Handout for Vat-new

7/31/2019 Handout for Vat-new

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Apt Financial Consultant CPA Reviews

INTRODUCTION TO VAT

VAT is the Value Added Tax. It is the tax which is charged on the value added of goods or services ateach stage of a business transaction and it is also collected on imports. The business transactionsinvolve the supplies of goods or services. The VAT standard rate is 18% there is VAT at 0%, Zero

rated. The VAT registration threshold is where the taxable turnover exceeds or is likely to exceed-Forty million shillings in a period of twelve consecutive months and, or Ten million shillings in anyperiod of three consecutive months

The VAT is paid by the final consumer. It is the consumer who bears the tax burden .The taxableperson deducts what he/she has paid as VAT when he / she was purchasing the taxable supplies forthe furtherance of his /her business. The tax paid by consumer is the money of the government sincethe day or time she purchases goods or services. The tax on purchases is Input tax. Output tax is thetax on sales. The difference between the two i.e. out put tax and input tax is what is payable to TRA orrefundable to taxpayer.

TYPES OF VATThere are three types of VAT namely:

(i) Consumption type(ii) Income type(iii) Gross produced

(i) Consumption type:Capital goods purchased are treated like any other purchases of input i.e. Full credit of input taxare given. This type of VAT is practiced in Kenya, Uganda, Tanzania, Singapore and South Africa.

(ii) Income type:Input tax paid on the purchases of capital a goods is spread over the life span of the products orAssets. The input tax credit with capital purchases against the liability in a particular tax period willtake into account the depreciation portion only. This type of VAT is practiced in Argentina and

Peru.(iii) Gross product type:

Completely denies input tax deduction on capital goods against the firm VAT liability. VAT iscomputed by subtracting from the firms sales only purchases apart from capital goods. This type ofVAT is practiced in Finland, Morocco and Senegal.

METHODS OF CALCULATING THE CONSUMPTION TYPE OF VATThere are three methods of calculating the consumption type of VAT

(i) Credit (invoiced based) method.(ii) Subtraction (accounts based) method.(iii) Additional (account based) method.

(i) Credit Method:This is the most favored method where by the net VAT liability is computed by deducting the tax onpurchases (input tax) from tax on sales (output tax) for each tax period. The tax on sales must beshown separately on all invoices to provide documentary evidence for credit claim by registeredtraders.

(ii) Subtraction method:Under this method net liability is obtained by deducting the aggregate value of purchases from theaggregate value of sales and applies a VAT rate to the difference obtained. Figure of sales andpurchases are obtained from final accounts.

iii) Additional method:

Value added is obtained by summing up the factors of production rewards like wages, interest,depreciation and net profit within the specified tax period. The tax rate is then applied to thesummed value to establish the tax liability of the firm in the given period.


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Experience in Tanzania Tanzania is using consumption type of VAT with credit (Income method) ofcalculation.Why Credit (invoiced based) method is most favored?

(i) Tax liability is attached to the transaction and invoices become a crucial document.(ii) It creates a good audit trail(iii) It allows easy application of multiple rates of tax.

(iv) VAT can be collected on monthly basis or any tax period.(v) Goods and services can be easily identified.(vi) Zero rated supplies can easily be applied.(vii) Credit methods have self-enforcing features.

- Non-business transaction (e.g. private use and goods imported for private purposes).- Exempt transactions.- Outside the scope transactions (e.g. non-supplies, passive investment activities).

VAT incurred on certain categories of expenditure is never eligible for deduction even if theexpenditure is for business purposes. Value added tax shall in no circumstances be deductible onexpenditure which is not strictly business expenditure such as that on luxuries, amusements or

entertainment.

Motor Cars: VAT on the supply, requisition or importation of a motor car is not deductible unlesscertain conditions are met. In general terms, VAT is not deductible unless the car cannot be availablefor any non-business use. VAT on the M/C is deductible if the car is to be use exclusively for businesspurposes and will not be available for private use. It is available for private use and not actual use forprivate use purposes that determines whether or not the VAT will be deductible.VAT on the supply acquisition as importation of M/C is also deductible if the M/C is to be used forspecified purposes, namely:

As stock in trade

For letting

As a mini-cab.

The black on deduction of input VAT applies to the VAT on the car and also any accessories fitted atthe time of purchase. In put tax on accessories fitted subsequently may be deductible if they are forbusiness purpose.The blocking provisions do not apply to other types of vehicles e.g. a company van. In respect of suchvehicles, if there is any private use the business can either disallow a proportion of VAT on thepurchase of the motor vehicle as representing the VAT on private use.Business entertainment. If deduction is not allowed on goods or services on which VAT is incurred ifthe goods and services are used for the purposes of business entertainment? Business entertainmentis defined as entertainment including hospitality of any kind provided by a taxable person on by him.Example of what has been held to be business entertainment includes:-

A customer or perspective customer of any form of beverages, tobacco, accommodation,amusement, recreation, transportation or hospitality an employee of any form of alcoholicbeverage, tobacco, amusement, recreation, or hospitality.

Business gifts: Gifts of goods or service are not in principle subject to VAT because they are notprovided for consideration. Samples or gifts of small value provided by a taxable person for thepurposes of his business are not to be treated as made for consideration. Otherwise if VAT ischargeable on the gifts or sample the recipient can deduct that VAT as input tax subject to thenormal rules.

Advantage of VAT: it is a broad based tax which yields more revenue to the Government. It ischarged on local as well as imported products which are not exempted. It a tax which is paid by the

final consumer and therefore the business community does not bear the tax burden as they use torecover what they have paid on their purchases as input tax. It is a self administered tax and thereforeit promotes voluntary compliance.

Disadvantage of VAT

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Is VAT regressive?(A tax is regressive if it affects all levels of income equally by a flat rate A progressive tax affects highincome earners more, and is accepted as a better system in that the better off part of the populationbears a greater proportion of the tax burden).Governments can reduce the effect of regressive ness by having the social scurity and the exemption inthe tax system.

Is VAT inflationary?o Yes-if prices increase, the value of money decreases.

Does VAT involved complicated book keeping?o The regulations prescribe a number of books, which must be kept by all registered traders as a

minimum.o These are probably more than those kept by most small businesses.

o Keeping basic records is good practice for any business, and can promote efficiency and

profitability by providing a trader with more information about how the business is performing.

REGISTRATION AND DEREGISTRATION FOR VATINTRODUCTION:

The tax authority needs to know who is going to pay the tax and whom it can pursue in the event ofnon-payment. Basing on that, the authority is assured of tax payments by obliging traders to registerfor the tax.Purposes of Registration:The purposes of registration are to:

(a) Record the particulars of taxable persons for the purpose of control and collection of tax.

