Ministry of Finance and VAT Department provide clarification and warning on compliance

Posted on: January 8, 2015

Authored by: Ministry of Finance
Source: Ministry of Finance
Date: January 8, 2015

VAT not to blame for exorbitant price increases

The Ministry of Finance and the VAT Department are acting to provide clarifications and general warning on VAT compliance.

Some businesses have made impressive efforts to comply with the transitional provisions for tax inclusive pricing. However in some other cases progress has been insufficient.  Business are cautioned that where product labels have not been changed to show VAT inclusive pricing, customers must still see visible signage that the tax is is being added to final prices, or they must see general signage next to items that disclose what the final tax inclusive prices are.  The VAT Department has started to bring this deficiency to the attention of some registrants through warning letters.  Later into January these warnings will be replaced by administrative fines.

The Department is also issuing cautionary letters to registrants who may be making incorrect calculations.  Consumers are entitled to refunds if the amounts identified as “tax” or “VAT” exceed 7.5%.  In addition, retail businesses are not allowed to disclose as taxes charges that are not VAT.  The Department raises this caution in light of least one media report of a business that claims to have collected service charges instead of VAT, when customers may have been led to believe that they were paying a tax.

The VAT Department also cautions all registrants that, without exception, their responsibility to collect the tax started on January 1, 2015.  In particular, some queries have surfaced, on whether motor gasoline was taxable from January 1st.  There was no delay.  In this and other cases, the liability to account for VAT exists from January 1st even if it was not charged to the customer.

At the same time the consuming public is advised that they cannot be charged VAT by businesses that have not completed the registration process.  The proof of registration is the registration certificate with a TIN.  The TIN must be shown on all receipts issued and the certificate must be on open display.  Businesses that issue VAT receipts without being registrants will face fines.

Meanwhile, the Ministry of Finance takes issue with a statement by a local cinema that attributed a tax inclusive ticket price increase of 17.5% mostly to VAT related costs. The statement conveys misunderstanding about VAT credits to which the cinema is entitled. These are recoverable outlays and not costs.  The public is encouraged to challenge assertions which convey impressions that VAT is a significant cost for registered business.  The tax is directly borne by consumers.  When paid by the VAT registrant it is recoverable as credits.

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