Computing & Accounting for VAT

In accounting for VAT, four aspects are to be highlighted:

  • The terminologies to be used
  • The accounts to be used
  • The system or regimes of Assessing VAT; and
  • The right to the recovery of VAT

TERMINOLOGIES USED IN ACCOUNTING FOR VAT

  • The VAT inclusive amount: Also known as the amount after VAT, this terminology is used to describe a given value that already carries VAT.
  • The VAT Exclusive amount: Also known as the amount before VAT, this terminology is used to describe a given value that does not carry VAT and as such VAT has to be included on it.
  • The VAT invoiced: This is the VAT that is imposed on the value of goods and services by the supplier and collected from customers as the VAT  the latter pays on the goods or services consumed. Depending on the type of operations carried out by the supplier registered for VAT purposes. The VAT invoiced shall be described as follows
  • VAT invoiced on sales
  • VAT invoiced on services rendered:
  • VAT invoiced on works or contracts
  • The Accrued VAT

The accrued VAT or the VAT due for a given period corresponds to the amount of the VAT that has to be paid to the state on the difference of the VATs that have been invoiced to customers and the VATs that have been paid to suppliers.

  • VAT Credit

A VAT credit exists when the total VAT invoiced for a period cannot absorbed the total of the VAT to be recovered for  a given computation period.

  • VAT Recoverable:

This terminology is used to describe the VAT paid to suppliers on which the taxpayer has the right to impute or charge on the VAT invoiced for the period. Depending on the category of the purchase or acquisition made, the VAT recoverable is described as follows:

VAT Recoverable on fixed assets:

VAT Recoverable on purchase:

VAT Recoverable on transport

VAT RETAINED AT SOURCE

According to Paragraph 2 of section 149 of the GTC, the state, governmental units, public sector and para public organisations, and certain private enterprises will retain VAT at source when making payments for taxable supplies received. The list of private enterprises authorized to make such retains at source is fixed by the Minister of Finance. This means that these persons( authorized to retain VAT at source) will only pay the value of the supplies before VAT. The Vat retained at source has to be paid to the state treasury by the 15th of the month following the month during which the tax is retained at source. The person who invoiced the tax will subtract the amount retained at source from the total value of the VATs invoiced when computing the total of the VAT collected for the period on sales.

ACCOUNTS USED IN THE RECORDING OF VAT

The accounts to be used shall depend on whether the registered person is receiving revenues, making payments, or declaring and paying VAT.

  1. When Sales are realized, Services and Contracts are Rendered:

The following accounts are used to record the VAT invoiced on these aspects:

443 – State, VAT invoiced. The main account of the VAT invoiced account is subdivided following the type of activity on which the revenue will be received as follows:

  • 4431 – State, VAT invoiced on sales
  • 4432 – State, VAT invoiced on services rendered
  • 4433 – State, VAT invoiced on contracts or works
  • 4434 – State, VAT invoiced on self- constructed assets
  • 4435 – State, VAT on documents to be established.

2. When purchases and acquisitions are made, services are received and other expenses are incurred:

The following accounts are used to record VAT to be recovered on these aspects:

445 – State, VAT Recoverable. The main account of the VAT Recoverable account is subdivided as follows:

  • 4451 – State, VAT Recoverable on Fixed Assets
  • 4452 – State, VAT Recoverable on Purchases
  • 4453 – State, VAT Recoverable on transport
  • 4454 – State, VAT Recoverable on External Services and other Expenses
  • 4455 – State, VAT Recoverable on Invoices Receivable
  • 4456 – State, VAT Transferred by other enterprises

3. During the declaration and payment of VAT    

The following account are used to record the declaration of VAT:

  • 444 – State, Accrued VAT or VAT Credit: This main account is subdivided as follows:
  • 4441 – State, Accrued VAT
  • 4449 – State, VAT Credit to be carried forward