(b) Enable them to take credit of input tax on their purchases of taxable supplies; and

(c) Allow them charge output tax on their taxable supplies and to issue tax invoices.Interpretation of the main legal provisionsThe under mentioned guidelines, covering significance and meaning, are provided for each of the legalprovisions listed above:

a) Section 18 of the VAT Act 1997This section requires the Commissioner to maintain a register of taxable persons. It does notstipulate the type of register to be maintained or the details to be recorded. In practical terms theregister is computerized and is compiled from the information provided by registered taxablepersons on their application forms Form VAT 101.

b) Section 19(1) to (4) of the VAT Act 1997i) Sub-Section 1

This sub-section defines those persons who are required to apply for registration and the time limitfor doing so. A taxable person is a person WHO MAKES or who has reasonable grounds forbelieving, he WILL MAKE or HAS MADE taxable supplies in excess of the turnover figures

prescribed in the Regulations made under this Act. The fact that such a person is liable to registerunder this sub-section means that such a person must account for VAT on any taxable supplies hemakes from the date he becomes liable for registration. Any person who exceeds the taxableturnover figures prescribed in the Regulations must apply for registration. Taxable supplies meansany supply of goods or services made by a taxable person in the course of or in furtherance of hisbusiness and includes zero rated supplies. The taxable turnover of all businesses under one legalentity must be added together to determined whether the person should be registered.

ii) Sub-Section 2:This sub-section requires all taxable persons to apply for registration in the manner and formprescribed by the regulations.

iii) Sub-Section 3:This sub-section compels the Commissioner to register every applicant who is eligible to registerunder sub-section 1 (that is, whose taxable turnover exceeds the threshold limits set in theregulations).

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iv) Sub-Section 4This is a wide-ranging sub-section which gives the Commissioner the power to register a businesswhether or not an application has been made. This could be where he has reasonable grounds forknowing that the person has exceeded the turnover figures prescribed in the regulations but hasfailed to register. It could also cover the case of someone trading below the threshold who appliesto register on a voluntary basis. The reasons for taking action under this sub-section are stipulated

as being on the grounds of national economic interest or protection of the revenue. In both casesthe Commissioner should notify the business in writing of his actions and the reasons why they havebeen taken.

c) Section 20(1) to (4) of the VAT Act 1977i) Sub-Section 1 & 2

These sub-sections require the Commissioner to notify the taxable person when he has beenregistered for VAT purposes and issue a certificate of registration showing the taxpayers name,principal place of business, the effective date of registration (EDR) and the TaxpayerIdentification Number (TIN) and VAT Registration Number (VRN).

ii) Sub-section 3 & 4These sub-sections require the registered taxable person to use the unique VRN TIN allocated on

all documentation including returns and tax invoices and to display the registration certificate in aprominent place at the principal place of business. Sub-section 4 also requires the Commissioner toissue copies of the registration certificates for display at any additional business premises(branches).

d) Section 21(1) to (3) of the VAT Act 1997These sub-sections are concerned with deregistration for VAT purposes and places an obligation onthe taxable person to notify the Commissioner within a thirty day period if he is no longer registerable. Sub-section 2 requires the Commissioner, if he is satisfied, to notify the taxable person inwriting of the effective date of deregistration (EDD). Sub-section 3 provides some relief on thetreatment of stock on hand at the EDD. It allows relief on any stock transferred as part of a going

concern to another taxable person and also provides a limit for administrative convenience. No taxwould be chargeable on any stock if the amount of VAT does not exceed five thousand (5000)T. shillings.

e) Section 22(1) to (5) of the VAT Act 1997i) Sub-section 1

This sub-section allows a business to register its divisions or branches separately ratherthan as one single legal entity. It is aimed primarily at facilitating existing businessstructure/practice but is can also be advantageous for revenue control purposes. Theprovision is a concession and does not allow any applicant to register in branches/divisionsby right. It is only allowed if the Commissioner is satisfied and it could not be used as ameans of avoiding registration.

ii) Sub-section 2 and 3 provide the Minister with power to make regulations defining theresponsibilities of organizations like clubs managed by members or by committee. Similarlyunder sub-sections 4 and 5 the Minister may make regulations covering the bankruptcy andcompanies in liquidation/ receivership.

f) Section 23(1) and (2)These sub-sections provide the Minister with the power to make regulations covering the type ofchanges in circumstances that a taxable person must notify in writing to the Commissioner and thetime limit for doing so.

g) Section 44(1) to (3)Sub-sections 1 and 2: Sub-section 1 makes it an offence where a person fails to register withinthirty days after qualifying. If convicted of an offence he is liable to imprisonment for a term not

less than two months and not exceeding one year, or a fine not exceeding two hundred thousandshillings, or to both fine and imprisonment. Sub-section 2 means that any person who fails toregister will also be liable for any arrears of tax and interest in addition to any penalty imposed.

Sub-section 3This sub-section extends the offence situation to those taxable persons who are registered but who

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fail to notify the Commissioner of any changes in business circumstances within the thirty-dayperiod allowed. This is considered to be a less serious offence and if convicted the person will beliable to a fine not exceeding one hundred thousand shillings.

2.0. Persons liable to Register:The meaning of Taxable Person Taxable person means a person registered or required to be

registered under the provisions of the Value Added Tax Act 1997.Taxable Persons to be registered are as follows:

(a) Sole Proprietorships: The proprietor should be registered and the registration of a soleproprietorship should cover all the business activities of the proprietor unless a specific request fora separate branch registration is received (see Part 6). Where a sole proprietor has more thanone business and uses trading styles, the registration should be affected in his natural name. Allapplication forms for registration (VAT 101) in respect of Sole Proprietors must be signed by theSole Proprietor. A single registration does not affect any separate accounting arrangements forthe business and the totals in the accounts of all the businesses should be aggregated at the endof each tax period for the purpose of making only one VAT return.

