The registration for VAT is determined by whether the person is conducting a taxable activity.
This as mentioned in our previous communications makes the meaning of “taxable activity” crucial for both registration purposes and in establishing whether a person must account for VAT on specific supplies made by them.
Taxable Activity
A taxable activity for VAT includes:
- any activity that is carried on continuously or regularly and
- involves the supply of goods and services to another person, and
- consideration (payment) is received for that supply, and
- the supply does not necessarily have to be for profit and It includes (but is not limited to) any such activity carried on:
- in the form of a business, trade, manufacture, profession, association, club, or
- by any government agency
When applying for VAT registration you must make sure that all criteria’s that define taxable activity are met. This article is rewritten as we continue to experience registration applications are lodged that does not satisfy the criteria “consideration (payment) is received for that supply”.
In these circumstances the applications are kept pending until such time the relevant criteria is satisfied.
Consideration
The VAT Act does not provide a definition of consideration, other than to say that it “includes all forms of consideration but does not include an unconditional gift”. This means that the common English usage of the word applies, that is, payment or reward for a supply of goods or services.
Taxable Supplies
A taxable supply by definition is goods and services supplied in Vanuatu in the course of conducting a taxable activity.
Note: a taxable activity cannot exist without taxable supplies.
Distinction between “taxable activity” and “business”
It is important to distinguish between the VAT concept of “taxable activity” and the general concept of “business”. The key difference is that a business involves a profit motive on the part of the person operating it, whereas the profit motive is not necessary precondition for a taxable activity.
Also as an example, an organization selling goods to raise funds for its charitable work is not carrying on a business, but it carrying on a taxable activity and will be required to register if its supplies exceed the registration threshold.
VAT Deregistration
The VAT Office is currently conducting an exercise to identify those registered persons who are not conducting a taxable activity in particular those since their registration and accordingly should not be registered for VAT purposes. The VAT Office has and will continue to deregister businesses in this situation and will reverse all VAT returns lodged that in most cases are refund returns. The reversals in nearly all cases will initiate a VAT liability meaning there will be tax payable to the VAT Office.
For more information on any VAT issues, please contact the VAT Office by phone: 00(678) 24573 and 00(678) 37517 (Santo), visit us at our Office in Carnot Street, Port Vila or email us.
