale on a regular basis is definitely considered to be an ongoing business activity. Page 13 of 67
Activities carried on by a Government entity are generally not business activities for the purpose of VAT, except if such activities can equally be carried on by individuals or companies on a commercial basis Many charities, philanthropic and voluntary and non-profiting making organisations and bodies have no business activities, and hence are not required to register for VAT. This includes those providing free services or information, religious or political activities. Under the VAT Act, a business is taxable only if a person makes taxable supplies and is registered or required to be registered. However every individual and business importing taxable goods is liable to pay VAT to Customs. In this case it is the importation of the goods that is taxable and not the individual or business itself. 3.5.0 VAT Threshold Only businesses with turnover above the VAT registration threshold are required to register for VAT. The threshold is designed to relieve small businesses from the burdens of complying with the VAT administrative requirements. The minimum turnover that has to be attained by a business during a certain period of time is called VAT registration threshold. This threshold has been set as one million dalasis (D1, 000.000) for compulsory registration and at a half million dalasis (D500, 000) for voluntary registration. The determination of turnover is by registrant, not each separate activity. Therefore, all of the Registrant s business activities are considered in determining if the total turnover has reached the threshold. Supplies made by associates will be considered and are accounted as part of the turnover. An associate is an entity which is significantly owned and influenced by another business. Non taxable supplies and the supply of capital items are not considered in determining the threshold. Generally, in determining the VAT threshold, the following are: Considered - Annual incurred and projected turnover on goods and services - Sale of good exported to destinations outside the Gambia - Sale from all branches and divisions of business falling under that person Not considered - Sale of capital assets - Sale of whole or part of a business - Exempt supplies - Sale from a business operating outside The Gambia 3.6.0 Procedure for VAT registration The VAT application for registration must be submitted at the nearest GRA branch to the place where a taxpayer s business is situated or carried on. Where there are several activities operating under one VAT registration number, registration will be at the GRA office nearest where the taxpayer s main branch and or business is located. Page 14 of 67
VAT is administered solely by the GRA. There is no option for registration at the offices of local authorities or other government departments. GRA, the taxpayer him/herself or a registered agent acting on behalf of the taxpayer may initiate the VAT registration process. All the necessary information as listed on the application form must be provided, otherwise there may be a delay in finalising the VAT registration. Below are the procedures that must be followed in registering for VAT: 1. Submit an application for VAT form along with the following relevant information to the nearest GRA office Existing Taxpayers Individual i. VAT Application form ii. Previous and/or projected 12 month Turnover Companies/ Partnerships i. VAT Application form Trusts, Associations & Clubs ii. Previous and/or projected 12 month Turnover i. VAT Application form ii. Previous and/or projected 12 month Turnover Government Agencies i. VAT Application form ii. Previous and/or projected 12 month Turnover New Taxpayers i. VAT Application form ii. Turnover projection for the first 12 months i. VAT Application form ii. Turnover projection for the first 12 months i. VAT Application form ii. Turnover projection for the first 12 months, for the commercial activity engaged in i. VAT Application form ii. Turnover projection for the first 12 months, for the commercial activity engaged in 2. The taxpayer must also provide the following a. Valid TIN. If the business is new, VAT application must be done separately with the TIN application b. Taxpayer s correct business address and postal address c. Taxpayer s correct business telephone number(s), email address, fax, etc. d. Value of taxable supplies (turnover) for the last 12 months if business was existing, and/or projected turnover for the next 12 months e. Projected value of taxable supplies (turnover) for the next 12 months if the business is new Page 15 of 67
3. The GRA will consider the application and give approval or rejection within 21 days of the receipt of the application. The authorities from the GRA may then elect to inspect the premises of the business 4. Once the review of the application and inspection (if it was recommended) is completed, the application will be processed and a VAT registration certificate will be issued. Examples of VAT Registration and Certification forms are included on pages 65 and 66. Page 16 of 67
