What is goods and services tax?
Goods and services tax (GST) replaces sales tax and is payable on a limited range of supplies of goods and services. It is payable only in respect of:
- Goods supplied by a manufacturer – Manufacturers who make annual taxable supplies (sale, exchange or transfer of manufactured goods including goods taken for own use, or provided under a lease or hire purchase agreement) exceeding SL Sh 5m are required to pay GST on those supplies (unless they have been specifically listed as an exempt supply – see below). GST does NOT apply on supplies by wholesalers or retailers.
- Imported goods – GST on imports is collected by Customs along with import duties. Details of imported goods are NOT included on GST return Form 09.
- Taxable services – Section 165 of the Revenue Act specifies that GST is payable on the following services:
- Electricity services;
- Telecommunications services;
- The provision of water for a fee;
- Board, lodging, and incidental services supplied in carrying on the business of a hotel or similar facility, or of
Meals or beverages in carrying on the business of a restaurant;
- Sale of tickets by international transport services (air, sea, and land);
- Services of a travel agency or travel arranger, including the issuing of tickets; and
Sporting services or game arranger, including the issuing of tickets.
What are the exempted goods?
Exempt from GST are supplies of the following goods as per section 153(7) of the Revenue Act: —
- Supply of foodstuffs for human consumption (but not when served as a meal or as cooked or prepared food);
- Supply of foodstuffs for the general use of educational, and philanthropic institutions (excluding goods for the personal use of the members and employees of such institutions and organisations);
- Supply of computers, computer accessories and software;
- Supply of goods for the relief of distressed persons in the case of natural disasters or other humanitarian emergencies;
- Supply of a pharmaceutical or medicinal preparation, if it was exempted from customs duty on importation;
- Supply of medical aids or appliances specifically designed for persons with an illness or disability, if they were exempted from customs duty on importation;
- Supply of textbooks or other instructional materials designed for use in schools or adult education programs, if those materials were exempted from customs duty on importation;
- Supply to a registered manufacturer, or to a person in the business of mining or forestry of (a) raw materials or other inputs for use directly in manufacturing, (b) capital goods or (c) supplies of goods as part of the transfer of a manufacturing business as a going concern by a registered manufacturer to another registered manufacturer.
What is the tax rate for goods and services tax?
The rate of tax on a taxable supply of goods and services as per sec 152 & 164 of the Revenue Act is five (5) percent of the amount of the taxable supply, except in respect of exported goods where the rate of tax is zero (0) percent.
Who is obliged to register for GST?
Any person who carries on a business of manufacturing or providing a taxable service has an obligation to register as per sec 158 of the Revenue Act 2016 where the person has made or expects to make taxable supplies with an annual total taxable amount equal to or in excess of five (5) million Somaliland Shillings.
How to register?
Every person who has an obligation to register shall apply to the Inland Revenue Department for registration within twenty-one (21) days of becoming so required. They will be required to complete a tax registration form which is available from any IRD office, or can be downloaded from the bottom of this page.
What if a person required to register does not do so?
If a person liable to register fails to register by the due date as per regulation 22(b) of the Revenue Regulations 2017, they will be liable to penal tax of $US 1,500. They may also be liable on conviction to pay a fine of up to $US 2,000 or to imprisonment for up to 5 years, or both as per sec 175 of the Revenue Act.
Any person who fails to make an application for registration as required as per sec 158(9) or 169(7) of the Revenue Act, shall be treated as registered from the beginning of the tax period immediately following the time at which the person was required to be registered or such later date as the Inland Revenue Department may determine.
What if my annual taxable supplies falls below the 5m SL Sh threshold?
As per sec 158(11)(b) any registered person who makes taxable supplies of goods or services may apply in writing to the Inland Revenue Department for cancellation of their GST registration if the value of their taxable supplies during the most recent 12-month period does not exceed the 5M SL-SH threshold.
What if my taxable supplies will be less than 5m SLSH in a year?
