1. Indirect Taxes in KSA - Implications of VAT and Impact on Business
17 May 2017, Riyadh

2. Contents Part 1 – Theory Part 2 – Practice Why VAT ?
How VAT works in principle ?
Statutory Obligations
VAT in International Transactions
Part 2 – Practice
Preparing for VAT - Implementation Plans & Road Maps
Common Pitfalls for Businesses & Regulator
VAT Accounting
Practical & Business Issues
Questions

3. WHY VAT ?

4. Value Added Tax
VAT is a multi-stage levy; charged at each stage in the supply chain. It is collected on import and supply of goods / acquisition or rendering of services.
At the time of import, the importer is responsible to pay VAT. At the time of sale, the supplier is liable to pay VAT to the exchequer. VAT also carries an element of reverse charge mechanism.
Adoption of VAT or the equivalent Goods and Services Tax (GST) in an economy aims to:
Improve neutrality amongst countries in a common economy, e.g. European Union (EU)
Increase GDP and government revenues
Improve competitiveness.

5. GCC VAT – A Perceived Outlook
GCC states expected to introduce VAT from 1 January 2018
Each GCC Member State will transpose its provisions into their own domestic VAT law
EU type VAT model as GCC will become a common economic zone
VATable supplies of goods and services
A single standard VAT rate of 5%, 0% and exempt
VAT exemption - Government, health, education
Financial services, Free Zones – unclear as of now
Imports - VATable at the point of entry into the GCC
Exports – 0% rated
Intra-GCC supplies of goods and services – reverse charge principle
Mandatory and elective VAT registration thresholds
Restriction on reclaim of input VAT on exempted supplies and non- business expenses ►

6. IMF Report 2015 – VAT as a % of GDP

7. VAT World
VAT has been in existence for over 50 years and has been implemented in over 150 countries across the globe. France was the first to introduce VAT in 1954, with latest adoption by Malaysia on 1st April 2015.
1967

8. World wide VAT Rates Country VAT RATE Australia 10% Bangladesh 15%
China
17%
France
20%
Germany
19%
Canada 5%
Malaysia 6%
New Zealand
Spain
21% UK
Pakistan

9. Advantages & Disadvantages
A VAT may eliminate the complex income tax system, since the VAT is so much more efficient and would bring in more revenue.
Can be regressive
A VAT would also solve the problem of lost online sales tax, since the imposition of a VAT would mean that all sales, even online sales, would be taxed.
Lead to excessive spending
It is based on consumption; has the potential for raising large sum of revenue at a low tax rate
Lack a counter recurring balance
It is “neutral,” since it would be imposed on all types of businesses
Be harmful to new and marginal business activities
Self assessment framework
Joint and several liability for the VAT payable. That means if one company becomes insolvent, the rest of the group may become liable for its VAT debt
Incentives for Exporters
In many instances, may not create meaningful benefit for exports.

10. HOW VAT WORKS ?

11. Key Features Transaction based tax Tax on consumption
VAT charged on supplies – output tax
VAT deducted on purchases – input tax
Simple premise but can become incredibly complex
VAT output & input on accruals
Self assessed tax
Collected by businesses on behalf of tax administration
Businesses calculate VAT and declare on periodic returns
Penalties for non compliance

12. Value of Refunds & Payments of VAT Supply Input Tax Credits
Payments & Refunds
VAT
Scope
Registered / Taxable Persons
Determination of VAT Liability
Taxable Activity
Place of Supply
Time & Manner of Payments
Supply
Reverse Charge
Time of Supply

13. Taxable Person Scope Taxable Activity Concept of Supply
Types of Supplies
Time of
Supply
Place of

14. Scope of VAT VAT is charged: on supply of taxable goods
services rendered by a registered / taxable person in the course or furtherance of taxable
activity.
on import of taxable goods
on receipt of services rendered by non-resident person to resident
FOR TAXABLE / REGISTERED PERSON
VAT paid on import / purchase of goods / services = Input Tax
VAT charged on supply of goods / services = Output Tax

