Tax Talk: VAT system is tax inclusive

OUR value-added tax system is tax inclusive.This means the price you see must be the price you pay – whether the seller is registered for value-added tax or not.

When the seller is not registered for value-added tax, no tax may be included in the selling price. When the seller is registered for value-added tax, any price quoted is deemed to include the tax whether or not the tax has been included in such a price.Prices advertised or quoted on price tags, catalogues, quotations, tenders or advertisements or in contracts must include value-added tax and must be accompanied by a statement to the effect that the price is inclusive of tax.The seller may, however, advertise of quote a price exclusive of value-added tax if the advertisement or quote states the value of the good or service sold, the tax payable on the selling price and the total selling price inclusive of value-added tax.In addition, the price inclusive of tax and exclusive of tax must be quoted with equal prominence and impact.At retail level, price tags on goods sold need not contain the ‘inclusive’ statement, provided that all entrances and pay points carry a notice declaring that prices in the store are tax inclusive.Ticketing on shelves or in-store advertising must contain such a notice or must reflect the fully broken-down components of the total selling price.Till slips need not state that prices are inclusive of tax.It is important to take note that when you sign any agreement for the sale of goods or a service where the seller is registered for value-added tax, the contract price is deemed to include tax.The seller must declare and pay the tax on the transaction to the Receiver of Revenue.The output tax that the seller must pay to the Receiver will be calculated by multiplying the selling price by the standard rated tax fraction (15 divided by 115).Therefore, if the selling price is N$100 000, the seller must pay N$13 043,48 of tax to the Receiver of Revenue in respect of the tax that must be included in the selling price.If the selling price is N$115 000, N$15 000 must be paid to the Receiver in respect of the tax that must be included in the selling price.The important lesson here for any person who is value-added tax registered and who is selling goods or services is that any price quoted or advertised must always by tax inclusive.You therefore have to determine how much you want for the goods and then add the 15 per cent tax onto that to get to the total selling price.You can hardly go back to the purchaser and ask for a further 15 per cent on the selling price and expect the purchaser to hand it over without a fight.The purchaser will have the law on his or her side and there is no need to comply with your request.Make sure you know your rights and you won’t be short changed! * Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com.When the seller is registered for value-added tax, any price quoted is deemed to include the tax whether or not the tax has been included in such a price.Prices advertised or quoted on price tags, catalogues, quotations, tenders or advertisements or in contracts must include value-added tax and must be accompanied by a statement to the effect that the price is inclusive of tax.The seller may, however, advertise of quote a price exclusive of value-added tax if the advertisement or quote states the value of the good or service sold, the tax payable on the selling price and the total selling price inclusive of value-added tax.In addition, the price inclusive of tax and exclusive of tax must be quoted with equal prominence and impact.At retail level, price tags on goods sold need not contain the ‘inclusive’ statement, provided that all entrances and pay points carry a notice declaring that prices in the store are tax inclusive.Ticketing on shelves or in-store advertising must contain such a notice or must reflect the fully broken-down components of the total selling price.Till slips need not state that prices are inclusive of tax.It is important to take note that when you sign any agreement for the sale of goods or a service where the seller is registered for value-added tax, the contract price is deemed to include tax.The seller must declare and pay the tax on the transaction to the Receiver of Revenue. The output tax that the seller must pay to the Receiver will be calculated by multiplying the selling price by the standard rated tax fraction (15 divided by 115).Therefore, if the selling price is N$100 000, the seller must pay N$13 043,48 of tax to the Receiver of Revenue in respect of the tax that must be included in the selling price.If the selling price is N$115 000, N$15 000 must be paid to the Receiver in respect of the tax that must be included in the selling price.The important lesson here for any person who is value-added tax registered and who is selling goods or services is that any price quoted or advertised must always by tax inclusive.You therefore have to determine how much you want for the goods and then add the 15 per cent tax onto that to get to the total selling price. You can hardly go back to the purchaser and ask for a further 15 per cent on the selling price and expect the purchaser to hand it over without a fight.The purchaser will have the law on his or her side and there is no need to comply with your request.Make sure you know your rights and you won’t be short changed! * Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com.