Value Added Tax – zero-rated supplies explained |20 April 2012

If you are a Vat registered business, Vat will be included in the price of most of the goods, services and other items you sell to others in the course of your business. These are called taxable supplies. There are other types of sales where Vat will not be included in the price.

These are called non-taxable supplies also known as exempt supplies. Taxable supplies are made by Vat registered businesses and they are either standard rated (15%) or zero-rated (0%). Therefore a zero-rated supply is also a taxable supply.

Which supplies are zero-rated under the Vat Act?
A zero-rated supply is a supply which is taxable at a zero rate (0%).
All exports are zero-rated because Vat is a local-based consumption tax and is therefore not charged on consumption made abroad. However it is important to note that companies registered under the SITZ regulations are not considered as making zero-rated supplies because of their special characteristics where they are deemed to be operating outside the Seychelles jurisdiction hence they are outside the scope of the Vat system.

In addition to exports, there are also some designated supplies which are zero-rated under the Vat Act. Some examples include:

• good sold in a duty free shop;

• supply of maritime’s services including maintenance and repairs of vessels;

• supply of management and maintenance of facilities at aerodromes.

(Please note that this list is not exhaustive. For the complete list see Schedule II of the Value Added Tax Act 2010).

Note that if a supply is both a zero-rated and an exempt supply, the supply will be treated as a zero-rated supply.

What are the differences between zero-rated and exempt supplies?
Zero-rated supplies are taxable, even though no Vat is actually collected (Vat is charged at 0%) on transactions involving such supplies. However input tax incurred in the making of zero-rated supplies is fully deductible (unless otherwise provided in the Vat Act 2010), meaning that a business making zero-rated supplies can claim for a Vat credit or refund under Vat.

Exempt supplies on the other hand are outside the scope of the Vat system. No Vat can be charged on supplies which are exempted under the Vat Act. At the same time exempt supplies do not create any deduction right of the input tax correlated to transactions involving such exempt supplies. They cannot charge Vat and they cannot claim input tax credits or refund of Vat.

For example, educational institutions (their supplies are exempt under the Vat Act) will not be able to deduct any Vat they incur, say for example on their monthly telephone bills because their supplies are exempted from Vat.

For more information
You can contact Seychelles Revenue Commission on 4293737 or email us at advisory.center@src.gov.sc. The Value Added Tax Act, 2010 is available on the Seychelles Revenue Commission website (www.src.gov.sc).

Submitted by the Seychelles Revenue Commission