(b) Partnerships: The registration of partnerships can be in the natural names of the partners or a

trading name, if certified. The names of the Senior Partners should be entered on the Form VAT105 Advice of Additional Trader Particulars which should be signed by the Senior Partner.Partnerships in Tanzania must be registered under Business Names (Registration) OrdinanceChapter 213 if they use a business name. A business name certificate is issued by the Registrarof Companies from the date of registration. (Only when a partnership is dissolved should it benecessary to cancel the registration. Changes can be made to an existing partnership agreementbut the legal entity remains the same).

c) Companies incorporated under the Companies Ordinance. All such companies are required by theCompanies Ordinance Chapter 212 to register with the Registrar of Companies and a certificate ofincorporation is issued. The registration of a company for VAT will be in the name by which it is

registered as a company. The names of all the Directors and Company Secretary will be obtainedas Additional Trader Particulars on the first visit by using the form VAT 105 (see also Part 4,Paragraph 7). The application for registration (VAT 101) must be signed by one of the Directors orthe Company Secretary.

d) Other bodies (groups, associations, clubs, and cooperatives). In the event of an application forregistration received from a cooperative, the body concerned is to be consulted to ascertain who isauthorized to act on behalf of the organization. Other groups or associations use their constitutionsto determine a person authorized to act on behalf of the organization. The application forregistration, VAT 101, should be signed by a responsible person and in general terms the VATregistration will be in the name of the organization specified in the Act.

Eligibility to registerBefore a person can be registered for VAT purposes he must satisfy the following conditions:

a) He must be making or intending to make taxable supplies of goods and/or services inexcess of the turnover figures prescribed in the Value Added Tax (Registration) Regulations; and

b) The taxable supplies must be made or intended to be made in the course of, or furtherance of, abusiness carried on by that person.

Each trader should be issued with only one copy of the application form.Form VAT 101 Application for RegistrationAll applications for VAT registration must be made on an original Form VAT 101. .The Form VAT 101is designed to help the registration process (both business community and the tax administration) byseeking the minimum information to effect registration. Once a properly completed and acceptableForm VAT 101 is received, it is not intended to subject the applicant to any further enquiry, at thisstage, unless it is absolutely necessary. No other documents will be required to accompany the VAT

101. (See also Paragraph 7 below).

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TYPES OF REGISTRATIONNormal RegistrationsFor many traders there is nothing optional about registering for VAT. Their turnover is above thethreshold so they have no choice in the matter. For some traders, however, things are not quite sostraightforward. In this session we shall be looking at how these traders are dealt with.There are six registration categories to consider:-

o Voluntary (V)o Intending trader (I)

o Compulsory (C)

o Branch registration (B)

Divisional registration (D)Voluntary RegistrationApplications to register may be received from persons who do not fulfill the registration requirementse.g. their annual taxable turnover is below the threshold.This type of application is not normally encouraged but you are already aware that the Commissionerhas the power to register any person on the grounds of National Economic Interest.The trader should be told that:

1. Registration brings with it obligations as well as benefits.2. It will involve accounting for Vat on taxable goods and services supplied by him.3. It will be necessary to keep proper accounts and records.4. It will be necessary to furnish monthly returns with any tax due.

Intending TradersThe regulations require any person who has grounds for believing he will qualify for registration mustapply for registration.Traders who intend to start trading fall into this category and may seek registration in order to recoverany input tax incurred in setting up the business (e.g. equipment, office machinery, lawyers, andarchitects fees).

1. Full information about the nature and size of the business; and2. Firm evidence of the stage reached in the development of the business such as contracts to

supply, procurement of stock and or services and the degree of financial commitment.

Branch RegistrationMany businesses operate from more than one set of premises, and it is important on any visit to thetrader that details of all branches etc. should be obtained and recorded in traders folder.Normally all branch activities are part of one legal entity and all figures (turnover, VAT etc.) areamalgamated for completion of a single VAT return, but some businesses may with to have branchesregistered separately, and Sec.22 of the VAT Act gives Commissioner authority to allow such

applications.The trader must apply in writing giving details and legal entity involved and breakdown of branchese.g. location/turnover/activity, and reason for requiring separate registrations.A separate VAT 101 must be completed for each branch.Divisional RegistrationLimited Companies may structure their organization and create autonomous units within same legalentity-and describe them as divisions. These can be separately registered in the same way asbranches.The procedure is the same except that box 21 of the VAT 101s is codes D

5.0 Changes in traders Particulars

A traders particulars/circumstances often change after registration. Quite often these changes canaffect the legal entity of the business and action needs to be taken by the trader and by the VATDepartment.

Section 23 of the VAT Act and Regulations 13 and 14 deals with this situation. Under section 23 a

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If any of the above conditions is not met then the transaction does not fall within the scope of MainlandTanzania VAT.

Supply of goods or services: The term supply is not defined in the VATA. For VAT purposes theterm is taken to mean to provide, to furnish or to serve. The supply can be of goods orservices and it is important to make the identification because the time of supply (sec.6)

and place of supply (sec.7) varies between goods and services.In most cases the supply is made for a consideration. It rarely occurs without consideration e.g. in thecase of self-supply of goods or provision of gifts.Supplied in Mainland Tanzania: In case of goods they should be situated in Tanzania at the time of

supply and in case of services the provider should belong in Mainland Tanzania.Supplied by a Taxable Person: The provider of either goods or services must be either registered by

the Commissioner or is required to be registered (sec. 2)

In the course of furtherance of business: The term business is defined in section 2 as, include allform of trade or commercial activity.

Furtherance of businessIt is not defined in the VATA.New Zealand Case N43 (1991) 13 NZTC, Bath gate DJ said at p3366: An act done for the purposeor object of furthering the (business), or achieving its goals, can be to help, or advance, and thus afurtherance of a taxable activity, although it may not necessarily be always in the course of thattaxable activity.

RETAIL SCHEMEThe purpose of retail scheme is to allow traders who are unable to issue tax invoices for every sale, toestimate their output tax by calculation, rather than by addition of tax charged on each transaction.

The traders are retailers selling to the general public, who do not normally require a tax invoice.Generally, they have high volume of low volume transactions. There is no formal definition of retailerin the Law or notice. Retail scheme is under General Regulation 14.

What is the purpose of retail schemes?To allow traders who are unable to issue tax invoices for every sale, to estimate their output tax bycalculation, rather than by the addition of tax charged on each transactions.

The traders are retailers selling to the general public, who do not normally require a tax invoice.Generally, they have high volume of low value transactions. They are mostly known as the Retailers.No formal definition of retailer in the law or notice. Retail scheme have been described underRegulation 14 of the VAT General Regulation 1998. Definition as per the dictionary- the sale of goodsto the public for use or consumption rather than for resale.

What are record keeping requirement? Regulation 12, drawing attention to concession allowed in12(C) - no requirement to keep record of value of each supply made). Retailers are not relieved of therequirement to issue receipts (see sec. 29 of the VAT Act.) Is it feasible or Desirable that retailersissue receipts? Or Keep records?