CHAPTER 4 COMPULSORY AND VOLUNTARY REGISTRATION 4.1.0 Introduction A trader can be registered for VAT compulsorily, voluntarily and by way of GRA mandate. 4.2.0 Compulsory Registration There are two conditions under which registration is compulsory. This is based on the historic turnover, or on the projection of future turnover. If turnover in the last twelve months totalled at least one million dalasis (D1,000,000), then the trader is compulsorily required to register for VAT. Therefore unregistered traders must be constantly monitoring their turnovers to indentify when the registration must commence. When a trader projects that the turnover will be at least one million dalasis (D1,000,000) for the next twelve months, the trader is required to immediately register for VAT. A trader who has or will make this one million turnover must notify GRA for registration within 21 days of becoming required to register. The trader s application for registration will then be duly processed within 21 days of application. 4.3.0 GRA Mandate registration GRA will register a person when there are reasonable grounds to believe that the person is required to be registered for VAT but has failed to do so. When GRA has sufficient information indicating the required registration of this person, and the taxpayer is still unwilling to initiate the registration process, then GRA has the mandate to initiate and register the trader. Third party information followed by investigations and/or audit results can be reasonable grounds to believe that a trader is required to register for VAT. Such a trader will be registered within seven days of such a decision and the taxpayer will be notified of the registration and the effective date of the registration. Such a person will have the same obligation as any trader that is registered in the normal way. 4.4.0 Promoters and Auctioneers Promoters of public entertainment and auctioneers must register for VAT, regardless of the level of the turnover. 4.5.0 Late registration Penalty Where a trader fails to register when the taxable turnover is at least D1,000,000, the trader will be liable for a late registration penalty. The late registration penalty is double the amount of VAT payable during the period for which the person failed to register on time. This period starts from the earlier of Page 17 of 67
the day the person was required to apply for registration or is registered as determined by the Commisioner-General. The VAT registration penalty applied to the taxpayer cannot be collected from the customers. This therefore becomes the taxpayer s expense, as the tax burden cannot be pushed to the final consumer this time around. 4.6.0 Voluntary Registration A business whose taxable turnover is at least D500,000.00 in the previous 12 months can apply for VAT registration, even though the annual turnover is below the compulsory registration threshold of D1,000,000. This voluntary registration must occur within six months of the end of any such twelve month period. Each application is subject to GRA approval, and will be refused when it is determined the applicant has not: (i) kept proper records; or, (ii) complied with its obligations under other GRA revenue laws 4.7.0 Effective date of Registration The effective date of registration is the date by which a trader is registered, or supposed to be registered with GRA for the purpose of VAT. Following the processing of a successful application for registration, a trader is given a registration certificate to acknowledge the registration. Registration will take effect at the beginning of the first tax period after the person is required to apply for registration, or at a later date as the Commissioner-General may determine. No VAT-inclusive invoices can be issuewd for the period before the registration date. 4.8.0 Registrant Responsibilities A person who voluntarily registers and a mandatory registrant have the same responsibilities. Every registrant must keep the required VAT records, issue proper VAT invoices, complete and submit monthly VAT returns, and pay their VAT as and when due. Page 18 of 67
CHAPTER 5 OBLIGATIONS 5.1.0 Introduction The VAT Act specifies the rights and obligations for all registrants. 5.2.0 Rights of a VAT Registered Trader Under the VAT Act, a registrant has numerous rights, including: - Claims for allowable input tax - Refund when input tax exceeds output tax - Credit for VAT paid on trading stock acquired prior to the date of registration. - Refund of tax paid in error. - Request for reconsideration of an assessment - Appeal to the tribunal - Every GRA officer contacting the registrant provide official identification - Be treated fairly and with equity. - Be provided assistance in understanding the legal obligations. Additional information is provided in later chapters of this guide. 5.3.0 The obligation of a VAT registered trader As a registered trader, there are certain obligations and responsibilities upon which the registrant must comply. Failure to carry out these duties and responsibilities could result in additional taxes, penalties and possibly prosecution. Under the VAT legislation, these responsibilities include: - Apply for registration when required. - Display the VAT Registration Certificate prominently in a public area of the business. - Charge VAT on all taxable supplies and quote VAT inclusive prices - Issue a VAT invoice for every supply made - Submit monthly VAT returns to GRA on or before the 15 th of each following month - Pay VAT amounts due within 15 days following each tax period - Maintain proper accounts and records - Advise the GRA of change to the business operations, e.g. change of address or telephone number, addition of partner, cessation of business premises - Provide accounting records and business information, when required, to officers of the GRA Additional information regarding these obligations is provided in later chapters of this guide. 