You will have noted that the Minister of Finance announced an increase in the VAT rate today, which will apply with effect from 1 April 2018.
The VAT Act contains a number of rules which cater for an increase in the VAT rate. These rules cover, for example, what happens when contracts have been entered into before the date on which the VAT rate is increased but where no invoice has yet been issued or payment received (ie the time of supply for VAT purposes has not yet happened).
We have set out below some examples to show how these rules will work.
What about the circumstances where the time of supply (invoice or payment) fall within the period from the date the Minister announces the increase in the VAT rate (21 February 2018) and ending on 1 April 2018?
If the goods will be provided more than 21 days after 1 April, or the services will be performed after 1 April, the new VAT rate should be charged on the supply of goods or services ie 15%. However, there are certain exceptions to this. This rule therefore prevents invoices being raised before 1 April where goods will be supplied more than 21 days after the effective date.
There are several other rules which may have implications and KPMG will be happy to work through these with each of our clients.
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