Yes. The Primary record retailers must keep is the record of daily gross takings - this is the record,which forms the starting point for the scheme calculations.Must keep a record of payments as they are received Must not reduce gross takings by amounts takenout of till Cheques treated as cash on day received Must include deposits if advance payments Non-

retail supplies e.g. sale of assets, sales to other registered traders must be excluded from the schemecalculations.

What are the schemes?Method 1

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Separation of standard and exempt goods at point of sale - or can be used if standard ratedgoods only are sold.

Would normally expect separation to be achieved by using a cash register with separatedepartment keys, or by using different till for each class of goods.

Could also be achieved by writing down cash sale as it takes place. (Reg. 12 states that arecord must be kept of each supply as it takes place, and each payment received.)

At the end of the period, the takings applicable to standard rated goods are totaled,Steps as per Reg. 14Step 1: Separate gross takings at the point of sale between taxable and exempt suppliesStep 2: Each day at the close of business total the records of gross takingsStep 3: At the end of the prescribed accounting period, from the records of taxable daily gross takings,calculate the tax using the tax fraction for the rate of tax in force and include the amount on the VATreturn for that period. VAT fraction applied; to give the output tax due.Method 1

Standard Rated Taking X 1/6= Output Tax

Method 2Where trader is unable or unwilling to separate at point of sale. .Sales of standard rates and exemptgoods are apportioned in the same ratio as taxable and exempt purchases made in the period. Alltaxable and exempt purchases are included, not just goods purchased for resale, expenses andoverheads are also included, which can have a very distortive effect

Step as per Regulation 14

Step 1: Record total gross taking for each day Step 2 : At the end of each prescribed accounting period total daily gross taking for that period Step 3: Allocate those gross takings to taxable supplies in the same proportion that the valuetaxable purchases made in the period bears to the value of total purchases in that period.

Step 4 : From the gross takings allocated to taxable supplies calculate the tax for the prescribedaccounting period using the tax fraction in force and include the amount on the VAT return for theperiod.

Taxable purchases x DGT Total x VAT FractionTotal Purchases

= Output tax

(Output figure for box 02 of the VAT return can be calculated by multiplying output tax x 5).

The trader must carry out on annual adjustment similar to that required for partial exemption, by

recalculating at the end of the tax year, using the whole years figures. If the annual adjustment revealsany over or underpayment, an appropriate entry is made in the VAT account in the first period after theend of the tax year. The trader is allowed to choose which method he wishes to use; having chosen hismethod, he must use it for one full accounting year.

Risk Involving Retail SchemesWhat are the risks involving retail schemes

1. Suppression of sales,2. Suppression of both sales and purchases3. Method 1 - Miskeying/misdescription4. Method 2 - Inclusion of services or ineligible transactions

How might these be detected and combated?1. Suppression of sales will depress the mark up achieved of both standard and exempt goods.2. Suppression of both sales and purchases will not affect mark up.

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3. Miskeying or miss-description of standard goods as exempt will depress standard rates mark upbut inflate exempt mark up.

4. Inclusion of ineligible items in method 2 will increase standard rated mark up, but the wronglyincluded items will not be fully taxed.

How can these problems be dealt with? By examination of mark ups achieved, and comparison with

mark up calculated from stock challenge .Extended challenge of stock to detect suppressed purchasesQuestioning of trader and staff to determine knowledge and practice in liability/keying errorsExaminations of records and interview with trader to discover any services or ineligible suppliesprovided Substantial suppression will probably be best dealt with by mark up exercise.

METHOD 2:TAXABLE PURCHASESTOTAL PURCHASES X DGTX 1/6 = OUTPUT TAXINPUT TAXCONDITIONS GOVERNING INPUT TAX DEDUCTIONTaxable persons may reclaim the VAT they incur on their purchases of goods and services subject to

the conditions (rules) mentioned below: The law is provided under sect.16 of the VATA 1997 andGeneral Regulations 1998 , Reg 3-8 of the Value Added Tax.

The amount to be claimed must actually be VAT properly charged by another taxable person orrelate to a taxable importation.It is important to establish whether there was an actual supply to the business?The existence of a tax invoice is not conclusive evidence that a supply has occurred. Firstly,invoices are often issued in advance. Secondly, the invoice could be fraudulent.

The supplies on which the tax was charged must be made to the person seeking to claim theinput tax. The supplies must be to the taxable person not to someone else. Check if the supply wasmade to the taxable person or to a third party?For example, payments made by a clearing and forwarding agent to third parties such as Customs,

DAHACO, THA etc. on behalf of his principal is an input tax of the principal, whether the receipt isissued in the name of the agent or importer.

The supplies must have been incurred for the purpose of the business. Is the expenditure forthe purpose of the business of the taxable person? Goods or services must be used or to be usedfor the purpose of the business. Refer cases

The supplies must normally be received in the accounting period on which the claim is to bemade.

The person seeking to claim input tax must hold satisfactory documentary evidence of thesupplies in support of his/her claim.

The supplies received must not be subject to input tax restriction i.e. non-deductible i.e.motorcars, entertainment.

(i) In case goods, the goods were in the ownership and possession of the taxable person at thedate of registration and the same were received not more than six months prior toregistration.

(ii) In case of services, the services were received not more than six months prior toregistration. Note: The services should relate to the goods in ownership and possession bythe taxable person at the date of registration.

(iii) There is documentary evidence to support purchases and utilization of the goods orservices on which input tax is claimed.

PARTIAL EXEMPTIONIf a trader makes only exempts supplies he is not liable to register for VAT. If he makes a mixture ofexempt and taxable supplies, he must register if the value of taxable supplies exceeds the registration

threshold. Such a trader is a partially exempt .The major disadvantage for traders making exemptsupplies is that they cannot register and therefore they can not reclaim the tax they are charged bytheir suppliers if it relates to their exempt supplies.

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What attributes to partially exempt trader? Types of Supplies these are Standard rated, zero rated,Exempt

What makes exempt supplies different from the others? Input tax incurred in making exempt suppliescannot be reclaimed

The registration position of trader who makes only exempt supplies cannot register for VAT purpose. Ifa trader makes a mixture of taxable and exempt supplies he must register if taxable suppliesexceed the threshold. Trader is then faced with problem of apportioning the input tax betweenexempt supplies (not claimable) and taxable supplies.Method1:Advantages

simple to operate No complicated bookkeeping required

Disadvantages

Crude method Recovery of input tax not related to use - may be significant amount of input tax not recovered.More suitable for smaller traders where books are simple, amount of tax not significant;Traders where taxable outputs are low compared to exempt outputs.