5.4.0 Pricing All registered traders must display, advertise and quote VAT inclusive prices for all goods and services, i.e. the price must be the selling price including VAT. Retailers, including supermarkets and traders who sell directly to the public, do not need to show the VAT portion included in the price on each label or advertised price Page 19 of 67
for each item. However, they do need to identify their pricing in such a way that the customer can understand which products are exempt and which have VAT included in the price. In addition, the sales receipts must identify all the items on which VAT is charged. If a registrant recipient is in agreement, a supplier may provide a quotation for a taxable supply of goods or services on the basis of the tax-exclusive value of the supply. In these circumstances, the quote must clearly state that tax will be payable on the supply and state either the tax-inclusive value of the supply or the applicable rate of tax and the amount of tax that will be payable. 5.5.0 VAT Inclusive Price When the selling price of a good or service has been determined without VAT, the VAT is added to the selling price by multiplying the intended selling price by 15% to the VAT inclusive price. This is the price that must be shown on all price tags, tickets, price marks, or other pricing information, and for the purposes of advertising. Illustration Adding VAT to Selling Price Selling Price before VAT is added D1000.00 Rate of VAT 15% Multiplying by 15% D1000.00 x 15% = D150 VAT D150.00 VAT-Inclusive Price D1,150.00 5.6.0 VAT Invoice VAT invoice or tax invoice is a document which is provided under the VAT Act in order to: 1. Provide consumers the details regarding VAT charged on their purchases, and 2. Enable a registered trader to deduct input tax. A VAT registered customer must obtain a valid VAT invoice from the suppliers in order to claim back the VAT they have paid on their purchases. The tax invoice must be supplied to the customer not later than the time when the goods or services are supplied. Without a proper tax invoice a registrant cannot deduct input tax on purchases for their business, and the registered clients cannot claim back the VAT that is charged to them. The details that must be shown on a VAT invoice are described in Chapter 8. Page 20 of 67
5.7.0 Completion of VAT Returns As mentioned earlier, each registrant must account for the VAT collected on behalf of GRA and recover the costs of VAT paid out by completion of their VAT returns. The returns must be submitted for each taxable period on or before the due date, even if there is no required payment or there are no sales made in the tax period. 5.8.0 Taxable period A taxable period is the period of time for which VAT returns is filed. Taxable periods are normally for each calendar month. This means every calendar month is a taxable period, for which a VAT return must be submitted to GRA. 5.9.0 Due date for filing Returns and their respective payments must be submitted on or before the 15 th day of the month following the end of each tax period. For example, the return and payment for the tax period end 31 st May must be submitted no later than 15 th June. Mandatory penalties are applicable for all late filed returns and payments. If the due date of filing and payment (the 15 th ) is on a day when the GRA offices are closed, i.e. a Saturday, Sunday or any public holiday, then the return and payment must be submitted no later than the last working day before that date. For example, assuming that the 15 th falls on a Sunday, the return and payment must reach GRA by the previous Friday (or the Thursday if Friday is a public holiday). 5.10.0 Record Keeping When registered for VAT, all businesses must keep proper and complete records of all sales and purchases. Including an account of the portion of VAT collected on sales and the VAT paid out on all expenditures. GRA officers will periodically, visit businesses to examine the records and accounts, and to verify the VAT is correctly accounted for. 5.11.0 Records which must be kept A Registrant must: 1. Record the nature, quantity and value of both supplies made and supplies received e.g. purchase and sales day books; 2. Record the daily sales such as till rolls, cash books and other accounts; 3. Retain bank statements and documentation of all bank transactions; 4. Retain documentation for all business transactions, including orders and delivery notes; 5. Ensure sales records distinguish between taxable and exempt supplies; 6. Record payments for both supplies made and supplies received e.g. a cash book; 7. Include a summary and reconciliation to the reported VAT return amounts - the output tax, input tax and the net VAT payable or credit; 8. Retain all documentation in support of imported goods; 9. Retain all documentation in support of exported goods (zero-rated). Page 21 of 67
