Question Tag: VAT

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  • 5 Marks

AT – May 2017 – L3 – Q4b – Business income – Corporate income tax

Explain the VAT implications on the sale of an asset after failing to claim VAT on its importation.

b) Bossman Ltd acquired assets for GH¢10,000 from outside Ghana but failed to claim Value Added Tax (VAT) on imports of the assets in accordance with the Value Added Tax provisions and later sold the assets for GH¢12,000.

Required:
What is the tax implication of the transaction (if any) in the light of the provisions of the VAT Act 2013 (Act 870)?
(5 marks)

b) Input VAT paid for goods and services is claimable by a VAT registered trader, and by the same token, the trader is required to account for output VAT when it parts with ownership of the assets.

Under section 48(4)(b) of Act 2013 Act 870, input tax deduction shall not be made after the expiration of a period of six months after the date the deduction accrues.

The taxpayer’s right to claim is extinct under the above situation, if it is not exercised at the right time—that is, after 6 months.

Conclusion:
For failure to claim the input tax within 6 months, Bossman Ltd has lost the right to claim but must charge and account for VAT on the sale of the assets accordingly, as the failure to claim is not a denial of the right to pay output VAT.

(5 marks)

  • 5 Marks

AT – May 2017 – L3 – Q4a – Business income – Corporate income tax

Provide tax advice on the sale of a vehicle, considering previous denial of input VAT claims, and explain the implications of the transaction.

a) Eddie Enterprise Ltd imported a vehicle for GH¢30,000 and was denied the claim of input tax (VAT) on the imports in 2014 on the vehicle by the Ghana Revenue Authority. In 2017, it intends to sell the vehicle for an amount of GH¢26,000.

Required:

The Company seeks your views as a seasoned Tax Expert to advise on the possible tax implication of the above transaction.
(5 marks)

a) A taxable person registered for VAT is required to claim input VAT on the acquisition of goods and services which are business-related and also required to pay output VAT on goods and services. In effect, the net is claimable or payable (i.e., input tax minus output tax). If the input tax exceeds the output tax, it is claimable, and if the output tax exceeds the input tax, it is payable.

(2 marks)

If the input tax paid by the registered person is denied, the supply of the goods and services by the taxable person is considered a supply of goods and services other than in the course or furtherance of a taxable activity.

(1 mark)

Conclusion:

Eddie Enterprise Ltd was denied the claim of VAT paid on the importation of a vehicle. The proposed sale of the vehicle shall be deemed as a sale that will not attract output VAT in accordance with section 25 of Act 2013 Act 870 as amended.

(2 marks)

  • 10 Marks

AT – May 2016 – L3 – Q4a – Tax administration in Ghana

Explains the circumstances under which a taxable person can claim VAT refund or credit.

Under what circumstances will a taxable person be entitled to a tax refund or tax credit where the amount of input tax which is deductible exceeds the amount of output tax due in respect of the tax period. (10 marks)

The following conditions have to be satisfied before a registered VAT trader can get a refund paid on his/her inputs for business purposes:

  1. The business must be registered for VAT, that is, he/she must be a registered VAT trader.
  2. The business must have submitted returns for all months for which it has been in operations.
  3. The business must complete and submit a prescribed VAT claim form for the refund of the VAT paid to the VAT Service.
  4. The business must be engaged in the export of 25% or more of the output.
  5. Total export proceeds should have been repatriated by importer’s bank to exporter’s authorized dealer banks in Ghana.
  6. The VAT paid should qualify as deductible input VAT.
  7. The input VAT paid should exceed the output VAT paid.
  8. Possession of all original tax (VAT) invoices.
  9. Where the credit remains outstanding for a continuous period of three months or more.

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