Method 2:Advantages

Better recovery of input tax Recovery related to use (attribution)Disadvantages

Need better records (to analyze input tax into the three categories) More difficult calculation Suitable for use by larger traders with better bookkeeping systems.The trader is entitled to choose whichever method he/she wishes.First MethodStep 1: Calculate the value of taxable supplies made in the prescribed accounting period.Step 2: Calculate the value of all supplies made in that period.Step 3: Calculate the amount of tax payable on supplies made to the registered person in that period.(Total input tax)Step 4: Divide the amount obtained in step 1 for the period by the amount obtained in step 2 (thevalue of all total supplies made in the period)Step 5: The amount of input tax to be claimed as a deduction or credit in the prescribedAccounting period is the product obtained by multiplying the amount obtained inStep 3 by the amount obtained in step 4.METHOD 1: FORMULARTaxable supplies x Total Input Tax = Deductible Input TaxTotal supplies

Second MethodStep 1: Divide input tax for the prescribed accounting period into categories:-Category A: input tax that is directly attributable to taxable supplies/;Category B: Input tax that is directly attributable to exempt suppliesCategory C: Input tax that is paid for the purposes of the business but is not directly attributable to

either taxable supplies or exempt supplies.Step 2: Calculate the value of taxable supplies made in the prescribed accounting period.Step 3: Calculate the value of all supplies made in that period.Step 4: Divide the amount obtained in step 2 for the period by the amount obtained in step 3 (thevalue of all total supplies made in the period)

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Step 5: The amount of input tax to be claimed as deduction or credit in the prescribed accountingperiod is the product obtained by multiplying the amount obtained in step 4 by the amount obtained incategory C( found in step 1) and then add the input tax attributable to taxable supplies ( category Afound under step 1)

Second Method:Taxable Supplies x C+ A = Deductible input taxTotal Supplies

EXAMPLE:PARTIAL EXEMPT TRADERThe taxable person indicates through his records that during the month of October 2006, VAT waspaid on his purchases as follows:TABLE

Value(Tshs)

VAT(Tshs)

VAT(Inclusive)

aSugar 50,000 10,000 60,000bCooking oil 75,000 15,000 90,000

c Laundry Soap 60,000 12,000 72,000

dTransportation of wheat flower and maize 10,000 2,000 12,000

eBags for re-packing wheat 12,500 2,500 15,000

f Tax invoice books 37,500 7,500 45,000

gElectricity 10,000 2,000 12,000

hTelephone 12,500 2,500 15,000

Total 267,500 53,500 321,000

Also during the same months, the taxable person supplies goods with the value indicated below:-

Value(Tshs)

VAT(Tshs)

VATInclusive

aSugar 60,000 12,000 72,000

bCooking oil 90,000 18,000 108,000

c Laundry soap 80,000 16,000 96,000

dToilet Soap 100,000 20,000 120,000

eWheat flour 40,000 Exempt 40,000

f Maize 30,000 Exempt 30,000

APPORTION OF INPUT TAX

FIRST METHODStep 1: The value of taxable supplies made is:

Tshs

a Sugar 60,000

b Cooking oil 90,000

c Laundry soap 80,000

d Toilet soap 100,000

Total 330,000

Step 2: Value of all supplies made is:Tshs

eSale of wheat flour 40,000

f Sale of maize 30,000

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gSale of taxable supplies( refer the total at step 1 above)

330,000

Total 400,000

Step 3: Tax paid to supplies made to the registered person:-

Tshs

a Sugar 10,000


C Laundry soap 12,000

d Transportation of wheat flour and maize 2,000

e Bags for re-packing wheat flour 2,500

f Tax invoice books 7,500

g Electricity 2,000

h Telephone 2,500

Total 53,500

Step 4: 330,000 400,000 = 0.825

Step 5: the amount of input tax to be claimed is:53,500 0.825 = 44,200/=

SECOND METHODStep 1: Category A: a) Input tax directly attributable to taxable supplies:-

Tshs

a Sugar 10,000b Cooking oil 15,000


Total 37,000

Category B

b) Input tax directly attributable to exempt supplies:

d Transportation of wheat flour 2,000

e Bags for re-packing wheat flour 2,500

Total 4,500

Category CInput tax paid for the purposes of business but is not directly attributable to either taxable supplies or

exempt supplies:

f Tax invoice books 7,500

g Electricity 2,000

h Telephone 2,500

Total 12,000

Step 2Calculate the value of taxable supplies made in the prescribed accounting period

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a Sugar 60,000



d Toilet soap 100,000

Total 330,000

Step 3Calculate the value of all supplies made in that period = 400,000

aSale of wheat flour 40,000

bSale of maize 30,000

cSale of taxable supplies ( refer the total at step 1 above) 330,000

Total 400,000

Step 4Divide the amount obtained in step 2 for the period by the amount obtained in step 3 ( the value of all

total supplies made in the period)

330,000 400,000 = 0.825

Deductible input tax:

Ratio obtained in step 4 of the first method is 0.825

Multiply the ratio by input tax in category C

12,000 x 0.825 = 9,900/=

The amount to be claimed is

Tshs 37,000 + 9,900 = 46,900/=

RECORD TO BE KEPT BY THE VAT REGISTERED TRADERS1) A VAT account, recording for each prescribed accounting period total VAT on outputs and inputs

together with the net difference to be paid to or reclaimed from the Commissioner;2) A record of each supply made related to the appropriate tax invoice or any other invoice;3) A record of the value of each supply made excluding VAT, together with the VAT charged on each

supply unless the taxable person is using one of the methods described in Regulation 13 in whichcase, the taxable person shall keep the records required under that regulation;

4) A record of each supply received related to the appropriate tax invoice, any other invoice or importdocument;

5) A record of the value of each supply received excluding VAT and the VAT charged;6) a record of the total VAT recorded in paragraphs and (e) for each prescribed accounting period;

7) a record of each payment made or received showing the date, amount and the person making orreceiving the payment;8) a record of all goods appropriate or taken into personal use or into the use of others, the date of

appropriation or taking into use, the description of the goods, the value of goods excluding VAT,and the VAT calculated on the goods.