Taxpayers with annual taxable supplies of goods and services that are less than this the threshold do not have to register for GST but may do so voluntarily.
What do I do with my GST registration certificate?
On registration for GST, registered manufacturers and taxable service providers will receive a registration certificate. Every registered person who carries on business shall keep and publicly display at their principal place of business their original certificate of registration as a registered person and at every branch of the business a copy of their original certificate of registration. Display of certificates lets customers know whether businesses are GST registered and can charge them GST. Penal tax of $US 500 may be imposed where registration certificates are not so displayed.
Do I need to provide GST invoices?
Every registered manufacturer making a taxable supply as per sec 159 of the Revenue Act, shall provide the recipient with a GST invoice for the supply. The invoice shall be provided at the earlier of—
- The time of payment or partial payment, (b) the delivery date; or (c) the shipment date. Every supplier of taxable services as per sec 171 of the Revenue Act, shall provide the recipient with a GST invoice for the supply within 10 days of performing the service, or in the case of supplies with periodic payments, at least 5 days before the due date of such payments.
A GST invoice shall contain the following particulars –
(a) The words “GST invoice” in a prominent place, (b) the name, address, and taxpayer identification number of the registered manufacturer or taxable service provider making the supply, (c) the individualized serial number and the date on which the invoice is issued, (d) the description of the goods or services supplied (including quantity or volume), (e) the date(s) on which the goods were delivered or service was provided, (f) the amount paid for the supply and (g) the amount of GST charged.
When does a supply of goods or services occur?
A supply of goods or services occurs on the earlier of – (a) the date on which the GST invoice for the supply is issued, or (b) The date on which the GST invoice is required to be issued under Sec 159 or 171 of the Revenue Act, as specified above. These rules determine in which monthly GST return taxable supplies should be reported.
Where does a supply of goods or services occur?
A supply of taxable goods or services occurs at the place of business from which the supplies are provided, except for supply of electricity or telecommunications services which occur at the location where those services are received. Only supplies of goods and services in Somaliland are subject to GST.
When are registered GST persons required to file a return and pay goods and service tax?
As per section 160 & 172 of the Revenue Act 2016, every registered manufacturer & taxable service provider shall file a return and pay goods & service tax (GST) for each month within 21 days after the end of the previous month.
What if registered GST persons file their GST return late (after 21 days of the following month)?
A registered manufacturer or taxable service provider who fails to file their monthly GST return on time (within twenty-one (21) days of the end of the previous month) will be liable to pay penal tax of two (2) percent of the tax payable for that month or US $100 per month, whichever is the greater, for each month or part month during the period from the day after the return was due to be delivered to the day the return will be delivered. Registered GST persons may also be convicted of an offence under sec 17 of the Revenue Act and be liable to a fine of up to US $1,500.
What if registered GST persons pay their GST late (after 21 days of the following month)?
A registered manufacturer or taxable service provider who fails to pay their monthly GST on time (within twenty-one (21) days of the end of the previous month) is liable for late payment fees equal to two (2) percent per month on the
amount unpaid calculated from the date on which the payment was due until the date on which payment is made as
per sec 16 of the Revenue Act 2019.
Where should registered GST persons file their return and pay their goods and services tax (GST)?
If you are a large taxpayer, your GST return forms and payments should be submitted to IRD HQ in Hargeisa. If you are a medium or small taxpayer, then you should file your GST forms and pay to any IRD regional/district office.
How do you calculate goods and services tax?
Example: Suppose a beverages manufacturer in Somaliland produces and sells 300 crates of soft drinks for 40,000,000 Slsh in July 2019.
Calculate GST for manufacturer in July.
- Sale price received for soft drinks supplied = 40,000,000 SL-SH
- Taxable amount = 40,000,000*5% = 2,000,000 SLSH
GST to be paid before 21st of August 2019 = 2,000,000 SLSH
Where can registered persons get GST return forms and guidelines for their completion?
Goods and services tax forms and guidelines are available from any IRD office, or download it from below.