Chapter
4
Value Added Tax
1. A manufacturing company registered with value added authority produces a
commodity not subjected to schedule tax, had the following data for august 2018:
Ø Total value of the invoices issued during the month amounted to
50,000 L.E.
Ø Total value of inputs purchased during the month amounted to
30,000 L.E.
Required:
A. Determine the deadline for submitting the monthly tax return.
B. Compute the tax due amount.
Solution:
A. Deadline to submit the tax return of August is two months after August 31 which is
October 30, 2018.
B. Subject to the general tax rate (14%)
Value added tax due = tax on outputs – tax on inputs
= 50,000(14%) – 30,000(14%)
= 2,800 L.E
2. A service firm provided a service subjected to schedule tax only, the following is the
data that relate to September 2018:
Ø Total value of invoices issued during the month to clients amounted
to L.E. 200,000.
Ø The value of inputs purchased during the month and subjected to
value added tax amounted to L.E. 8,500.
Ø The scheduled tax rate is 10%.
Required:
A. Determine the deadline to submit the tax return of September 2018.
B. Calculate the scheduled tax due.
Solution:
A. The deadline to submit the tax return is November 30th.
B. As the service is subjected to only scheduled tax rate then it will be treated only as a
cost.
Value added tax due = 200,000(10%) = 20,000 L.E.
3. A whole sales merchandising company registered with value added tax authority had
the following data for month of September 2018:
Ø Total sales during the month amounted to 300,000
Ø Total merchandise purchased during the month amounted to 180,000
Ø Quantity discount on sales was 10%
Required:
A. Determine the deadline for submitting the value added tax return for September.
B. Compute the amount of tax due
Solution:
A. The deadline is November 30th, 2018.
B. As the quantity discount is deducted from the taxable sales then the
Value added tax due = value added tax on net sales – value added tax on purchases
Net sales = 300,000 – 300,000(10%) = 270,000 L.E.
Value added tax due = 270,000(14%) – 180,000(14%) = 12,600 L.E.
4. The following is pertaining to a company registered with value added tax authority
for June 2018.
The company sold used commodities valued L.E. 150,000 and were used by the
company, the general sales tax paid for purchasing these commodities was
L.E. 25,000.
Required:
Determine the value added tax due on selling these commodities in June 2018,
according to the following two situations:
A. The commodities were purchased in February 2016
B. The commodities were purchased in March 2017
Solution:
A. As the used commodities sold have the following conditions:
- Purchased new
- Used by the same company for a period exceeding two years
The used commodities sold are subjected to value added tax at 30% of its selling
value and the tax paid on purchases cannot be deducted.
Value added tax due = 150,000(30%)(14%) = 6,300
B. As the used commodities sold were used by the same company for a period
less than two years.
Then the value added tax is imposed on the total selling value of these used
commodities
Value added tax due = 150,000 (14%) = 21,000 L.E.
5. The following is pertaining to a retail merchandising company that registered with
value added tax authority for March 2018:
Ø Total retail sales amounted to L.E. 228,000 including value added tax.
Ø Total purchases during the month amounted to L.E. 150,000.
Ø The commodities which the company deals with are not subjected to
schedule tax.
Required:
A. Determine the deadline for submitting the value added tax return.
B. Compute the value added tax due
Solution:
A. The deadline to submit the value added tax return is May 31, 2018.
B. Total sales including value added tax = 228,000.
Sales + 14%(Sales) = 228,000
1.14(sales) = 228,000 à sales = 200,000
Thus VAT = 28,000
Value added tax due = VAT on sales (output) – VAT on purchases (input)
= 28,000 – 14%(150,000)
= 7,000
6. An importing company had the following data that pertain to an imported shipment
from European country during July 2018:
Ø Bought 100 units of 32 inch TV. FOB for $200 per TV.
Ø Freight cost of the shipment amounted to $1,000.
Ø Insurance cost of the shipment amounted to $1,000.
Ø The foreign broker commission is $500.
Ø The port uploading and grounds cost amounted to L.E. 2,500.
Ø The custom tax is 30%.
Ø Other duties and taxes amounted to L.E. 10,000.
Ø $1= L.E.17
Required:
A. Compute the value added tax on the shipment
B. Determine the importing cost of the shipment and the cost per TV.
Solution:
A.
The value (FOB)à 200*100*17 L.E. 340,000
+ freight cost à 1000*17 17,000
+ insurance cost à 1000*17 17,000
+ broker commission à500*17 8,500
+ uploading & grounds cost 2,500
= Custom tax base 385,000
Custom tax à 385,000*30% 115,500
+ other duties and taxes 10,000
Value added tax base L.E. 510,500
Value added tax on custom release = 510,500(14%) = L.E. 71,470
The importing value of the shipment is amounted to 510,500 and the value added tax
cannot be added because it will be deducted later on selling the TV units.
B. The importing value per TV unit = 510,500/ 100 = L.E. 5,105.
7. An exporting company had the following data pertaining to the month of April 2018:
Ø The total merchandise exported aboard during the month amounted
to L.E. 2,000,000.
Ø The total merchandise purchased during the month that subjected to
value added tax totaled L.E. 1,200,000
Ø There were no importing transactions during the month
Required:
A. Determine the value added tax due.
Solution:
As the commodities exported abroad are subjected to value added tax at 0% and the
reporter has the right to deduct the value added tax on inputs.
Value added tax on exports
(2,000,000*0%) 0
Less value added tax on inputs
(1,200,000*14%) (168,000)
Value added tax due = (168,000)
v The negative balance of value added tax can be refunded or deducted from the next
month balance.
