Parliament passes VAT Amendment Bill to reduce rate from 17.5% to 3%

Abu Mubarik 10:26 - 01 April 2017

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The Bill seeks to amend the VAT Act, 2013 (ACT 870) to classify the supply of financial services, domestic transportation of passengers by air and supply of immovable property by a real estate developer as exempt supplies.

Parliament has passed the Value Added Tax Amendment Bill, 2017, which will reduce the rate from 17.5 percent to 3 percent.

The bill is also to give legal backing to a VAT Flat Rate Scheme that would facilitate collection of VAT on the supply of goods in the distribution chain and to provide for related matters," according to the Finance Committee.

The bill follows government announcement of tax cuts and reduction in the 2017 budget statement.

The VAT flat rate will apply on the supply of financial services but exclude professional services in the nature of accountancy, investment, legal services and non-life insurance contracts from the exempted provisions.

In addition, the VAT flat rate is expected to be neutral because no loss of revenue is expected but rather bring about enhance efficiency, ease of compliance and convenience administration.