Deferment of VAT

VAT is  payable on importation of goods or removal of goods from Bond on goods that attract VAT. VAT may be deferred in certain instances.

What is deferment of VAT?

• Deferment of VAT is an officially sanctioned temporary postponement of paying VAT on importation of specified goods of a capital nature imported by companies in the manufacturing, agriculture, mining, aviation transport and health sectors. The goods should have been imported for own use by the importer. It is granted on application to the Commissioner.

Deferment period for different investment thresholds.

Who qualifies for deferment?

• Any person who produces proof to the satisfaction of the Commissioner that he or she intends to import goods of a capital nature or approved medical equipment for his or her own use
• This includes companies and partnerships.
• The importer`s tax record should be up to date. Non-filers do not qualify.

Which goods are of a capital nature?

Goods of a capital nature refer to specific prescribed plant, machinery or equipment used exclusively for:

• Mining purposes on a registered mining location as defined in the Mines and Minerals Act[Chapter 21:05]; or
• Manufacturing or industrial purposes in, or in connection with a factory (including spare parts required for the purpose of maintaining or refurbishing such plant, equipment or machinery);
• Agricultural purposes (including spare parts required for the purpose of maintaining or refurbishing such plant, equipment or machinery);
• The aviation industry (including spare parts required for the purpose of maintaining or refurbishing aircraft and such plant, equipment or machinery);
• Equipment and / machinery for use in the medical sector.

1. Goods of a capital nature do not cover motor vehicles intended or adapted for use on roads or capable of being so used.

How does one apply?

The application shall be submitted to the Regional Office in charge of the port of entry through which goods will be imported, for processing of deferment authorisation letter and shall be accompanied by the letter of certification from the responsible Ministry, the approval letter from the Ministry of Finance together with the pro-forma invoices for the goods and also the following:

1. the registered office address, and if different, the physical and postal addresses of the place of business;
2. full names, in the case of individuals, and in the case of a corporate body
3. the full corporate name and a certified copy of the certificate of incorporation or partnership agreement as the case may be;
4. Tax Clearance Certificate
5. Banker’s name and account number;
6. a full description of the equipment or machinery in respect of which deferment of tax is sought, including the country of origin, quantity, value, amount of tax which applicant wants to be deferred and a letter of undertaking from the importer stating:

• the intended use of the equipment;
• that the equipment is for the exclusive use of the importer;
• that it is to be used exclusively for the intended purpose;
• that he or she will make full payment at terms of set payment plan.
• that the goods will not be disposed of even after deferment period without notifying the Commissioner

What happens if one fails to settle the deferred VAT debt?

• Deferred debts which are not settled on due date may result in the VAT deferment facility being stopped or withdrawn.
• Fine equivalent to the deferred  VAT debt shall be levied  together with  interest.

What happens if one sells the goods during or after deferment period?

Where goods that enjoyed deferment of tax are sold, re- exported or disposed off before or after expiry of  the deferment period instead of being used for the declared use, the importer will pay in addition to any tax for which he or she is liable on such disposal the outstanding deferred amount, 100% fine and interest at prevailing rates.