VAT: Sale of livestock, animal products
16 November 2020 | Business
Farming is an important sector in the Namibian economy. Special rules for value-added tax (VAT) apply and should be kept in mind when buying or selling livestock.
Furthermore, animal products such as hides and skins are subject to export levies, and the exporter must pay these levies to Customs and Excise Namibia.
The sale of livestock by a VAT registered farmer is a zero-rated supply in terms of the Namibian VAT Act. This means, if one farmer sells cattle to another farmer, the sale will be subject to VAT at the zero rate and VAT should not be charged by the VAT registered seller.
The seller will qualify for an input tax deduction on the acquisition of goods and services related to cattle farming since a zero-rated VAT supply remains a taxable supply. Cattle feed, medicines, vaccines and veterinary services rendered to the farmer are examples of allowable input tax claims.
The farmer buying the cattle cannot deduct any input tax as no VAT was paid, but the VAT on other charges, such as transport fees could qualify as deductible input VAT as this expense relates to the farming of cattle. The farmer buying the cattle will only be able to deduct this input VAT on transport expenses if the transporter charges VAT and if the farmer is registered for VAT.
The term “livestock”, is not defined in the VAT Act. The general interpretation is that all livestock including sheep, goats, cattle and poultry would thus fall within the ambit of what constitutes livestock. It is however important to note that the zero-rating provision specifically excludes a supply of game from the zero rating. By implication, the supply thereof would be subject to VAT at the standard rate.
Export of animal products
The Export Levy Act, 2016 was amended by Government Gazette No. 7080 dated 20 December 2019 to make the following products subject to the export levy:
* Raw hides and skins of bovine animals (cattle), wet or dry, whether tanned, de-haired or split: 60%
* Goat and sheep skins, wet or dry and whether salted or not: 60%
* Pickled skins of various animals (including crocodiles): 15%
The levies are payable to Customs and Excise Namibia on export and the value is the price charged by the exporter. The export levy is considered as a final tax.
In exceptional cases where the price charged is considered lower than the prescribed valuations contained with the Customs and Excise Act, remedial action may be taken by Customs and Excise to ascertain the value on which the export levy should be determined.
* Memory Mbai is the senior manager for VAT at PwC Namibia.
Furthermore, animal products such as hides and skins are subject to export levies, and the exporter must pay these levies to Customs and Excise Namibia.
The sale of livestock by a VAT registered farmer is a zero-rated supply in terms of the Namibian VAT Act. This means, if one farmer sells cattle to another farmer, the sale will be subject to VAT at the zero rate and VAT should not be charged by the VAT registered seller.
The seller will qualify for an input tax deduction on the acquisition of goods and services related to cattle farming since a zero-rated VAT supply remains a taxable supply. Cattle feed, medicines, vaccines and veterinary services rendered to the farmer are examples of allowable input tax claims.
The farmer buying the cattle cannot deduct any input tax as no VAT was paid, but the VAT on other charges, such as transport fees could qualify as deductible input VAT as this expense relates to the farming of cattle. The farmer buying the cattle will only be able to deduct this input VAT on transport expenses if the transporter charges VAT and if the farmer is registered for VAT.
The term “livestock”, is not defined in the VAT Act. The general interpretation is that all livestock including sheep, goats, cattle and poultry would thus fall within the ambit of what constitutes livestock. It is however important to note that the zero-rating provision specifically excludes a supply of game from the zero rating. By implication, the supply thereof would be subject to VAT at the standard rate.
Export of animal products
The Export Levy Act, 2016 was amended by Government Gazette No. 7080 dated 20 December 2019 to make the following products subject to the export levy:
* Raw hides and skins of bovine animals (cattle), wet or dry, whether tanned, de-haired or split: 60%
* Goat and sheep skins, wet or dry and whether salted or not: 60%
* Pickled skins of various animals (including crocodiles): 15%
The levies are payable to Customs and Excise Namibia on export and the value is the price charged by the exporter. The export levy is considered as a final tax.
In exceptional cases where the price charged is considered lower than the prescribed valuations contained with the Customs and Excise Act, remedial action may be taken by Customs and Excise to ascertain the value on which the export levy should be determined.
* Memory Mbai is the senior manager for VAT at PwC Namibia.
Classifieds