VAT, GST and Sales Tax in Seychelles

Summary

Name of the tax Value-added tax (VAT)
Date introduced 1-Jan-13
Trading bloc membership Common Market for Eastern and Southern Africa Member, Southern African Development Community Member
Administered by Seychelles Revenue Commission (SRC)
VAT rates
Standard 15%
Other Zero-rated and exempt
VAT number format Not applicable
VAT return periods
Monthly Annual amount of taxable supplies exceeds SCR2 million (Compulsory Registration)
Quarterly Annual amount of taxable supplies is SCR2 million or less (Voluntary Registration)
Thresholds
Registration Compulsory registration for businesses exceeding SCR2 million of taxable supplies for any 12-month period
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Seychelles by taxable persons
  • Reverse-charge services received by taxable persons in Seychelles
  • The importation of goods from outside Seychelles

Who is liable

A taxable person is any entity or person that is required to be registered for VAT.

VAT registration is compulsory for any person or entity if the taxable supplies for any 12-month period exceed SCR2 million, the threshold effective 1 January 2015 (reduced from SCR3 million).

Taxable supply means a supply, other than an exempt supply, made in Seychelles by a person in the course of furtherance of an enterprise.

In determining whether a person exceeds the SCR2 million threshold for a 12-month period, the value of the following tax­able supplies is ignored:

  • A taxable supply by way of the sale of a capital asset of a person
  • A taxable supply made solely as a consequence of the person selling the whole or a part of the person’s enterprise or perma­nently ceasing to carry on the person’s enterprise

An entity or person who intends to make taxable supplies below the SCR2 million annual threshold can opt for voluntary registration.

Exemption from registration. A taxable person whose turnover is exclusively exempt from VAT may not apply for registration.

Voluntary registration. A taxpayer may register for VAT volun­tarily if its taxable turnover is below the VAT registration thresh­old. A person may also register for VAT voluntarily in advance of making taxable supplies.

Group registration. Not applicable.

Reverse charge. If a nonresident person supplies services to a VAT-registered person that are performed or used in Seychelles, the VAT-registered person must account for the VAT due under “reverse charge” accounting; that is, the registered person must charge itself VAT, but only to the extent the taxable person would not have been entitled to a credit for the full amount of input tax paid if the recipient had acquired the services in a creditable acquisition. This measure does not apply to supplies that are exempt from VAT under the Seychelles VAT law.

Registration procedures. Registration can be compulsory or vol­untary. Taxable persons must register with the Seychelles Revenue Commission at the beginning of the 12-month period if there are reasonable grounds to believe that the person will exceed the compulsory registration threshold during that period. A registration form should be completed and signed by an autho­rized person of the business and submitted to the Seychelles Revenue Commission in hard copy. The registration process takes an average of one week, upon which the SRC will issue a VAT registration certificate.

A business that does not expect to exceed the threshold may register voluntarily. Once registered, it must make taxable sup­plies, have a fixed place of business in Seychelles where the enterprise is conducted, keep proper records of the enterprise and comply with all other regulations.

Late-registration penalties and interest. A penalty applies to late registration. An additional tax is due equal to double the amount of VAT payable for the period commencing on the day on which the person was first required to apply for registration and ending on the day the person lodges an application for registration.

Non-established businesses. Non-VAT registered businesses will not be able to charge VAT on their taxable supplies nor recover input VAT on their purchases and expenses.

Tax representatives. A nonresident person who is required to apply for VAT registration, but who does not carry out an enter­prise through a fixed place in Seychelles, must appoint a VAT representative in Seychelles. The VAT representative is respon­sible for applying for registration, furnishing of VAT returns and payment of VAT.

Digital economy. There are no special rules for electronically sup­plied services.

Deregistration. A registered person who ceases to make taxable supplies should apply for deregistration within seven days of the date on which the person ceased to make taxable supplies. The person must write to the Revenue commissioner, SRC, who determines the effective date of deregistration.

VAT rates

In Seychelles, the term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.

The VAT rates are:

  • Standard rate 15%
  • Zero rate (0%)

The standard rate of VAT applies to all supplies of goods or ser­vices, unless a specific measure provides for a zero rate or an exemption.

Examples of goods and services taxable at 0%

  • Rice
  • Sugar, salt
  • Meat, fish
  • Vegetables and fruits
  • Lentils
  • Edible oils
  • Newspapers, magazines, journals and periodicals
  • Infant foods
  • Export of goods and services

The term “exempt supplies” refers to supplies of goods and ser­vices that are not liable to tax and that do not give rise to a right of input tax deduction.

Examples of exempt supplies of goods and services

  • Financial services by a financial institution as defined as per the Financial Institutions Act
  • Education services
  • Life insurance premiums or reinsurance contract
  • Government hospital, medical and dental services
  • Internationally donated goods or services to a nonprofit body

Option to tax for exempt supplies. Not applicable.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” The tax point under the Seychelles law is the ear­lier of the receipt of payment or the issuance of an invoice or VAT invoice.

Deposits and prepayments. The receipt of a deposit or prepay­ment normally creates an actual tax point if the amount is paid in the expectation that it will form part of the total payment for a particular supply. A tax point is created only to the extent of the payment received.

Imported goods. The time of supply for imported goods is the time when the goods are removed from customs.

Goods sent on approval or for sale or return. The tax point for goods sent on approval or for sale or return is the earlier of the issuance of an invoice or VAT invoice or when payment is received.

Continuous supplies of services. If services are supplied continu­ously, a tax point is created each time a payment is made or an invoice or VAT invoice is issued, whichever occurs earlier.

Reverse-charge services. The tax point for reverse-charge ser­vices is when the consideration for the services is paid. If the consideration for the services is not in money, the tax point is the last day of the VAT period during which the services are per­formed.

