the operating system of VAT and its accounting record in OHADA

VAT stands for added -value tax. This tax is levied on goods and services in republic of Benin. It is indirectly collected from taxpayers .In fact the amount prices of goods and services ares levied. As result, each time, the consumers purchase goods or services they knowingly or unknowingly pay for it. The tax rate in  Benin is 18% of amount price of sold goods and services. Between the office tax and consumers we have an enterprise wich is legally established,and appointed to collect this tax for Government. While the enterprise sells its goods and services,the accountant has to state separately or not the amount of VAT on invoice from the price out of tax.In fact the right of deduction is obtained according to the invoice format.since an entreprise used to collect tax to Governement its also gets right to deduct a part of its tax collected.the deductible part is just concerned some payable  invoices which ares legually established.what ares the compulsory mentions wich shall be necessary on the payable invoice?:
-the registered company name of supplier
-the adresse of supplier
-The IFU : it is the  registered unique identification that tax office uses  to identify each taxpayer.
-the amount of the goods and services out tax.
-the amount of calculated tax.I mean the amount of input tax
Since all theses compulsory mentions have been written, the amount of input tax gaines the right of  deduction.As the accountant that receive the payable invoice gain the right to deduct this input tax
,its means that the accountant at the date he receives this invoice payable should record like  this :


First step: the day his company purchased the goodsgoods
The recording below will be save in

DEBIT:601 merchandise purchased---------> the amount price of goods out of tax (a)
DEBIT :445 recoverable tax---------------------->the input tax amount(b)
         CREDIT:401 supplier trade bill payable-----------> a+b

Once the company paid the amount of the bill the accountant shall record it like this


Second step:the day the company cashes the total amount of bill

DEBIT:401 supplier trade bill payable-----------------> b
   CREDIT: 571 cash account-------------------------------> b
b=0,18×a
b=0,18a
So a+b=a+0,18a
a+b=1,18a
Then suppose that  company decide yo sell its good to a' xof amount out of tax . The day  the company will shallshall record it like this:

First step : the day the company sells its good

DEBIT: 411 customer trade bill receivable------->1,18a'
          CREDIT : 443 VAT payable---------------------->0,18a'
           CREDIT: 701 merchandise sold--------------->a'
The day the customer of the company will come to cash the account Will record like this

Second step : the day the customer comes to cashcash

DEBIT:571 Cash account ---------------------------------------->1,18a'
       CREDIT: 411 customer trade bill receivable------>1,18a'

Normally the VAT has to be reported to the office tax the 10th of each .this is the time delay of reporting tax .if the tax has not reported till the 10th of a month the company will be subjectsubject to the Majorations or penalties. It depends on the time delay
For examples:
Consider that the date of your reporting is d and the  date of time delay is d'
If d <= d'--------->the company isn't subject to neither Majoration nor Penalities
If d  €  d' <  d <= d'+30 days -------> the company will pay for majoration fees
If  d> d'+30 days----------------------->the company will pay for penalities


At the end of each month the accountant of the company has to transfer the amount of VAT from balance of account 445 and 443 respectively to the account 4449 and account 4441.Ended the accountant while transfering the balance will be confronted  of two kinds  of situations whichwhich Ares:
-VAT payable> VAT recoverable
-VAT payable< VAT recoverable

First case: VAT payable>VAT recoverable

The accountant of the company in this case should record like this:
First step :

DEBIT:443 VAT payable--------------------------------------------------------------------------------------------> 0,18 MS
      CREDIT:4441 liabilities arising from taxable temporary difference ------------------> 0,18 MS
With MS= Total amount of sold merchandise out of tax

Second step
DEBIT : 4449 right to tax deduction and credit pending application------------------------->0,18MP
   CREDIT:445 VAT recoverable---------------------------------------------------------------------------------->0,18MP
Whith MP total amount of mechandise sold on bills which ares legally well established(refer to the compulsory mention on legual bill)

First case: suppose that VAT payable > VAT recoverable .i mean 0,18 MS > 0,18MP and the difference of balance between them is DVAT .i mean DVAT=0,18MS-0,18MP and DVAT>0

First step: compensation of payable VAT

DEBIT 4441:liabilities arising from taxable temporary difference -------------------->0,18MP
    CREDIT 4449: right to tax deduction and credit pending application ------------->0,18MP

Second step : the cashing of VAT debt to the office tax

Remember that I have said DVAT = 0,18MS-0,18MP

DEBIT:4441liabilities arising from taxable temporary difference -------------------------->DVAT
     CREDIT: 571 cashing account-------------------------------------;---------------------------------------->DVAT

Second case:
Same recording like the first case except that the way of doing compasation is different.In fact we have

DEBIT 4441:liabilities arising from taxable temporary difference -------------------->0,18MS

    CREDIT 4449: right to tax deduction and credit pending application ------------->0,18MS

We notice that instead of taking MP we choose MS that is the difference.

The diffence DVAT will not be paid by governement to the company but it will be deducted from the next payable VAT



NB: This way of recording is based on OHADA Accounting system. Normally all theses account i've used is in french but i tried to find their equivalence in English accounting