Introduction
For every VAT tax period, every taxpayer must submit a VAT return. The net balance determines the type of VAT return for the tax period.
Types of VAT returns
For every VAT period, the net balance for a VAT return may be either of the following:
- A debit return.
- A credit return.
- A zero return.
- A nil return.
A VAT Credit return
In a VAT credit return, there is no VAT to remit to the Tax Commissioner. The taxpayer has paid more VAT than the amount of VAT they must pay for that month. Though there is no VAT to pay, the credit VAT return should be submitted before the 20th day of the following month.
Reasons for a VAT credit return
Many factors contribute to a net credit balance in a VAT monthly return. The following are twenty (20) reasons that may contribute to a VAT credit return in any VAT period.
1. The person has input VAT with no output VAT, and no credit carried forward.
2. The person has input VAT that is more than output VAT and the credit carried forward.
3. Pierson has input VAT that is more than output VAT, and the credit is carried forward.
4. Input VAT is more than the credit carried forward, and there is no output VAT.
5. Clerical error.
6. Issuing of credit notes which decreases the VAT in the month.
7. Receipt of debit notes from suppliers.
8. Introduction of zero-rate VAT status for supplies that were previously exempt.
9. The decrease in tax rates, e.g., exercise duty in imports.
10. Reduction of VAT in additional assessments by the tax Commissioner.
11. The inclusion of previously omitted purchase invoices increases the input VAT.
12. Over-declaration of purchases, thus increasing the input VAT.
13. Purchase price decrease, which decreases input VAT.
14. VAT credits carried forward from previous months, thus increasing the input side of the VAT return.
15. Unused Withholding VAT carried forward.
16. Withholding VAT in the month.
17. Increased purchases in the month.
18. Decrease in VAT rates.
19. Decrease in sales in the month.
20. Remitting previous Withheld VAT by customers or clients withholding VAT agents.
These are not the only reasons for a net credit VAT return. There are many other reasons, and many other reasons may emerge since the tax industry is very dynamic.
