I didn’t charge my customer VAT, what now?
Every registered person who carries on a “taxable activity” is by law, required to levy value-added tax (VAT) on their supplies of goods/services, unless exempt from VAT.
The VAT can be levied at 15% or 0%.
Taxable activity is defined as “any activity carried on continuously or regularly by any person in Namibia or partly in Namibia, whether or not for a profit, that involves or is intended to involve, in whole or in part, the supply of goods or services to any other person for consideration …”
Where a sale is subject to VAT at 15% and the registered person does not levy the 15% VAT on the sale, the consideration (i.e. the selling price), received by the registered person on which VAT is required to be levied, shall be regarded to be inclusive of the VAT not charged by the registered person.
Furthermore, the revenue earned by the registered person will be reduced by 15/115 of the amount charged, implying less revenue is earned due to this error of not charging 15% VAT when due.
Example
Let us consider an example:
Mr. B, a registered person, sells goods for N$100.
In terms of the VAT Act, Mr B is required to levy 15% VAT on his sale; resulting in the selling price being N$ 115 (N$100 *15% plus N$ 100). Mr. B would therefore record sales of N$100 in his books and N$15 as output VAT due to Inland Revenue.
Where Mr. B erroneously neglects to charge 15% VAT on his sale, the effect of the above-mentioned provision results in Mr. B only being able to record sales of N$87, the net of the selling price reduced by the tax fraction (15/115 * N$100) as the N$100 is deemed to be inclusive of the output VAT due to Inland Revenue.
Lesson learned
It is important for every registered person to ensure that 15% VAT which is due on the sale of goods or rendering of services are correctly charged to customers/clients. Non-compliance or incorrect application leads to reduced revenue and reduced profits, as illustrated in the above example.
In these times this is an implication no business can afford.
Memory Mbai is the senior manager in VAT at PwC Namibia. This series on tax is published bi-monthly on a Monday in Market Watch.
The VAT can be levied at 15% or 0%.
Taxable activity is defined as “any activity carried on continuously or regularly by any person in Namibia or partly in Namibia, whether or not for a profit, that involves or is intended to involve, in whole or in part, the supply of goods or services to any other person for consideration …”
Where a sale is subject to VAT at 15% and the registered person does not levy the 15% VAT on the sale, the consideration (i.e. the selling price), received by the registered person on which VAT is required to be levied, shall be regarded to be inclusive of the VAT not charged by the registered person.
Furthermore, the revenue earned by the registered person will be reduced by 15/115 of the amount charged, implying less revenue is earned due to this error of not charging 15% VAT when due.
Example
Let us consider an example:
Mr. B, a registered person, sells goods for N$100.
In terms of the VAT Act, Mr B is required to levy 15% VAT on his sale; resulting in the selling price being N$ 115 (N$100 *15% plus N$ 100). Mr. B would therefore record sales of N$100 in his books and N$15 as output VAT due to Inland Revenue.
Where Mr. B erroneously neglects to charge 15% VAT on his sale, the effect of the above-mentioned provision results in Mr. B only being able to record sales of N$87, the net of the selling price reduced by the tax fraction (15/115 * N$100) as the N$100 is deemed to be inclusive of the output VAT due to Inland Revenue.
Lesson learned
It is important for every registered person to ensure that 15% VAT which is due on the sale of goods or rendering of services are correctly charged to customers/clients. Non-compliance or incorrect application leads to reduced revenue and reduced profits, as illustrated in the above example.
In these times this is an implication no business can afford.
Memory Mbai is the senior manager in VAT at PwC Namibia. This series on tax is published bi-monthly on a Monday in Market Watch.
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