So part of our business involves collecting payment from clients on behalf of our customers. We transfer the payments to the relevant customer and charge the client a fee plus VAT for processing this. We have been reporting the total fees earned monthly as our Total Sales/Income Exclusive of VAT and Sales/Income Subject to VAT.
Would appreciate confirmation if the payments we collect on behalf of our customers should not count towards the Total Sales/Income Exclusive of VAT?
Answered 1 year, 4 months ago
Kindly note that there is a different between "total profit", "gross profit" and "net profit".
Total Profit is the amount of money your business gains in a particular period of time. Gross profit is the Total profit minus the cost of goods sold (that is to say Selling Price minus Cost Price). Your net profit is the Gross Profit minus expenses.
Ordinarily, with good tax planing (and where allowed) your tax liability is supposed to be the percentage chargeable divided by 100 multiplied by the chargeable profit (which is usually the net profit minus "allowable expenses" as provided under the relevant tax statute).
In essence, it is not advisable to evade tax and it is also not advisable to pay more than you ought to. It may therefore be advisable for you to hire an Accounting Expert or Auditor with a good knowledge of Taxation.
Hope this helps your inquiry.
1 year, 4 months ago
Just to clarify, this question is about the FIRS VALUE ADDED TAX RETURN FORM 002.
There are two fields on this form, the first is labelled Total Sales/Income Exclusive of VAT and the other Sales/Income Subject to VAT.