15. What is ‘Supply’ ?
Sale
Other transfer of the right to dispose of goods as owner
Sale or transfer under a hire purchase agreement
Private, business or non-business use of goods produced in the course of taxable activity
Auction or disposal of goods to satisfy a debt owed by a person
Rendering of taxable services
Receipt of taxable service from a non resident person – Reverse Charge

16. Supply Buyer Car Seller Client Lawyer Sale of a car Cash
Provision of legal service

17. Supply Insurance Company Policy Holder Insurance Co Premium
Supply of
Insurance Policy
Premium
Insurance Co
Insurance Claim
Deemed Supply for Insurance Claim (in Pakistan VAT Law, it is not a supply)
Supply of the loss

18. Progressive or periodic supply
Types of Supplies
Standard
Rate
Zero Rated (0%)
Exempt
Excluded
Deemed Supplies
Types of Supplies
Mixed Supplies
Incidental Supply
Deferred Supplies
Progressive or periodic supply

19. Types of Supplies Standard Zero rated Exempt
VAT charged at standard rate (5% in GCC)
Input VAT claimable against Output VAT
Standard
VAT charged at 0%.
Zero
rated
VAT not charged
Input VAT not claimable against exempt supply
In GCC countries – Education , Health Care, Staple Food is Exempt
Exempt

20. Mixed Deferred Types of Supplies Supplies Deemed supplies Excluded
A mixture of taxable & exempt supplies.
Input VAT on mixed supply - apportionment unless directly identifiable
Mixed
Supplies
Certain activities are deemed as a supply, e.g., insurance claim received against loss of stock / inventory
Deemed
supplies
Supplies that does not fall within VAT
Excluded
Where the revenue office decides to defer (where applicable)
Deferred

21. Zero Rate / Exempt Supplies
Food (but with exceptions)
Supply by Duty Free Shop to Tourist / Visitor, provided that the supplier holds evidence that the goods would be taken abroad and not used in the country
Water & Sewerage
Books, Newspapers, Magazines
Public Transport
Supplies against international tenders
Children’s Clothing
Indirect Exports
Certain construction services
Land (with certain exceptions)
Sale / Transfer of economic activity as going concern
Financial Services (with certain exceptions)
Insurance (with certain exceptions)
Supply of goods used in repair of temporarily imports (attached to original goods or not usable again)

22. Reduced Tax Rate Domestic Fuel & Power Children’s Car Safety Seats
Energy Saving Materials
Certain Building Works (conversions)
Smoking cessation products

23. Earliest of any of these events
Time of Supply
Earliest of any of these events

24. Value of Supply
VAT is charged on every taxable supply by reference to the value of supply of such goods or services.
The VoS will depend on whether such supply is –
For consideration in money; or
Not for a consideration in money; or
Not wholly in consideration of money

25. Supplier, Recipient & Consideration
Consideration (Cash / in kind)
Supply

26. Value of Supply
Value of Supply (consideration in money) = Price paid less VAT
Value of Supply (consideration not in money) = Open market value*
Value of Imported Goods = customs value + any other duty + any excise
Value of Supply for No-Consideration = Open market value*
OMV = consideration in money which a similar supply would
generally fetch if supplied in similar circumstances

27. VAT Formula Net VAT 3,000 (5,000) Output Tax Input Tax
VAT to Tax Office
VAT Payable
Refund
VAT charged at the point of Sale (Output)
Less : VAT paid on purchases (Input)
Less : VAT paid on import (Input)
Net VAT
20,000
(10,000)
(7,000)
(15,000)
3,000
(5,000)

28. VAT in supply chain VAT Office Furniture maker USD 5 remitted
Timber Co
Furniture maker
USD 5 remitted
($ 15 – 10) Retailer
USD 10
remitted
Furniture sold to consumer
USD (VAT)
USD 3 remitted
($ 18 – 15)

