I run a trading company, among my activities to maintain the importation account, it’s a bit of challenge regarding the account transaction.
We paid a client BH Photo USD3839.30 for goods and USD188.63 for freight charge from our local account with Standard Bank given the rate of 2733/1; TZS/USD
These goods they are undergo customs clearing procedures where the customs authorities add the following to the value:
Import Duties TZS 493811.00
Excise Duties TZS 68682.00
Railway Development Levy TZS 210564.00
Copyright Levy TZS 8226
and Freight & Insurance amount which doesn’t tally with the amount I paid to a supplier
Then from this total amount thus including the goods value they charged VAT (18%) TZS 2046895.00
How do i treat / control this Receivable amounting to VAT (18%) TZS 2046895.00 in my accounts record (journal entries)?
The solution is easy and that is to account for the customs charges separately.
To do that:
-
Create a Supplier account for your customs authority.
-
Record your supplier BH Photo’s invoice as-is as follows:
| Item | Description | Amount | Tax Code |
|---|---|---|---|
| … | Goods cost | 3839.30 USD | |
| Shipping | Shipping cost | 188.63 USD | |
| Total | 4,027.93 USD |
- Record your customs charges in a separate invoice from your Customs Authority as follows:
| Item | Description | Amount | Tax Code |
|---|---|---|---|
| … | Goods cost – used to calculate VAT at customs | 10,877,827.89 TZS | VAT 18% |
| … | Goods cost – already paid to supplier (not payable to customs) |
-10,877,827.89 TZS | |
| … | Import Duties | 493,811 TZS | VAT 18% |
| … | Excise Duties | 68,682 TZS | |
| … | Railway Development Levy | 210,564 TZS | |
| … | Copyright Levy | 8,226 TZS | |
| Total before VAT | 781,283 TZS | ||
| VAT | 2,046,895 TZS | ||
| Total | 2,828,178 TZS |
Of course, this is just an example I provided to describe the accounting process for customs VAT invoices, however, consult with your tax and customs authorities and/or accountant regarding:
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The applicability of VAT to import taxes as well
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How to treat any discrepancy in the tax base (in your case, assuming the above tax structure, it appears as though your customs authority underevaluated your goods).