Telnet: Suggested Solution

Note 1

VAT Act implications

 The provision of a marketing slot, advertisement and attendance of Telnet staff to the
conference are a supply of a service.
 The time of supply is the earlier of the receipt or invoice date.
 The value of supply is the consideration less VAT.
 Telnet shall therefore claim input tax since PAAB is a registered vendor and therefore
should charge VAT.
 Telnet should ensure that they obtain a valid tax invoice in order to claim input tax.

Note 2.

VAT Act implications

 The 50c is payment for a supply of telecommunication services.
 The time of supply will be the earlier of receipt or invoicing (billing) of the amount.
 The value of supply is the consideration less vat.
 The rate is standard rate.
 Telnet is a registered vendor and therefore shall levy the output tax.
 The 5c is a financial services supply.
 This type of supply is exempt.

Note 3

VAT Act implications

 Telnet is paying for an imported service as defined. The service is being supplied by a
non-resident and it is being used to make non-taxable supplies.
  VAT is charged on imported services where such services are imported for making non-
taxable supplies.
 Telnet uses the software for financial services in the form of the mobile money transfer
services and these services are non-taxable supplies.
 VAT is therefore levied on the licence fees.
 The time of supply is the earlier of invoice or receipt date.
 The value of supply is the greater of the open market value (omv) or the invoice value
of the service.
 The invoice value is $230,000. Telnet will need to research the open market value of
similar software.
 The VAT is payable by the recipient of the services who are Telnet in this case.

Note 4

VAT Act implications.

 The mobile charges are financial services supply.
 Financial services are an exempt supply.
 The mobile charges are therefore non-taxable.

Note 5

VAT Act implications.

 Telnet is a registered VAT vendor and VAT output would have been levied on the debts
on the date the goods were sold (time of supply).
 As the debt has been written off in the books of Telnet, they will be able to claim Input
VAT in respect of the irrecoverable debts s22.
 The time of supply will be November 2015.
 The value of supply will be $400,000.
 VAT will be claimed at the standard rate.
Note 6

VAT Act implications.

 The purchase of base station equipment is the supply of imported good s6(1)(b).
 The time of supply is the date the goods enter into Zimbabwe, October 2015.
 The value of supply as per s12(2) is the value thereof for customs duty purposes plus any
duty excluding surtax.
 The value is $1,269,000 [1,200,000 + 34,000 + 5,000 + 30,000]
 Import VAT will be levied at the standard rate.

Note 7

VAT Act implications.

 The purchase of Isuzu KB Double Cabs is the supply of goods.

 S16(2)(d) does not apply as the vehicles are to be used exclusively for the purposes of
trade.
 The time of supply is the earlier of the date of payment or the date of delivery.
 The value of supply as per s3(a) is the consideration.
 VAT will be levied at the standard rate.
 Depreciation is not a supply and therefore no VAT input can be claimed.

Note 8

VAT Act implications.

 The sale of immovable property is a supply of goods.

 VIS and Telnet are connected persons as per s2 as VIS is a shareholder of Telnet.
 The time of supply will be the date on which the buildings are sold (March 2015).
  The value of supply will be the open market value of $250 000 s9(4).
 VAT will be levied at the standard rate.
 Telnet would have claimed input vat on the date of purchase on the $180 000 as the
building was being used in the furtherance of their enterprise.

Note 9

VAT Act implications.

• The school’s main service shall be the provision of tablets and sim cards to Universities
which constitutes a supply of goods. and there should be VAT consequences since it is a
supply of a service by a registered operator in furtherance of trade per section 6(1)(a)

• While the service is for teaching it is not an educational service as defined unless the
Telschool registers the training office registers under a law administered by the Ministry
responsible for higher education.

• Since Telschool shall be a non-accredited trainer therefore the teaching shall not be an
education service and therefore its service shall be standard rates.

• The time of supply shall be the earlier of invoice dates or receipt of any payment.

• The value of supply shall be the consideration less VAT.