Partly exempt businesses, making both exempt and taxable supplies, must calculate their input tax in accordance with the partial exemption method. The calculations for determining input tax recoverable should be retained to provide a clear audit trail between VAT incurred on costs and VAT recovered per the VAT return.
Specific VAT rules
A VAT-registered person who has made a supply and paid tax on that supply can apply for a refund or remission of the VAT paid under the following circumstances:
where three years have elapsed since the date of that supply and the debt has not been recovered; or
before three years have elapsed where the debtor has been declared legally insolvent; and
where the debt is not more than five years old.
The taxpayer must prove that reasonable attempts have been made without success to collect the debt.
Land and buildings
The renting, leasing, hiring or letting of land and residential buildings is exempt from VAT. The exemption does not apply where such services are supplied in respect of car park services or conference or exhibition services, except where provided for educational institutions as part of learning.
However, renting, leasing, hiring or letting of buildings used for nonresidential purposes is subject to VAT with effect from 1 January 2008.
The sale of land and buildings is exempt from VAT.
There is a claw-back provision on sale, disposal or conversion of business premises. Where a registered person has deducted input tax in respect of business premises in which taxable supplies are made and subsequently, before the expiry of five years, the whole or any portion of the premises is sold or disposed or converted for use in making exempt supplies (from the date the construction of such premises was completed), such tax or portion thereof must be paid as output tax to the Commissioner within 30 days of such sale, disposal or conversion.
Input tax on secondhand goods is deductible. Output tax is to be accounted for on taxable secondhand goods. The exception is where input tax included in the purchase price of such goods was not allowable for deduction.
Tour operation and travel agency services, including travel, hotel, holiday and other supplies made to travellers, are generally exempt from tax. Excluded from this are in-house supplies and services provided for commission other than commission earned on air ticketing.
In this context in-house supplies means supplies that are either made from own resources or bought in from third parties but are materially altered so that the supply made is substantially different to that purchased.
Transfer of a business
Where a person disposes of a registered business as a going concern to another registered person, both registered persons, within 30 days, must provide the Commissioner with details of the transaction, of the arrangements made for payment of
tax due on supplies already made, of details regarding assets and stocks of taxable goods on hand at the date of disposal, and of arrangements made for transferring the responsibility for record keeping relating to the business before disposal.
Unless the Commissioner has reason to believe that there would be undue risk to the revenue and notifies the registered persons accordingly within 14 days of receipt of the notification, the assets and stocks of taxable goods on hand may be transferred without payment of the tax otherwise due and payable.
Notwithstanding that the business is being disposed of by the registered person as a going concern, the registered person will remain registered and be responsible for all matters in relation to the business prior to its disposal until such time as all requirements have been properly complied with.
Usually the grant of a repair under warrenty would be included in the price of goods or services to be provided under that warranty, and on that basis VAT would have been accounted for when accounting for the VAT on the taxable goods or services.
If warranty repairs are made without a further charge, the consideration for repair under warranty would be nil.
A VAT incentive scheme provides for VAT remission on certain capital goods, effectively resulting in no payment of VAT on the purchase or importation of certain capital goods. Under normal circumstances, VAT will be paid on capital goods on purchase or importation and will subsequently be recovered as a credit against output