5.12.0 Allowing GRA Officers GRA has the right to require information and undertake audits on any VAT registered business, to ensure the taxpayer has complied with their VAT obligations. Audits will normally be conducted at the registrant s business premises. 5.13.0 Change of Details Taxpayers must notify the GRA in writing within 21 days in the following circumstances: - When there is a change in the legal status of an entity; - If the business ceases trading permanently; - If a taxpayer is registered and fails to make taxable supplies; - When there is a change in the trading name, address or nature of the business. If the business is sold as a going concern, notification is required within 14 days. Page 22 of 67
CHAPTER 6 TAXABLE AND EXEMPT SUPPLY 6.1.0 Introduction A supply can be taxable or exempt. 6.2.0 Taxable and Exempt Supply For VAT purposes, a taxable supply is defined as a sale of taxable goods or a provision of taxable services. A taxable supply is a supply of goods or services made by a taxable person in the course of business in The Gambia which is other than an exempt supply. An importation of taxable goods is also a taxable supply. Taxable here means that VAT is applied to the transactions. The basic premise is that all goods and services are taxable unless they are specifically exempted goods or services, or goods and services sold in the course of a business by private individuals or by unregistered businesses who are identified as not being required to register and collect the VAT, in accordance with the VAT Act. A taxable supply can be either Standard Rated or Zero Rated. Standard Rated supplies are made at 15% whilst Zero Rated Supplies are made at 0%. The term exempt supply refers to supplies of goods and services that are specifically exempt from VAT. This can be illustrated as: Total Supply Taxable Supply Exempt Supply Standard Rated Supply @15% Zero Rated Supply @ 0% No VAT The difference needs to be noted regarding total supply and taxable supply. A taxable trader can be making both taxable supplies and exempt supplies. In such a case total supply made by such a trader is the sum total of all the taxable supplies and exempt supplies. Exempt supply are those goods and services supplied which are exempt from VAT and therefore outside the scope of the VAT. Page 23 of 67
REMEMBER: a TAXABLE PERSON is a trader who is registered, or is required or ought to be registered for VAT. 6.3.0 Standard Rated Supplies A supplier of standard rated goods or services must charge VAT on supplies made at 15%. All goods and services are considered as standard rated unless specifically classified as zero-rated or exempt. 6.4.0 Zero rated supplies A supplier of zero-rated goods or services collects no output tax, as the applied rate of tax is 0%. The 0% rate is used as a mechanism so that tax is not applied to consumptions which are destined to take place outside of The Gambia. A typical example of zero-rated supplies is when goods are sold and exported to customers located overseas. While the VAT registrant will not collect VAT on the sale of the exported goods, they will be able to claim a credit for any VAT paid on the purchases of goods or services needed to acquire, produce and/or make these goods available for sale. Examples of Zero-Rated Supplies include the following, when provided by a Gambian VAT registrant: Goods and services supplied for consumption outside of The Gambia Supply of land outside of The Gambia Supply and insurance of international transport Repair of goods under warranty Because the VAT rate is 0%, the VAT exclusive and VAT inclusive price are the same. For example, when the VAT exclusive price of an exported good is D10,000, and the trader has applied VAT at 0%, then the VAT inclusive price will be the same D10,000. 6.5.0 Exempt supplies A number of supplies of goods and services are exempt from VAT and the supply of these goods and services is called exempt supply. An exempt supply is a sale of a good or service which is not taxable and no VAT is charged on such supply. The supply is said to be outside the scope of VAT. A trader involved exclusively in this type of supply will not be subject to VAT. For exempt supplies, there is no VAT charged at the time of sale, nor when they are imported. Exempt supplies include: Basic foods, for example rice, flour, sugar, meat, fish, fresh vegetables, salt, cooking oil, bread, and infant food Education services Medical, dental, optical and veterinary services Prescription drugs Financial services, excluding those rendered for a fee or commission Life and health insurance Page 24 of 67
