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Commerce

VAT computation

takriban dakika 5 kusoma

Mada za sehemu hiiTaxationMada 8
  1. The concept of tax and taxation
  2. Practical issues in taxation
  3. Tax system
  4. Tax system in Tanzania
  5. Tariffs in Tanzania
  6. Value Added Tax
  7. VAT computation
  8. Limitations of taxation

VAT computation is the process of calculating the amount of Value Added Tax (VAT) payable at each stage in the supply chain—from the producer to the final consumer—based on the value added to the goods or services.

VAT is calculated as:

VAT Payable=Output VAT−Input VAT\text{VAT Payable} = \text{Output VAT} - \text{Input VAT}

Where:

Output VAT is the VAT a business charges on sales to customers.

Input VAT is the VAT a business pays on purchases from suppliers.

  1. A business charges VAT on goods or services it sells (output VAT).
  2. It also pays VAT on the goods or services it buys (input VAT).
  3. The business subtracts input VAT from output VAT to find the VAT payable to the government.

Step 1: Forester sells logs to Timber Merchant

Selling price (before VAT): TShs 1,000,000

VAT=0.18×1,000,000=180,000\text{VAT} = 0.18 \times 1,000,000 = 180,000

Total invoice price: 1,000,000+180,000=1,180,0001,000,000 + 180,000 = 1,180,000

VAT payable to government=Output Tax−Input Tax=180,000−0=180,000\text{VAT payable to government} = \text{Output Tax} - \text{Input Tax} = 180,000 - 0 = 180,000

Step 2: Timber Merchant sells timber to Manufacturer

Selling price (before VAT): TShs 1,400,000

VAT=0.18×1,400,000=252,000\text{VAT} = 0.18 \times 1,400,000 = 252,000

Total invoice price: 1,400,000+252,000=1,652,0001,400,000 + 252,000 = 1,652,000

VAT payable to government=252,000−180,000=72,000\text{VAT payable to government} = 252,000 - 180,000 = 72,000

Step 3: Manufacturer sells furniture to Retailer

Selling price (before VAT): TShs 2,000,000

VAT=0.18×2,000,000=360,000\text{VAT} = 0.18 \times 2,000,000 = 360,000

Total invoice price: 2,000,000+360,000=2,360,0002,000,000 + 360,000 = 2,360,000

VAT payable to government=360,000−252,000=108,000\text{VAT payable to government} = 360,000 - 252,000 = 108,000

Step 4: Retailer sells furniture to Final Consumer

Selling price (before VAT): TShs 2,500,000

VAT=0.18×2,500,000=450,000\text{VAT} = 0.18 \times 2,500,000 = 450,000

Total invoice price: 2,500,000+450,000=2,950,0002,500,000 + 450,000 = 2,950,000

VAT payable to government=450,000−360,000=90,000\text{VAT payable to government} = 450,000 - 360,000 = 90,000

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