DRAFT TAX RULING Ruling C3 (English)_2012.pdf · 2012-02-09 · DRAFT TAX RULING Reference Number:...
Transcript of DRAFT TAX RULING Ruling C3 (English)_2012.pdf · 2012-02-09 · DRAFT TAX RULING Reference Number:...
MALDIVES INLAND REVENUE AUTHORITY Malé, Republic of Maldives
Maldives Inland Revenue Authority, T-Building, Ameenee Magu, Male’ 20379, Maldives
Tel: (960) 332 2261, Fax: (960) 331 6577, E-mail: [email protected], Website: www.mira.gov.mv
D R A F T T A X R U L I N G
Reference Number: 220-PR/TR/2012/C3
Date: 09 February 2012
To: All GST Registered Persons
Subject: GST treatment of reimbursements and disbursements
Excerpt from the Goods and Services Tax Act
39. If a registered person receives in relation to a good or service supplied by him, monies
received as reimbursements, judgments of a court, arbitral awards or out of court
settlements, which are subject to tax in accordance with this Act, then such person
shall pay tax to the extent of such amount received.
1. Where a registered person bills another person to recover expenses they have incurred on
the other person’s behalf, the GST treatment of the amount re-billed shall depend on who
receives the good or service, who is legally liable to pay for it and to whom the tax
invoice is made out. For convenience, this ruling distinguishes between “reimbursements”
and “disbursements” of expenditure.
2. For a transaction to be regarded as a reimbursement, which requires GST to be added to
the amount on-charged by the registered person, under Section 39 of the GST Act, the
supply to which the payment relates shall meet all of the following conditions:
(a) A tax invoice for that supply is issued to the registered person who re-bills the
amount.
(b) That registered person is the recipient of the supply.
(c) The registered person is legally liable to make the payment for that supply.
3. Where Section 2 of this Ruling applies, the registered person may claim input tax on that
transaction.
-2 -
Maldives Inland Revenue Authority, T-Building, Ameenee Magu, Male’ 20379, Maldives
Tel: (960) 332 2261, Fax: (960) 331 6577, E-mail: [email protected], Website: www.mira.gov.mv
4. Where a re-billed amount meets all of the following conditions, it shall be regarded as a
disbursement and GST shall not be charged on the amount re-billed:
(a) A tax invoice for the supply is NOT issued to the registered person who re-bills the
amount.
(b) The registered person is NOT the recipient of that supply.
(c) The registered person is NOT legally liable to make the payment for that supply.
5. Where Section 4 of this Ruling applies, the registered person shall not claim input tax on
that transaction.
6. Notwithstanding Section 4 of this Ruling, where a registered person charges a
commission, fee or similar charge in addition to the amount of the reimbursement or
disbursement, the registered person shall add GST to that commission, fee or other such
charge.
7. The following examples illustrate the application of the above provisions.
(a) A lawyer, who is a registered person, bills his client for the recovery of printing
expenses of MVR 50 (excluding GST) which he incurred to facilitate the provision of
his legal services to the client. His fee for the legal services is MVR 1,000 (excluding
GST).
The transaction between the supplier and the lawyer, and the lawyer and the client are
two separate supplies. The on-charging of the MVR 50 is a reimbursement charge.
The lawyer must charge 6% GST on the total of the invoice (MVR 1,050) raised to
the client. Since the supplier is also a registered person, the lawyer may claim input
tax on the amount of GST paid by him to the supplier. The lawyer has the tax invoice
to support the claim.
(b) A clearing agent pays import duties of MVR 5,000 to the Maldives Customs Service
on behalf of an importer. The agent then recovers that amount from the importer by
raising an invoice for it plus a commission for his service (MVR 500 excluding GST).
Client Lawyer
(Registered
person)
Supplier
(Registered
person) Payment of
MVR 53 Payment of MVR
1,113
Tax Invoice for
MVR 50 + GST
Tax Invoice for
MVR (1,000 + 50) + GST
-3 -
Maldives Inland Revenue Authority, T-Building, Ameenee Magu, Male’ 20379, Maldives
Tel: (960) 332 2261, Fax: (960) 331 6577, E-mail: [email protected], Website: www.mira.gov.mv
In this example, the clearing agent is recovering his disbursement. He must not charge
GST on the re-billed amount to recover the amount of import duty (MVR 5,000) paid
to Customs. However, 6% GST must be charged on the commission (MVR 500)
charged by the clearing agent.
(c) Your company is the parent company of a group of companies. Your audit firm bills
one of your subsidiary companies MVR 20,000 (excluding GST) for the annual audit
of its financial statements. Your company pays the fee and subsequently recovers it
from the subsidiary company, together with charging your quarterly management fee
of MVR 50,000.
In this example, you must not charge GST on the re-billed amount to recover your
disbursement payment of the audit fee (MVR 21,200). The subsidiary company may
claim an input tax credit for the GST of MVR 1,200. It has the tax invoice to support
the claim. However, you must charge 6% GST on the management fee (MVR
50,000).
Audit firm
(Registered
person)
Tax Invoice for
MVR 20,000 +
GST
Payment of
MVR 73,000
Payment of
MVR 21,200
Tax Invoice for
MVR (50,000 +
GST) + 20,000
Parent
company
(Registered
person)
Subsidiary
company
(Registered
person)
Maldives
Customs Service
(Not a registered
person)
Invoice for MVR
5,000 (No GST)
Payment of
MVR 5,530
Payment of
MVR 5,000
(No GST)
Tax Invoice for
MVR (500 +
GST) + 5,000 Clearing
Agent
(Registered
person)
Importer