incurred to the registered person’s business (e.g. due to Tropical Cyclone Pam) and the insurance cover was a taxable supply.
The VAT Office will continue to uplift the relevant information’s from the insurance companies to conduct third party checks on those registered persons who have received indemnity payments to make sure that VAT is accounted for in the appropriate VAT returns.
Section 57 of the VAT Act No 12 of 1998 [CAP. 247] provides the Director with the authority to inspect any records that he considers necessary or relevant for the purpose to establishing a registered person’s correct VAT liability. Such records will include all business records and in some cases may extend to personal records such as statements from private bank accounts.
VAT Registered persons are again reminded that in Vanuatu, when a VAT registered person receives an indemnity payment under a contract of insurance, the payment is deemed to be consideration for a VAT taxable supply if the following conditions apply:
- the supply of insurance cover was a taxable supply by the insurer;
- the loss incurred by registered person was in the course of carrying on their taxable activity; and
- the indemnity payment was not in respect of insurance cover for loss of employment service earnings.
In simple words, based on the above conditions if you are a VAT registered person and your VAT registered business receives and indemnity payment (money) to compensate for the loss incurred to your business the payment received will be subject to VAT. Registered persons are encouraged to contact the VAT Office or refer to Section 3(4) of the VAT Act No.12 of 1998 [CAP. 247] for the correct and legal VAT determinations on insurance indemnity payments in Vanuatu.
The VAT Office also reminds registered persons that an offence is committed under section 51(1) (c) where a person:
- Makes any false return;
- Makes any false statement;
- Makes any false declaration; or
- Gives any false information.
Knowing it is false, or having disregard as to whether it is false or not. It is also an offence to intentionally mislead or attempt to mislead the Director or any other officer of the Department. (Note- the motive for committing the offence is irrelevant).
On the first occasion on which a person is convicted of any such offence (or offences) the person becomes liable to a fine of up to 100,000 vatu. Upon a second conviction the fine is increased to 200,000 vatu. For any subsequent offence, the VAT Office will proceed with prosecution.
For more information on any of our articles published in our weekly column, please contact the VAT Office by phone: 00678 24573 or email us