Rental of residential property Unprocessed agricultural and aquaculture products Agricultural and aquaculture supplies and equipment Most transportation services, e.g. taxis, ferries and private buses Electricity and water supplied to most households Exempt supplies fall outside the scope of VAT and a supplier of exempt supplies can neither charge VAT on sales nor claim tax paid on business inputs. For this reason, suppliers of only exempt goods and services cannot register for VAT. 6.6.0 Difference between Zero-rated and Exempt Supplies At first glance on a VAT invoice one may not see the difference between zero-rated and exempt supplies as no VAT is actually charged on either of them. However there is a substantial difference: zero-rated supplies are taxable supplies within the scope of VAT, and thus subject to VAT even though at zero percent; whereas exempt supplies are outside the scope of the VAT and hence VAT does not apply to such supplies at all. As such, while a VAT registered business is entitled to claim a credit on input VAT incurred in the acquiring and making of zero-rated supplies, they are not entitled to claim a credit for the input VAT incurred on the exempt supplies. Businesses that exclusively make exempt supplies will not be registered for VAT. This means that such a business must not charge VAT on its supplies and cannot claim any input tax credits on its purchases. A business that meets the threshold requirements on total turnover of zero-rated supplies must be registered for VAT, as the zero-rated supplies are taxable supplies. The registrant is then entitled to claim input tax credits on all VAT incurred on purchases. Where the sale of zero rated supplies represents a substantial portion of the business turnover, the registrant will commonly have input tax credits which exceed the output tax, and hence may often be eligible for a refund of VAT paid out. 6.7.0 Businesses selling both Taxable and Exempt Supplies A business making both taxable and exempt supplies can be described as a partially exempt business. In such cases only input tax credits in respect of the taxable part of the business can be claimed and only output tax in respect of the taxable supplies should be declared. Such taxpayers will need to apportion the Input tax so incurred proportionally between the taxable and non-taxable parts of the business. This is discussed in more details in Chapter 11. Page 25 of 67
CHAPTER 7 IMPORTATION 7.1.0 Introduction All importers must pay VAT on their imports regardless of whether they are registered for VAT or not, and whether the importation is for commercial use, personal consumption, or other purposes. The only exceptions are where goods or importers are specifically exempted under the VAT laws. 7.2.0 Import of goods All importers must pay VAT at the time of importation of goods or service. VAT is charged on all importations of taxable goods imported by private persons or by businesses whether or not they are registered for VAT. The VAT on importation of goods is administered by Customs and is payable together with any applicable Customs duties and other charges. There is no VAT charged on the importation of zero rated or exempt supplies. 7.3.0 Input VAT For VAT registered traders, the VAT paid on imported goods becomes input VAT. As mentioned earlier, taxable importers will be able to claim the VAT paid as an input credit on their VAT returns. Unregistered businesses will not be able to claim the input VAT, but will be able to account for it as a business expense. 7.4.0 Place of supply When goods are imported, the place of supply for the imported goods is where the goods arrived. Imported goods are in principle taxed in The Gambia upon arrival in the country, i.e. at the port of entry. 7.5.0 Time of Import The time of supply of imported goods and services is the date the goods enter The Gambia or should have entered The Gambia, as determined under the Customs laws. This will normally be the date the goods are cleared and released by Customs. 7.6.0 Value of supply The value of supply for imported goods under the VAT Act is the value of the goods ascertained for the purpose of Customs laws, that is, the purchase and shipping cost, plus the amount of Customs duty, excise tax and any other charge other than VAT payable on the goods. Below is an illustration of the value of supply for imported goods. Amount Value of Import 75,000 Import duty 15,000 Excise 79,200 Tax base for VAT determination 169,200 VAT @ 15% 25,380 Prof Fees 1,162 Eco Levy @ 1% 750 Total Paid to Customs 121,492 Page 26 of 67
7.7.0 Importation of services VAT is charged on all taxable services imported into the country. However the taxation of imported services may prove to be difficult as it is sometimes difficult to identify the trade in services across borders. For this reason, a reverse service charge process is used where import for service is made in The Gambia. This mechanism is used to place the obligation to charge and remit VAT on the Gambian recipients of the imported services. The reverse charge mechanism dictates that where a local person buys taxable services from a foreigner for use in The Gambia, he/she is obliged to calculate and pay VAT to the GRA. The obligation to charge, calculate and pay VAT is therefore reversed from the non-resident supplier of such services to the local receiver of the service. This obligation is not applicable for VAT registered traders who have the right to claim full input VAT on the service. This is because the taxpayer would pay such VAT and then claim it back, the net effect of which is zero. The reverse charge system is meant to ensure that Gambian consumers of foreign services pay tax in the same way as they would for local services, in order to ensure the local suppliers are not disadvantaged, i.e. that their supply of services is not more expensive due to the VAT they are required to charge. Reverse Charge Example: Company A contracts an audit firm resident in Senegal to do its annual audit work in The Gambia. The Senegal firm is a non resident business with no offices or permanent employees in The Gambia. Its personnel are temporarily placed in The Gambia to undertake Company A s work. The domestic purchaser of the service, Company A, will withhold 15% VAT from payments to the Senegal audit firm, and remit the VAT to GRA. Page 27 of 67
