a) the decision to exempt such transactions b) Giving a practical example discuss how VAT on exported
Question:
a) the decision to exempt such transactions
b) Giving a practical example discuss how VAT on exported services work
c) Discuss three tax planning opportunities that could be derived from the financial management decisions in a company
d) The following is a summary of the sales and purchases of Ngamia Limited for the six months ended 31 December 2020:
Month | Sales Sh. | Purchases Sh. |
July August September October November December | 1,200,000 1,400,000 1,650,000 2,200,000 Nil 2,800,000 | 450,000 300,000 Nil 700,000 650,000 900,000 |
Additional information:
1. The composition of each month’s sales is as follows:
· At the standard rate – 85%
· Exempt sales – 4%
· Export sales – 11%
2. One tenth of all purchases are made from suppliers not registered for VAT purposes. The rest of the purchases are made from suppliers registered for VAT purposes, at the standard rate.
3. As at 1 July 2020, the following balances were to be brought forward:
4. For the six month period ended 31 December 2020, the company issued credit notes amounting to Sh. 40,000, exclusive of VAT, for sales made at the standard rate.
In addition, the company received debit notes amounting to Sh. 22,000 (exclusive of VAT) from suppliers registered for VAT purposes.
5. A customer who had purchased supplies worth Sh. 200,000 at the standard rate in October 2020, was declared bankrupt in December 2020.
6. As at 31 December 2020, the company had not yet received payment for the sales made in August 2018.
Required:
VAT account for the six-month period ended 31 December 2020.
(Where applicable, the transactions are exclusive of VAT at the standard rate).
Expert Answer:
a Exempt transactions are those that are not subject to Value Added Tax VAT This exemption may apply to a wide range of transactions including sales of goods or services that are deemed to be of a cha... View the full answer