Tax Invoices

(i) A Tax invoice shall prominently bear the words tax invoice on its face.(ii) A tax invoice for the supply of goods or services shall include the following particulars, namely: -

(a) The taxable persons name, address, TIN and VAT registration number;(b) The date of supply;

(c) The number of the invoice taken from a consecutive series;(d) The customers name, address, TIN and his VAT registration number;(e) A description sufficient to identify the goods or services supplied which includes the quantity

of goods or the extent of services supplied, tax exclusive price for each description of goods

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or services supplied, rate of tax; and The credit note mentioned under sub regulation (1)shall contain:

(f) The particulars prescribed for tax invoices;(g) The amount of credit;(h) A statement of the reason for credit.(i) The rate of any discount.

(j) A tax invoice shall indicate: -(k) The total charge exclusive of tax;(l) The total tax charged; and(m) The total charge inclusive of tax.

A registered taxable person shall issue a tax invoice. To a customer who is a taxable person in respectto any taxable supply of goods or services to that customer; Upon request by a customer who is not ataxable person; in respect of any taxable supply, at the time of supply or not later than fourteen daysafter the time of supply. A registered taxable person who has issued a tax invoice in respect of ataxable supply shall, unless the Commissioner otherwise allows, issue a credit note if

(a) The supply is cancelled;(b) The goods are returned to the registered taxable person;

(c) The value of the supply is reduced;The credit note mentioned under sub regulation (1) shall contain:

(a) The particulars prescribed for tax invoices;(b) The amount of credit;(c) A statement of the reason for credit.

SCOPE AND COVERAGE OF VAT

INTRODUCTIONVAT is a tax on transaction, it is therefore important for an officer to be able to determine the Place ofsupply, Time of supply and Value of supply of goods and services. It is also important to know fourcategories of untaxed goods and services that is zero rated supplies exempt supplies special relief

supplies, and outside the scope.Section 4 of the VAT Act states that; VAT shall be charged on any supply of goods or services inmainland Tanzania where it is a taxable supply made by a taxable person in the course or furtheranceof any business carried on by him.There is lots of scope for argument over the terms used in this definition some words and phrases arespecifically defined and we also need assistance in considering.

Time of supply Section 6

Place of supply of goods and services - Sec. 7

Values of a supply Section 13 & 14

Time of supply Section 6

6.-(1) For the purposes of this Act the time goods or services are supplied, shall be when (a) Goods are removed from the premises of the supplier or from other premises where the goodsare under his control to the person to whom they are supplied, or goods are made available tothe person to whom they are supplied;

(b) a tax invoice is issued in respect of the supply; or(c) Payment is received for all or part of the supply,(d) Service is rendered or performed.

Whichever time shall be the earliest.(2) Where, in respect of any supply referred to in subsection (1), payment is received or a tax invoice is

issued in respect of part of a supply, paragraph (b) or (c) of that subsection shall apply to that partof the supply, and the tax on it shall be paid accordingly.

(3) Where supplies are measured by meter the time of supply shall be the date of the first meterreading following the introduction of VAT and subsequently at the time of each meter reading,except to the extent that a tax invoice is issued or payment is made in respect of the supply.

(4) VAT on imported goods shall be charged and payable at the time custom duty, tax or levy ispayable in accordance with the Customs Law unless prescribed otherwise in the regulations made

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Outside the scopeThese are transactions, which are not covered by section 4. Possibly because there is no supply, noconsideration, or the supply is not by way of business.Examples are insurance claims, licenses, compensation payments, and fines.

1.0 Partially exempt trader:

If a trader makes only exempt supplies, he cannot register for VAT. If he makes a mixture of exemptand taxable supplies, he must register if the value of taxable supplies exceeds the threshold. Thesetraders are partially exemptThe major disadvantage for traders making exempt suppliers is that although they do not account fortax on their sales, they cannot reclaim the tax they are charged by their suppliers if it relates to theirexempt supplies.For example a shop owner who buys a freezer to keep meat in, or a mill to grind maize, which is soldas flour.How we deal with these partially exempt traders is covered in more detail on later courses).

VAT RETURN AND OTHER FORMS

Since VAT is a self-assessment tax, the taxable person is responsible for computing his own taxliability and filling returns. All registered traders are required under the law to submit returns for eachtax period even when no trading has taken place.

2. Interpretation of the main legal provisionsThe under mentioned guidelines, covering the significance and meaning, are provided for each of thelegal provisions listed in paragraph 1:-. a) Section 26(1)This section requires returns to be submitted monthly in arrears i.e. the July 1998 return must besubmitted at the latest, by 31st August 1998. In other words VAT collected at the beginning of a monthcan remain with the trader until the end of the following month. Submissions of returns and money will

probably be delayed until the very last minute unless the return is for a repayment when, obviously, thetrader will have an incentive to send in the return at the earliest possible date.b) Section 26(2)Traders may be allowed to have a different prescribed accounting period other than the calendarmonth but only with the written authority of the Commissioner e.g. a firm which closes its booksmonthly, say on the last Friday in each month, might want that date to be the end of the prescribedaccounting period. This provision allows the business community to link their VAT tax periods to theirexisting accounting arrangements. It is more likely to be used by the large multi-national organizationswith standard accounting periods.

c) Section 26(3)In terms of Section 17(1) and 26(3) of the VAT Act, every taxable person must, by the last working dayof the month after the end of the prescribed accounting period or such other time as the Commissionermay determine, pay the tax payable by him.

d) Section 27(1)In terms of section 27(1) a person who fails to submit a return or pay tax for a specific period, becomesliable:(a) To pay a penalty of T.shs. 50,000 or 1% of the tax shown as payable in respect of the

prescribed accounting period covered by the return, whichever is greater; and(ii) A further penalty of T.shs. 100,000 or 2% of the tax shown as payable in respect of the prescribed

accounting period covered by the return, whichever is greater, shall be payable for each month or

part month thereafter.e) Section 28(1) to (5)This section covers the charging of interest, the rate of interest to be applied, compounding of interestand the interest to be paid to registered traders on tax, which has not been refunded by the due date.(i) Interest is levied on any unpaid amount of tax (including penalties and any unpaid interest)

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each month or part thereof.(ii) The rate of interest shall be the bank-lending rate of Central Bank plus 5%.(iii) Interest shall be paid to traders where any tax due to be repaid by the Commissioner

remains un-refunded after the due date in accordance with the provision of section 17(2) and (4).The Commissioner shall pay interest to the taxable person at the commercial bank lending ratefor the time being determined by the Central Bank.

Calculation of InterestI = P (1 + R/12)n - 1)

Where: I= interestP= Principal plus any penaltyR=bank lending rate of the central bank Plus 5%n=period for VAT i.e. months e.g. three months etc

Tax PeriodThe period covered by a tax return is known as the tax period. In the Tanzanian system this is one

calendar month.