CHAPTER 8 INVOICING 8.1.0 Introduction The most important document in a VAT system is the tax invoice. A VAT invoice is provided to inform the customer whenever VAT has been charged for the purchase of good or service. 8.2.0 VAT invoice A VAT registrant must issue an invoice for every sale, to every customer. A VAT registered customer must have a valid VAT invoice from the supplier in order to claim back the VAT they have paid on their purchases. A tax invoice must be issued to the customer not later than the time of supply. Without a proper tax invoice a registrant cannot claim back the input VAT they have paid.. 8.3.0 Details on a Tax Invoice A valid tax invoice must show the following information: 1) The name and business location of the supplier 2) The VAT registration number or tax identity number (TIN) of the supplier 3) The serial number of the invoice which is unique and follows on from the number of the previous invoice, date of issue and date of supply (i.e. tax point). 4) The quantity or volume of the goods or services supplied. 5) A description of the goods or services supplied 6) An indication of which items are taxable, when the sales receipt also contains the sale of exempt goods 7) The total consideration of the supply and amount of the VAT charged. The following are examples of acceptable VAT invoices and receipts. Page 28 of 67
Acceptable VAT invoices: NAME OF BUSINESS LOCATION VAT Reg #: xxxxx Customer : Smiling Coast Services VAT Invoice # xxxxx Date: dd/mm/year Address : Down by the Sea Rd. Special Village, The Gambia Quantity Description _ 4 Round wood tables,100cm. 16 Metal chairs -black Cost/unit _2850 910 Total Cost _11400 14560 Total Cost GMD 25960 VAT at 15% included in Total Cost : GMD 3386 Sleepy Rest Hotel Manjie Side Road VAT Reg #: xxxxx Customer : Mr. and Mrs. Njie Address : A road somewhere Big City, The Gambia Room: Date: xxx 20/Feb/2013 Date Description Total 18 Feb. 19 Feb. 20 Feb. 20 Feb. Room Charge Room Charge Transfer to Airport Payment by Visa 2500 2500 400 5400 Total Charges Balance Due 5400 5400 0 The above charges include VAT at 15% totaling 704d continued Page 29 of 67
NAME AND LOCATION OF BUSINESS TIN or VAT certification # VAT Invoice # : xxxxxx Date of Supply: dd/mm/yr Qty Description Total 2 Aqua bottled water 300cl 40 Tx 1 Fresh fish 2.2kg@55 121 1 Salted peanuts 200g 25 Tx Subtotal : 186 Amount Due : 186 Cash Tendered : 200 Change : 14 VAT included @ 15% : 8.48 8.4.0 Simplified or abridged tax invoice A taxable trader in retail business, who is selling to the general public, can provide a simplified or abridged tax invoice which is less detailed than the normal tax invoice. However, where he is making a sale to a registered trader who identifies himself as such and request for a normal tax invoice, then this must be issued. A simplified or abridged tax invoice cannot be used to obtain a claim for input tax credit or refund. A simplified or abridged tax invoice needs to show the following details: (a) the name and VAT registration or taxpayer identification number of the supplier; (b) the date on which the simplified receipt is issued; (c) a bar code or other method to identify the goods or services supplied; and (d) the consideration for the supply and the amount of VAT charged, or the VAT-inclusive price identified as such. Page 30 of 67
Sample simplified VAT receipt NAME OF BUSINESS VAT Reg #: xxxxx Date: dd/mm/year 2 water 40 Tx 1 meat dept 121 1 snack 25 Tx Amount Due: 186 Cash Tendered: 200 Change: 14 VAT included @ 15%: 8.48 8.5.0 Changes to Invoices If a change is required at the time of sale, the original invoice can be voided and a replacement issued, providing all original invoices are returned or clearly documented as being voided. 8.6.0 Lost or Missing Invoices If a tax invoice in respect of a particular supply is lost, the VAT registrant cannot claim input tax credit on this invoice. The registrant will be required to acquire a replacement invoice from the supplier. It is an offence to issue more than one tax invoice for the same taxable supply. When a replacement tax invoice is issued it should be clearly marked as a copy. The above described procedures must also be followed on credit and debit notes. 8.7.0 Invalid VAT invoices The following are not VAT invoices: i) quotations and pro-forma invoices ii) invoices that do not provide the required VAT details iii) statements of account iv) delivery notes v) orders vi) letters, emails or other correspondence For these type of documents, the input tax credit for VAT cannot be claimed, as the documents do not provide proof of legitimate VAT payment. Page 31 of 67