29. Consumer pays VAT of 5% on the final price
How does standard rated work?
VAT at 5%
Consumer pays VAT of 5% on the final price
Supplier claims back VAT
Utilities co. claims back VAT
Goods purchased: USD5m + USD250k
Supplies of electricity and water:
USD10m + USD500k
VAT return:
VAT on sales:
VAT on purchases:
USD 500k
- USD 250k
Net VAT payable:
USD 250k

30. Goods purchased (imported):
How does zero rated work?
Supplier claims back VAT
Utilities co. claims back VAT
Utilities co. applies 0% VAT on power supplied to plant in KSA Free Zone
Goods purchased (imported):
USD5m + USD250k
Power supplies: USD7m + 0
VAT return:
VAT on sales:
VAT on purchases:
USD 0
-USD 250k
Net VAT payable:
VAT at 5%
VAT at 0%

31. Goods purchased (imported):
How does exempt work?
Supplier claims back VAT
Insurance co. cannot claim back any VAT
Consumer does not pay any VAT
Goods purchased (imported):
USD5m + USD250k
Insurance: USD 10m
VAT at 5%
VAT exempt
USD 250 is not refundable and is a cost for the exempt business

32. How VAT Works – fully taxable businesses
Cotton
farmer
Clothing
Factory
Clothes
Shop
Customer
$1,000
+VAT
$2,000
$3,000
$50.00
Output
tax
$ OT
($50.00) IT
$50.00 due
$ OT
($100.00) IT
$150.00

33. How VAT Works – unregistered supplier
Cotton
farmer
Clothing
Factory
Clothes
Shop
(unregistered)
Customer
$1,000
+VAT
$2,000
+VAT+
Additional VAT
$3,150
$50.00
Output
tax
$ OT
($50.00) IT
$ due

34. Amendment in VAT return or VAT invoice - Debit & Credit Notes
Debit or credit note may be issued in the following cases: - cancellation of supply; - return of goods; - change in the nature of supply; - change in the value of supply; or - any other such event On the basis of debit / credit notes, both parties shall adjust their VAT liability / credit in the tax period in which such notes were exchanged with each other.

35. Credit for input VAT against output VAT
VAT paid on goods / services used in the
making of taxable supplies in a taxable activity
If output tax < input tax  Refunds / Carry
Forward
Admissible
Inadmissible
Generally, cannot claim inputs used in making exempt supplies or supplies having no nexus with taxable activity
Refund / CF

36. Inadmissible Credit / Input VAT
Supplied identified specifically by law, e.g., passenger vehicles, entertainment expenses, etc.
Not connected with the taxable activity
No valid tax invoice or customs declaration
Tax invoices that have not been deducted from output tax within specified time
Claims on tax invoices that have been issued prior to the commencement of liability to VAT
VAT paid on fixed assets or goods of general nature
Issued from non active taxpayers
Expenses or Assets of general nature (where applicable)
VAT on purchase of goods / acquisition of services where the corresponding party does not pay output VAT into the exchequer.
VAT paid on certain supplies cannot be claimed against the Output VAT.
These are additional cost to the business.

37. Admissible Credit / Input VAT
Raw materials consumed in manufacturing of a VATable product.
Electricity bill of an oil company.
Utensils purchased by a Restaurant.
Delivery trucks imported by a furniture distributor.
Crane purchased by a logistics company.
Cartons imported by a courier company.
Packing materials by an exporter.
IT software purchased by a telecommunication company.
Machinery imported by a textile mill.
Customs agents invoice issued to an importer.
Insurance premium in respect of plant insurance.
Repair & maintenance or air conditioners by mall management company.

