ACCF 3108 : Business and International Taxation

University Of TechnologyMauritius

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Tutorial 7 & 8VAT and PAYE – MauritiusVAT - Value Added Tax Act 1998Definition of certain critical terms:-Exempt supply – means a supply of such goods or services exempted from the payment of VAT as are specified in the First Schedule-Goods:(a) Any movable or immovable property; and(b) Includes animal; but(c) Does not include money.-Output tax – in relation to a taxable person, means VAT on the taxable supplies he/she makes in the course or furtherance of his business

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- Taxable period – When yearly turnover greater than Rs 2m, then it has to submit quarterly VAT return and if yearly turnover is greater than Rs 12m, then submit monthly VAT return.

- Taxable supply – means a supply of goods in Mauritius, or supply of services performed or utilised in Mauritius; and

(a) Includes a supply which is zero-rated; but(b) Does not include an exempt supply,Made by a taxable person in the course or furtherance of his/her

business.Rate of VAT – 15%Zero rating VAT:(1) Where a taxable person supplies goods or services and the supply is

zero-rated – (a) No VAT shall be charged on the supply; but(b) It shall in all respects be treated as a taxable supply; and Accordingly the rate at which VAT is treated as charged on the supply

shall be nil.Pravesh 3

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- Zero rating VAT (CONT’D)(2) A supply of goods or services is zero-rated by virtue of this section if

the goods and services are of a description specified in the Fifth Schedule

- Value of taxable supplies:(1) For the purposes of the VAT Act 1998, the value of any taxable supply

made by a taxable person shall, subject to the other provisions of this Act, be determined in accordance with the provisions of this section.

(2) If the supply is for consideration in money, its value shall be taken to be such amount as, with the addition of the VAT chargeable, is equal to the consideration.

(3) If the supply is for a consideration not consisting or not wholly consisting of money, the value of the supply shall betaken to be the open market value of the supply.

(4) Where a taxable supply is not the only matter to which a consideration in money relates, the supply shall be deemed to be for such part of the consideration as is properly attributable to it.

- Value of taxable supplies (CONT’D)(5) For the purposes of subsection (3), the open market value of a supply of goods

or services shall be taken to be the amount that would fall to be taken as its value under subsection (2) if the supply were for such consideration in money as would be payable by a person who has no relationship with any person which would affect that consideration.

(6) Where a supply of any of the goods specified in Part I of the Seventh Schedule is made by a registered person –

(a) At the stage in the chain of distribution immediately before the stage of retail, VAT shall be calculated on such value of the supply as excludes the retail margin.

(b) At the stage of retail, VAT shall be calculated on the value of the supply as specified in paragraph (a).

(7) Where a supply of any goods specified in Part II of the Seventh Schedule is made by a registered person –

(a) At the stage in the chain of distribution immediately before the stage of retail, VAT shall be calculated on such value of the supply as includes the retail margin.

(b) At the stage of retail, VAT shall be calculated on the value of the supply as specified in paragraph (a).

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Registration for VAT:Compulsory and voluntary registrationCompulsory registration occurs when MRA determines that the turnover of a trader/company exceeds the VAT threshold, that is the turnover is above Rs 2m yearly, as a result of which that trader/Company must be VAT Registered.Voluntary registration occurs when a trader/company expects that its yearly turnover will exceed Rs 2m and is not an exempt trade then that trader/company can register for VAT.VAT input v/s outputOutput VAT – VAT on sales, which the trader/company collect from his clientsInput VAT – VAT on purchases, which the trader/company paid to VAT registered suppliers.

VAT return forms:VAT 1 – RegistrationVAT 3 – Return of VATVAT 4 – Claim for repayment

The VAT Registration form refers to either ‘compulsory’ or ‘voluntary registration’.The VAT Return form is submitted either monthly or quarterly, maximum 20 days after month/quarter end. Late filing will be subject to penalties.The VAT Claim for repayment occurs when the VAT input is greater than VAT output and subject to exempt income received by the trader/company.

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Example of VAT input and VAT output

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Input tax –Purchase Pen Rs

10 Vat excl

Output tax – pen sold for Rs

20 Vat excl

Vat remitted Rs 1.5 to MRA

PAYE – Pay As You EarnPAYE is the tax withheld by an employer on taxable income of employees’ and remitted to the MRA.The employer shall remit the withheld tax within 20 days from the end of month in which the tax was withheld.As per Section 100 (1) (A) & (B):- Every person registered as an employer for the purposes of PAYE who, at any time has in his employment 50 or more employees shall, unless otherwise authorised, submit his PAYE return and remit the tax withheld to MRA-Every employer, irrespective of the number of employees in his employment; who submits his PAYE return and remits the tax withheld in the manner specified in above, shall – (a)Notwithstanding subsection (1), pay the tax so withheld on or before the end of the month immediately following the month in which the tax was withheld; and(b)Continue to submit his PAYE return and remit the tax withheld electronically until such time as he ceases to be an employer.

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PAYE - CONT’DSection 100 (2) ITA 1995:An employer who has not withheld tax as required by this Sub-Part shall be liable to pay to MRA the amount of tax which has not been so withheld but the employer shall be entitled to recover that amount from the employee.PAYE COMPUTATION

The tax is allocated over 13 months, where in December it will cater for bonus element (2 months).

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Details Rs

Basic – Yearly (A) XXX

Add bonus EOY (B) XX

Total income (A) + (B) = C XXX

Less EDF claimed by employee (D) (XXX)

Taxable income C – D = E XX

Tax @15% =E*15%

Travelling allowance is allowable, whereas car benefit is taxable.Ex: White goes work by bus and has a travelling allowance based on bus fares and attendance – this bus fare refund is not taxable.Whereas Black, the senior manager gets a company car for his work and personal use, which is assessable at Rs 4,000 per month as car benefit, this is taxable.

Example of PAYE:Z Ltd has 2 employees who earned monthly salary as follows:Jean Rs 25,000 Claimed EDF Category APaul Rs 50,000 Claimed EDF Category C

Compute the PAYE, payable by Z Ltd?

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AnswerJean Claim EDF Rs 255,000 for Category APAYE Retained = (25,000 – 19,615)*15% = Rs 808 (to nearest Rs)

Paul claimed EDF Rs 425,000 for Category CPAYE retained = (50,000 – 32,692)*15% = Rs 2,596

Total PAYE payable by Z Ltd = (808 + 2,596) = Rs 3,404

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