3.0 Particulars of Return form (VAT 201)The VAT Return Form (VAT 201)The VAT return form has been designed to be user friendly. That means it should require theminimum amount of information from a registered trader and should, with some familiarization, bereasonably easy to complete.The VAT return form is intended to cover only a traders tax liability, based on the normal suppliesmade and received (outputs and inputs) for a specific period. It does not make provision for theadjustment of any over/under payments or over/under declarations of tax. Any errors discovered bythe trader should be notified in writing and adjusted in the VAT account for the next tax period.

The registered trader should not use the VAT return to account for any interest or penalties payable.These will be calculated by the computer system and by vetting officers and the amounts due notifiedby use of penalty and/or interest notice

All VAT forms, including the VAT returns, are available free of charge.Completion of the Return Form (VAT 201)The taxable person must complete his return form using the information extracted from his accountingrecords. The form should reflect the summary totals of input tax, output tax and the differencebetween the two as contained in the traders VAT Account.

REFUND AND REPAYMENTSIn the normal VAT system at the end of tax period the registered traders deducts input tax from outputtax and pays the difference to TRA. In other circumstances input tax may exceed output tax. In thiscase repayment situation occurs whereby the credit amount has to be refunded according to theprovisions under section 17 of the VAT Act.

INTERPRETATION OF THE MAIN LEGAL PROVISIONS(a) Section 17(2) of the VAT Act, 1997

This section requires the Commissioner General to remit to the taxable person the amount of tax towhich the taxable person stands in credit by reason of excessive input tax over the output tax inrespect a particular prescribed accounting period.

The provision also spells out the time limit during which repayment should be effected.

(b) Section 17(3) of the VAT Act, 1997

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This provision puts an option to the taxable person to apply to the Commissioner for refunds to bemade on monthly basis. This implies that unless the taxable person applies for refunds to be madeon monthly basis, repayments will be made on half yearly basis.(c) Section 17(4) of the VAT Act, 1997This section requires the Commissioner General to remit to the taxable person approved to berepaid on monthly basis the amount of tax to which the taxable person stands in credit. It also

spells the time limit of repayment to be within thirty days after the due date for lodging the return forthe prescribed accounting period, or the date of receipt of the return, whichever is later.(d) Section 17(5) of the VAT Act, 1997This section authorizes the Commissioner General to reduce the amount of repayment by any sumowing to the TRA by the taxable person before making repayment. Upon doing this, the taxableperson must accordingly be informed in writing.(e) Section 17(6) of the VAT Act, 1997

This provision defines the half-year to imply any successive period of six calendar monthscommencing in the month for which a repayment return is first submitted.

(f) Section 17(7) of the VAT Act, 1997This provision defines the regularly results in excess credits to apply to a situation where over

a six month period the total input tax credit for the prescribed accounting periods exceeds thetotal tax charged and paid on supplies.

(g) Section 28(5) of the VAT Act, 1997This provision gives warning to the Tax Authority to expedite verification of repayment casesand effect refunds within the time spelt out under section 17(2) and (4) of the same Act,otherwise the Authority will be subjected to pay interest to the taxable person on any un-refunded amount.

(h) Section 35 of the VAT Act, 1997This section allows the Commissioner to impose some security measures (where he believesthere is a risk to the revenue) before repaying the tax. The security measures may range fromrequiring the taxable person to produce documents relating to input tax or financial bond

(guarantee).(i) Section 69 of the VAT Act, 1997This section gives the Commissioner General a leeway to repay or remit the VAT, which is paidto the Tax Authority, or VAT due which is not charged and paid by the taxable person becauseof misunderstanding arising from incorrect or misleading advice by an officer.

1.0 REPAYMENT CLAIMS CAN ARISE:

On exportation of goods and taxable services by a taxable person (exports are zero rated).

When input tax exceeds output tax in a prescribed accounting period (e.g. when taxable goods

are bought in large quantities or when high value capital goods liable for VAT are bought).

The TRA must repay money legitimately claimed as due by registered traders promptly, otherwiseinterest becomes payable. It is therefore essential that claims for, repayments are processed andpayment made within the time limits specified in the VAT Act, 1997.

2.0 TYPES OF REPAYMENTS:Half-year repayment claimsOnce half yearly repayment claims are received, the RRO should ensure that they have beenentered into a register and have been assigned to officers responsible for refunds. These officersshould make a quick but thorough verification e.g. by using the information contained in form VAT201A or even having a quick check on taxpayers records.

Regular repayment returnsNormally the Commissioner is approving the regular repayment traders. These traders will not berequired to apply for repayment i.e. they will not be required to complete form VAT 208. Once their

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returns have been submitted, they must be verified within two to three days and must also undergothe normal channels of returns processing up to the final stage of debatching/ filling

ASSESSMENT AND ENFORCEMENT

INTRODUCTION:The key objectives of the VAT Department are to maximize revenue collection and improve tradercompliance; efficient enforcement/debt management action has a vital role to pay in achievement ofthese objectives. It is very important; therefore, that prompt action is taken each month to ensure thattrader debts are collected, utilizing the full range of powers available under the law.

This lesson covers the procedures to be followed when dealing with VAT debts, Non-Filers andMissing Traders. It explains the steps to be taken to effect recovery of all tax arrears and action to be

taken to obtain returns.The main legal provisions in the VAT Act 1997 relating to the rendering of returns, payment andenforcement are as follows:

INTERPRETATION OF THE LAW(a) Section 26(3) of the VAT Act, 1997.

This section requires the taxable person to lodge the VAT Return to the VAT office by the lastworking day of the month following the month of business. It also requires the taxable personto lodge his return to the VAT office within the time determined by the Commissioner by noticein writing (in particular cases).

(b) Section 27 of the VAT Act, 1997:

This section provides for automatic penalties without recourse to the courts, if tax returns arenot lodged on time. The imposition of automatic penalties saves time, which could have beenspent in prosecuting such cases in the courts of law. It also saves time in terms of taxadministration.

(c) Section 28 of the VAT Act, 1997(i) Sub-sections (1) & (2)

These sub-sections provide for interest to be charged automatically at the commercial banklending rate of the Central Bank plus 5% per annum, if payment is made after the due date.The aim of these provisions is to discourage delay in making tax payments and returns to theGovernment.

Sub-sections (3) & (4)These provisions are also important if the Government revenue income is to be improved ormaintained. The interest payable, while it remains unpaid, attracts interest as if it forms part ofthe unpaid tax.