38. Inadmissible Credit / Input VAT
Tissue papers purchased by a furniture manufacturer for his own use.
Tea / refreshments served to customers.
Car purchased for company’s CEO.
Renovation of Director’s Office.
Calendars distributed among employees.
Laptop purchased from an unregistered person.
Paper bags purchased by a hospital.
VAT Invoice of Lubricant wherein VAT not separately disclosed

39. Partially Recoverable VAT / Apportionment of Input Tax
A business is partly exempt if it makes both taxable and exempt supplies and incurs tax on costs which relate to both:
► the business will not be able to recover all of its input tax
► a partial exemption method will have to be used to work out how much input tax can be recovered
Directly attributed input tax used exclusively to make taxable supplies may be deducted
Input tax on purchases used exclusively in making exempt supplies is non-recoverable

40. Partially Recoverable VAT / Apportionment of Input Tax
Taxable turnover 100,000 SR
Taxable turnover 100,000 SR
Input Tax
15,000 SR
Taxable Supplies
3,000 SR
Exempt Supplies
5,000 SR
Residual
Calculation method for recoverable residual input tax
Taxable supplies
x100 = 84%
Taxable + Exempt
Recoverable 84% x 5,000
=4,200 SR
Irrecoverable 16% x 5,000
= 800 SR
As such, the business will be able to recover 19,200 SR (15,000 SR + 4,200 SR) of input tax

41. STATUTORY OBLIGATIONS

42. Taxable Person
Registration
Provide details of
Business
Registration and
proof for meeting
threshold
Processing VAT
payment
Computation of VAT
Filing VAT Returns
Maintaining Records
of VAT invoices
(sales and purchases)
VAT Audits / Inquiry
Providing requested
information

43. Taxable / Registered Person
A person who carries on a taxable activity and is registered or required to apply for registration.

44. If supplies > threshold => mandatory to register
VAT Registration
If supplies > threshold => mandatory to register
Historical annual turnover and future annual turnover (incl. taxable but not exempt supplies or capital supplies)
Upto 3.75 million
SR 3.75 million and above
Voluntary registration for VAT
Mandatory registration for VAT

45. VAT Invoices
VAT invoices are required to be issued for sales / services at the time of supply
Must be retained as evidence for VAT recovery
Specific information must be included:
VAT registration number of supplier and customer
Name and address of supplier and customer
Net, VAT, gross
Date of supply
Description of supply

46. VAT Invoice Format VAT registration no-Customer
Name & address of supplier
Value of Supply
VAT Component
Total
Name & address to whom the supply is made
Description of Service
VAT Rate
VAT registration no-Supplier
VAT registration no-Customer

47. Statutory Requirements
VAT Returns Quarterly Returns The deadline for submission of VAT returns may be during the month following the end of the VATable period. For example in the case of quarterly VATable periods, the deadline for submission may be the 21st day of the month following the end of the quarter. If the entity is in a VAT payable position, the payment may become due on the same date Consolidated Annual Return Payment of due VAT Filing VAT Refund Claims within prescribed date(s)

48. Record Keeping for VAT VAT Returns VAT Challans VAT GL Account
Inventory Records / Stock Reconciliation
Sales Register & Credit Notes
Sales Invoices
Purchase Register & Debit Notes
Purchase Invoices
Goods Declaration / Bills of Entry
Utility Bills
Bank Statements, Cheque Stubs and Deposit Slips
GL for “Advance from Customers” and reconciliation with Sales as reported in VAT Returns
Gate Passes / Delivery Challans
VAT Refund Acknowledgement Receipts
Sale Purchase Agreement(s) & Other Contracts
Export Documents
Records of costing, wastages, scrap, etc.
Audited Accounts
Any other statutory declarations required
under any other law of the land

49. Sample - UK VAT return
VAT Returns in other countries are more complex. Contains hundreds of boxes, pages of data, annexures, etc.