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made.

A valid VAT invoice or customs import declaration must gener­ally support a claim for input tax.

Input tax on expenditure incurred before registration is not gener­ally allowable.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business pur­poses (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.

The following lists provide examples of items of expenditure for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is related to a taxable business use.

Examples of items for which input tax is nondeductible

  • Purchase, repair or maintenance of passenger vehicle
  • Accommodation
  • Membership or entrance to sporting, social or recreational club
  • Expenditure for the personal benefit of company directors

Examples of items for which input tax is deductible (if related to a taxable business use)

  • Telephone and internet expenses
  • Goods imported for business purposes
  • Services purchased locally for business purpose with a valid VAT invoice

Partial exemption. Input tax directly related to making exempt supplies is not recoverable. If a taxable person makes both exempt and taxable supplies, it may not recover input tax in full. This situation is referred to as “partial exemption.” The business needs to know what the relative share of its taxable supplies on its total turnover is to be able to determine the proportion of input tax claimable as a credit. Only the VAT incurred on goods and services for the making of taxable supplies is deductible. In such a case, the input tax credit needs to be apportioned using the below formula:

a x (b/c)

where:

  • a is the total amount of input tax incurred from the purchase and expense used for both the taxable and exempted supply
  • b is the value of all taxable supplies made
  • c is the value of all supplies made by the taxable person during the VAT period in Seychelles

However, if:

  • b/c is more than 0.90, the taxable person is allowed credit on the whole value of the input tax
  • b/c is less than 0.10, the taxable person is not allowed any input tax credit on the whole value of input tax

The above rule mainly concerns:

  • Traders that sell both taxable and exempted goods
  • Construction companies that build commercial buildings (tax­able) and individual dwellings (exempted)
  • Destination management companies that supply their own ser­vices (taxable) and buy-in to resell accommodation of transpor­tation tickets (commissions are exempted)
  • Insurance companies that supply general insurance as well as car insurance (taxable) and life or health insurance (exempted)

Pre-registration costs. Where a business buys goods or services before registering for VAT to support its taxable business activi­ties, it can only recover the VAT incurred from the point of regis­tration for VAT.

Capital goods scheme. The deferred VAT mechanism can be used for capital goods including construction materials, excluding trading stock. Under the deferred VAT mechanism, VAT can be deferred at the point of entry at customs. The capital goods must have an individual CIF value of over SCR100,000 or a grouped value of SCR100,000 or more where the goods have the same HS code. The requirements for applying for deferred VAT are as fol­lows:

  • The taxable person must apply for deferred VAT by submitting a prescribed form to the Seychelles Revenue Commission at least two weeks before the entry of goods into Seychelles.
  • The taxable person must have a good compliance record with the SRC and have made no offense within the past three years.

On approval of the SRC, the VAT can be deferred at customs at the point of entry. The VAT should be declared in the next VAT return as output and input VAT, giving a nil effect (unless input VAT recovery is restricted).

VAT refunds. If the amount of input tax (VAT on purchases) recoverable in a period is greater than the amount of output tax due (VAT on sales) for the period, a refund may be claimed where:

  • VAT credit has been carried forward for two consecutive VAT periods and exceeds SCR10,000 at the end of the third VAT period by a compulsorily registered taxable person
  • A VAT credit exceeding SCR10,000 is reported on the quar­terly return by a voluntarily registered taxable person
  • A VAT credit exceeding SCR10,000 is reported on a monthly VAT return by an exporter, supplier of zero-rated goods or ser­vices

Effective 1 September 2014, the statutory period to process any VAT refund was reduced from 45 to 30 days.

Recovery of VAT by non-established businesses

Seychelles does not refund VAT to businesses that are not estab­lished in Seychelles.

Invoicing

VAT invoices and credit notes. Taxable persons must provide VAT invoices for all taxable supplies made to other registered persons in Seychelles.

A VAT invoice is necessary to support a claim for input tax deduction or a refund.

A VAT credit note may be used to reduce the VAT charged and reclaimed on a supply. The credit note must reflect a genuine mistake, an overcharge or an agreed reduction in the value of the original supply.

Foreign-currency invoices. If an invoice or a VAT invoice is issued in a foreign currency, the VAT due must be converted into Seychelles rupees using the mid exchange rate published by the Central Bank of Seychelles at the time of the issuance of the invoice.

Proof of exports. The proof of exports would normally be the invoice, packing list and bill of lading with respect to the export of goods.

VAT returns and payment

VAT returns. VAT returns are submitted either quarterly or monthly. Quarterly VAT return submissions are applicable only to voluntarily registered persons. The quarterly return periods end in March, June, September and December, which are applicable only to voluntarily registered persons. Monthly VAT return sub­missions are applicable to compulsorily registered persons. Returns must be submitted within 21 days after the tax period. VAT payments must also be made within 21 days after the tax period.

Special schemes. Not applicable.

Electronic filing and archiving. The VAT return can be submitted online using the taxation e-service.

Annual returns. Not applicable.

Penalties

Penalties and interest for the late submission of a VAT return vary by the size of the business as follows:

  • In case of small business (less than SCR1 million turnover), SCR500 plus SCR50 for each week or part of the week the return is not furnished
  • In case of medium business (SCR1 million to SCR50 million turnover), SCR1,000 plus SCR100 for each week or part of the week the return is not furnished
  • In case of large business (above SCR50 million turnover), SCR5,000 and SCR500 for each week or part of the week the return is not furnished

For late payment of VAT, the rate of interest for penalty is the quarterly average prime lending rate on the first day the tax was due, increased by three percentage points.

An additional tax will be due if the taxpayer fails to the pay the VAT due after the extended due date, at the rate of 10% of the amount of unpaid VAT.