The Government of Vanuatu has officially advised that Value Added Tax (VAT) rate will increase from 12.5% to 15% from next Monday January 1, 2018.
This change comes as a result of the recent amendment to the Value Added Tax legislation by Parliament.
The change has already been gazetted in the Government’s Official Gazette on December 22, 2017.
The VAT Office has instructed all retailers to put up a notice between January 1 and 21 next year in their shops to let customers know that an adjustment may be made at the till (cash register) to account for VAT at the new rate.
“The simplest way to increase your VAT inclusive prices to reflect the increase (2.5%) in the VAT rate to 15%, just multiply your old price by 115/112.5,” the VAT office instructed retail owners.
In another statement to business houses, the VAT office has advised in a summary of how the rate change will impact business.
“Businesses registered for VAT on a payments basis; Payments received or made on or after 1 January 2018 for invoices issued on or after 1 January 2018 will attract the new rate of 15%,” it stated.
“Payments received or made for invoices issued before 1 January 2018 will remain at 12.5%.
“However an adjustment will be required on your VAT return to correctly account for it.
“Details are in the Transitional Guide released by the VAT Office which can be downloaded.
“For Businesses registered for VAT on an invoice basis;If the invoice was issued before 1 January 2018, the old rate of 12.5% applies (and will be included in that period’s VAT return).”
If the invoice is issued after January 1, 2018, the new rate of 15% applies.
The statement reiterated that clients are reminded that the next two VAT returns that are due on January 5 and January 27 2018 relate to the period’s November and December 2017 respectively, and therefore the old rate of 12.5% still applies when calculating VAT payable/refundable.
“Businesses utilising computerised accounting systems such as Xero, MYOB, Quickbooks, Opera, RoomMaster, etc. will need to manually update the tax rate in these systems on Monday 1 January 2018 to ensure that the correct VAT rate is charged. Please contact your software support provider/preferred advisor should you require assistance with this.”
The Customs & Inland Revenue VAT office then outlined new VAT calculations with examples through questions and answers.
Question 1: How much do i need to increase my price by to take into account of the increase in VAT?
“Example- An item in your shop is currently priced at Vt2,250 inclusive of VAT (at 12.5%), you simply multiply the price by 115/112.5 thus Vt2,250 X 115/112.5= Vt2,300- price inclusive of VAT 15% and the new price is increased by 2.5% or Vt50.”
Question 2: My prices are VAT inclusive. How do i calculate the amount of VAT (at the new rate included in my price?
“If you charge a VAT inclusive price, you just need to divide the VAT inclusive amount by 7.6667 or multiply by 3/23.
“Example- if you sell something for Vt115 inclusive of VAT at 15% then simply divide the VAT inclusive amount by 7.6667 multiply 3/23 thus Vt 115 divide by 7.6667 = Vt 15 (VAT included in price) or Vt115 multiply 3/23 = Vt15 (VAT included in price)”
Question 3: How do i calculate the VAT component of a VAT- exclusive price using the 15% rate?
“You will need to multiply the VAT exclusive price by the fraction 3/20. If you have an item with a VAT exclusive price of Vt 100 and you want to add 15% VAT thus Vt100 multiply by 3/20 = vt15 ( to add to price).”
This change came about after much pressure from the private sector against the proposed introduction of another tax- income tax.
The Daily Post has contacted the Department of Customs and Inland Revenue for further information but was unsuccessful as the office was closed for the festive season.