50. Time & Manner of Payment of VAT
VAT shall be paid at the time of:
Payment of custom duty in the case of import of goods; and
Filing of VAT returns in the case of supplies made or services provided in KSA

51. VAT Refund VAT Refund of Exports
Excess of VAT input over VAT output (not adjusted for a continuous period, e.g., 12 months)
VAT not claimed in the tax return within the relevant tax period
Refund to Diplomats, NPOs and other international bodies, i.e., public international organization, foreign government, diplomatic / consular mission in KSA or any other person entitled to exemption under international agreement, Vienna conventional or International treaty
Excess tax paid by the taxpayer by way of an inadvertence, error or misconstruction
Refund arising out as a result of any executive or appellate order

52. VAT Audit
Routine Audit
Analytical / Desk Audit
Refund Audit
Investigative Audit (for VAT Fraud cases)
Forensic Audit (conducted by accounting firms / forensic experts)

53. Assessment & Appeals
Assessment: After VAT audit or otherwise, the VAT Regulator may issue notice to the taxpayer to explain his viewpoint on certain observations noted from taxpayer’s record, such as unpaid / short paid VAT, claim of inadmissible VAT credits, etc. After receipt of taxpayer’s or his advisor’s response and hearings, the VAT Regulator may pass an assessment order.
Appeal: If the taxpayer feels aggrieved from the assessment order, it may file appeal against such order. Generally there are 3 or more tier appellate fora in fiscal matters, VAT Appellate Commissioner, VAT Appellate Tribunal (Trial Court), Higher Court(s).
Recovery of VAT: The law may also provide timelines within which recovery of alleged VAT demand framed under assessment order may or may not be recovered by VAT Regulator.

54. Exposure ! VAT compliances have to be managed carefully
It may prove to be expensive if you go wrong !
Penalties, surcharge for non / late / short payment of tax, non / late submission of VAT returns
Suspension / Blacklisting of VAT Registration No.
Blockage of imports clearance
Recovery of unpaid VAT from suppliers / customers / vendors
Recovery of unpaid VAT from businesses bank accounts

55. VAT on International Trade Destination Principle

56. VAT in International transactions - Goods
Importation includes bringing goods into the country from outside by any person
IMPORT SIDE – DEFERMENT OF VAT
- Temporary imports – Same State (for re-export purposes)
Immediate clearance
Warehousing
- Temporary imports – In-house consumption (for re-export purposes)
IMPORT SIDE – PAYMENT OF VAT
- Immediate clearance
- Warehousing
- Switching Bill of Lading (by Exporter)

57. VAT on International transactions - Goods
SUPPLY SIDE
Exports
Sale to / within Special Economic / Free Zone
Local Sale, subject to zero rate; e.g., food or other provisions supplied to a vessel proceeding out of country.

58. What is a Free Zone? (VAT Perspective)
Definition: a specific class of special economic zone that is seen as outside the GCC for tax purposes
For VAT purposes, Free KSA will be seen as territories that are outside of the GCC VAT jurisdiction
As such, goods coming through the Free Zones will not be ‘VATable’ until they leave the Free Zone for clearance
Import VAT will only be due when the goods are cleared for customs and leave the Free Zone.
Movement of goods and services within the Free Zone will not be exposed to VAT. No VAT registration or compliance requirements as of now

59. Treatment of KSA Free Zones
Import from non- GCC country
Processing/ Manufacturing
Packaging
Free Zone
Outside GCC VAT
VAT is due
VAT is Zero Rated
Sale of goods outside the Free Zone
KSA entities
GCC entities
Export of goods to other GCC countries
Retailers
Consumer
Business
Consumer
Business
Retailers
Business

60. VAT on International Transactions - Services
ZERO RATING
Services performed outside KSA. Work performed by engineers or technicians outside KSA.
Leased / Hired / Licensed goods outside KSA. Moveable Property, like vessel provided on lease.
Services connected with temporary imports
Services initiated from KSA but consumed outside KSA.
Some jurisdictions treat this as zero rated while others impose VAT
Supply of services, if it relates to the repair or replacement of goods under warranty.

61. VAT on International Transactions - Services
ZERO RATING
International Services - B2B & B2C
B2B
Supplied where customer belongs
Reverse charge
Specific rules for services
B2C
Basic rule - taxed where the supplier belongs
No reverse charge
Tax Planning Options !
Electronic services taxed where customer belongs

62. VAT on International Transactions - Services
Reverse Charge In case where registered / taxable person in KSA receives VATable service from a non resident person living in UK, such service will be assessed to VAT on a reverse charge basis in the hands of service recipient and subject to rate prevailing under KSA VAT Laws. Reverse charge mechanism provides level playing field for local business.