(d) Section 31 of the VAT Act, 1997This section provides for all monies owing to the Commissioner General to be recovered as acivil debt. The effective enforcement of debts is essential if revenue flow is to be maintained.

(e) Section 32 of the VAT Act, 1997This section provides for VAT debts of a taxable person to be recovered from any funds of thetaxable person held by another party. E.g. a bank or customer of the taxable person.

(f) Section 33 of the VAT Act, 1997

This provision authorizes the Commissioner to request immediate payment of tax where thereare grounds for believing the tax is at risk. It acts against taxable persons increasing their taxliabilities before the due date for tax payment with little chance of being able to pay on the duedate, either willfully or through negligence.

(g) Section 34 of the VAT Act, 1977

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This section provides for distress action on the authority of the Commissioner, for any tax orinterest due from a taxable person, which remains unpaid, or where the taxable person refusesto pay the tax assessed by the Commissioner, Section 34 (6) makes it an offence at interferewith items on which distress has been levied.

(h) Section 37 of the VAT Act, 1997This provision requires anyone involved with supplies or imports, to produce books, records,

accounts, any correspondence relevant to the transactions and to furnish information aboutthem. The provisions also relate to records and information stored on computer. Failure tocomply with the requirements of this section is an offence. An authorized officer may takecopies of any records or documents, or remove them, providing a receipt, if he does so. Theperson from whom the records or documents are taken will be provided with copies, withoutcharge, if they are needed for the business. Compensation will be paid if anything removed islost of damaged.

(i) Section 38 of the VAT Act, 1997This section gives authority for access to records held by a Public Officer. E.g. in tracingmissing traders or verifying eligibility to special reliefs or exemptions.

(j) Section 39 of the VAT Act, 1997

This section authorizes an officer to enter business premises and examine goods and businessrecords thereon, including records held on computer. It also provides for search of premiseswhere a magistrate is satisfied that there is reason to believe there has been a tax fraud andthat the goods involved, or evidence of the fraud are on the premises.

(k) Section 43 of the VAT Act, 1997This section authorizes assessments of tax to be made when there are grounds for believingthat a tax return is incorrect, or a tax return has not been made by the due date, or a taxableperson has not kept proper and adequate records for his business.

CIRCUMSTANCES UNDER WHICH ASSESSMENTS ARE RAISED.

The VAT system depends on traders making returns and paying the tax due on a regular basis. Why,then should we need to issue assessments of tax?Because sometimes

1. Traders fail to submit their returns, or1. Traders submit returns, which are inaccurate.

Case 1 is revealed because the computer is expecting a return from every trader.A report is generated every month of traders whose returns have not been received by a certain date.

These traders are known as non filers.Action is taken by the enforcement section in the VAT office to chase up these traders and get returnsfrom them. If the return is not forthcoming, an assessment will be issued.Assessments of either type are due for payment within one month of issue.

Interest can also be charged, and in the case of non-submission of returns, a penalty is also imposed -to encourage the trader to comply in the future.

SCHEMES FOR OBTAINING UNDUE TAX BENEFITSWhere the Commissioner is satisfied that any scheme that has the effect of conferring aTax benefit on any person was entered into or carried out(a) Solely or mainly for the purpose of obtaining that benefit; and(b) by means or in a manner that would not normally be employed for bona fide business purposes, orby means of the creation of rights or obligations that would not normally be created between personsdealing at arms length; the Commissioner may determine the liability for any tax imposed by the VAT

Act, and its amount, as if the scheme had not been entered into or carried out, or in such manner as, inthe circumstances of the case, he considers appropriate for the prevention or diminution of the taxbenefits sought to be obtained by the scheme.

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of the tax evaded; whichever is greater, or to imprisonment for a term not less than six monthsbut not exceeding three years, or to both the fine and imprisonment.

(3) Any goods which are the subject of an offence under this section shall, if the court convicts andso orders be forfeited.

Publication of List of Persons who Commit Offences

Section. 48(1) The Commissioner may publish a notice in the Government Gazette or any other newspapers

circulating in Tanzania a list of persons who (a) fails to comply with the provisions of section 17(1);(b) have been convicted of an offence against sections 45, 46, or 47; or(c) have conducted himself in a manner which amount to an offence which is an offencereferred to under paragraph (b).

(2) Publication of a name of a person in pursuance of subsection (1)(b) or (c) shall be done after anyproceedings in respect of appeal or review thereof have been completed or not been institutedwithin the period provided for.

(3) Every such list may specify (a) The name and address of the person complained of;(b) Particulars of the conduct complained of;(c) Tax period during which the conduct complained of occurred;(d) The amount of the tax involved;(e) The particulars of the fine or sentence imposed.[s. 47A]

Compounding Of OffencesSection 49(1) If a person alleged to have committed an offence under this Act agrees in writing to pay a fine

determined by the Commissioner which does not exceed the maximum fine provided by this Act for

the offence, theCommissioner may compound the offence and impose the fine, provided that, if criminalproceedings have been instituted against the alleged offender for such offence, the powerconferred by this subsection shall not be exercised without the written consent of the Director ofPublic Prosecutions.

(2) A person accepting a fine under subsection (1) shall be provided by the Commissioner with acertificate setting out the nature of the offence, thedate or period of its occurrence, the fine paid, and any conditions to the compoundingagreement.

(3) If the fine imposed under subsection (1) is not paid on demand the Commissioner may institutecourt proceedings or may take steps for recovery of the fine in any manner permitted by this Act forthe recovery of unpaid tax.

(4) The imposition of a fine under subsection (1) shall not be regarded as conviction for the allegedoffence and, provided the fine is paid in full, no prosecution for the alleged offence shall beinstituted or maintained.

(5) Nothing in this section shall in any way affect liability for the payment of tax or interest due underthis Act.

Detention of GoodsSection. 50(1) Where there is reason to believe that VAT has been fraudulently evaded or claimed or deducted

the goods concerned may be taken from the possession of any person involved in the suspectedoffence and detained by the Commissioner pending the outcome of his inquiries or the completion

of offence proceedings.(2) A receipt listing any item detained shall be provided.(3) The person from whom the goods are taken under subsection (1) may appeal against the detention

or continuing detention to an Appeals Tribunal.

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Offence by Body CorporateSection 51Where any offence under this Act or any regulations made under it has been committed by a body ofpersons, whether corporate or unincorporated, any person who, at the time of the commission of theoffence, was concerned with the management of the affairs of the body of persons as director, partner,agent or an officer, shall be guilty of the offence.

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