63. Preparing for VAT – Implementation Plans & Road Maps

64. VAT Preparing for VAT Process Scenarios Procure to pay & order to cash
Cut off / Transition
 Document retention
Chart of accounts
Impact analysis / Budget / Cash flow
Tax Collections
VAT awareness training
VAT communication
Organization structure
Capability
VAT registrations
Transition provisions
Returns reporting
Terms & conditions
Negotiations
Procurement guidelines
Domestic vs. Import
Vendor registrations
Variety of stakeholders
Tax accounting
Policies Controls
System readiness & enhancements
Auditability
Automation
Tax Payer Services
Data exchange
Customer awareness
Service: key customer touch points impacted
Customer / Service segmentation
Business Process
Accounting
& Analytics
Change
Management
Compliance
Contracts & Policies
Information Technology
Customer
Supply Chain
VAT

65. How to prepare for VAT ? Plan What’s required ?
Responsibility for implementation
Appropriate resources (human and technical)
Budget
What systems changes are needed ?
Undertake cost & cash flow analysis

66. How to prepare for VAT?
Create a project team and governance to manage the implementation
Undertake an initial review – how will VAT impact your business
Determine your strategy in terms of implementation resources
Prepare an implementation plan / timeline
Work backwards from January 2018

67. Example: Implementation plan & road map
Create
Implementation
Team
High level business analysis
Design of Changes to systems & processes
Approvals of design and implementation plan
Testing of System
Changes
Implement
Systems
changes
Communication to customers
Go Live
Review

68. Step One - People Set up implementation team
Who could be in the team ?
Logistics, Procurement, Sales, Finance, IT
Must be the right people
Involving all relevant stakeholders
Budget holders
Governance
Responsibility
Sourcing of resources
Recruitment
Up skilling, training and education

69. Step Two – Business Impact
Review the business and tax environment and how that might accommodate VAT including:
Tax strategy and governance
Business operations
Finance and tax functions and processes
Skills, roles and responsibilities
Risk management, compliance and control processes
Technology and VAT specific systems
Planning, budgeting and forecasting
Reputational risk of getting it wrong

70. Step Two – Business Impact
Evaluate where VAT will impact your business
Supply chain
Where do suppliers belong?
How will VAT impact supplies?
Costs of VAT e.g. irrecoverable VAT
Contracts – who will bear cost of VAT
Sales
Where do customers belong?
Who are they
Contracts – profits, VAT inclusive or VAT exclusive
Transitional measures

71. Step Two – Business Impact
Transitional VAT issues
Existing and future contracts
VAT impact on current major projects / asset purchases
Understand tax planning and fraudulent VAT practices
Test drive overall VAT commercial chain before going live
Quantify increased administrative costs
Understand and map resources – appoint VAT Manager
Decide VAT management strategy-in house, outsource?
Manage Cash flow, understand possible P&L impact

72. Step Two – Business Impact
Specific Considerations
Potential business impact of VAT on prices, margins, and cash flows
Liquidity impact in case VAT Refunds are not honoured on time
Irrecoverable VAT in computation of export orders
Perform a legal review of contractual terms requiring changes or actions
Raise awareness of VAT through the organisation

73. Step Three - Systems IT Impact assessment
Customer and supplier platforms
Financial systems
Filing and compliance systems
Digital documentation including e-invoicing, etc.

74. Step Three - Systems
Design VAT model for all impacted components: business operations, systems, processes and resources to meet VAT compliance, filing and reporting requirements
Your systems should allow you:
To be VAT compliant
To have the correct VAT coding of accounts payable and receivable transactions
To have appropriate internal controls and processes
Can it raise invoices ?
Can it report VAT ?
How robust is it ?

75. Step Three - Systems Design technical positions on:
External sales
Inter-company transactions
VAT clauses in contracts
Accounting and accruals
Design governance model
Roles and responsibilities
Risk management
Policies and processes
Cash flow management

76. Step Three - Systems
Implement system design requirements into the business ready for VAT go-live
Ensure all business areas are ready: marketing and sales, procurement, supply chain, finance, tax and legal
Simulate and test before go-live date
TESTING

77. Step Four - Implement Ensure VAT compliance and efficiency
VAT registration
Compliance with legislation
Monitor new developments
Keep Testing
GAP Analysis
Constant feedback
Ongoing staff training
Impact on financials
Implementation is only the beginning
Reputational risk

78. Common Pitfalls

79. Common Pitfalls for Business
Incorrect VAT rates applied
Sales Omitted
Invalid or missing documentation
Errors in calculation of VAT
Clerical / manual / system errors
Omitting inter company transactions
Journals incorrectly posted
Manual corrections
Transactions outside the system
Controls – checks and balances

80. Common Pitfalls for Regulator
Interpretational Differences between business and regulator
Assessments framed on 3rd party’s information
Revenue targets override equitable enforcement of taxation
Tax Accounting Model – Advance Collection
Distortion in VAT Laws – Retail Price Mechanism, Extra Tax, Withholding Tax
Law challenged before Courts put pressure on revenue targets
Parallel / Cash Economy – Absence of Level Playing Field
Best Judgment Assessment
Perception / Trust Gap !

81. VAT Accounting

82. VAT Accounting
The business pays VAT on its sales whether or not it has recovered the sale proceeds from customers.
The business can also claim VAT on its supplier’s invoices irrespective of whether purchase bills have been settled.
If the business is operating the Standard VAT scheme, VAT recorded on its sales invoices will be posted to a VAT Control Account within the accounting systems chart of accounts. Therefore, it keeps a record of all Sales or Input VAT, as well as records all purchase VAT or Output VAT within the same system.
At the end of each period, the business will report on the difference between the VAT which was paid by it and the VAT which was paid to it.
If your sales VAT exceeds your purchase VAT you will pay to the government exchequer. If it's the other way around, then refund will be claimed.

83. VAT Accounting
To record purchases and VAT input: To record sales and VAT output: To record Net VAT (Payable) to Government:
Description
Purchase Account
VAT Account
Bank / Accounts Payable
Debit
XXX
Credit
Description
Bank / Accounts Receivable
Sales
VAT Account
Debit
XXX
Credit
Description
VAT Account
Bank
Debit
XXX
Credit

84. VAT Accounting To record purchases and Irrecoverable VAT: Description
Purchase Account (Cost + VAT)
Bank / Accounts Payable
Debit
XXX
Credit

85. VAT Accounting – Specific Issues
Overlapping of goods and services
Overlapping of Services (program, advertisement, advertisement agent)
Revenue Recognition
Origination vs. Termination
Provision for contingent liability
Reimbursement of expenses as part of sale price
Reimbursement of expenses allowed for certain services
Transfer Pricing - Import Trade Price (ITP)
Stock in Trade (Standard, Actual)
Product Costing
Bad Debts
Provision of obsolete / slow moving stock
Free Sampling
Sales Incentives (Post Supply Discount)

86. Practical & Business Issues

87. Practical & Business Issues
VAT claimability on stock in trade as on 01 January 2018
Discounts – what is general industry practice ?
VAT on Rent ?
Self consumption
Joint & Several Liability of Buyer & Seller / Service Provider for unpaid VAT
Principal & Agent
Adjustment of Post Supply Discount
Replacement Invoice
E-intermediary
Double Taxation – Riz Carlton issued bill to a foreign guest; bill to be settled by non resident company
Mixed Supplies – Exempt & Taxable
Transfer of goods to shops / go-downs / sale outlets
Concept of Open Market Price
The Integral Part Concept
Reverse charged VAT as input
Service arranger vs. service provider

88. Q & A

89. THANK YOU