Value Added Tax (VAT) in Cameroon: Definition, Rates, and Rules

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THE VALUE ADDED TAX (VAT)
1) Definition of VAT
One of the most common and broad based taxes to consumers and businesses is the Value Added Tax, commonly
abbreviated as VAT. As the name implies, VAT is only collected by the state when value has been added to a commodity
or a service. Value is most commonly added during business transactions by means of a profit margin. VAT is an indirect
tax on expenditure charged on most goods and services to be borne by the final consumer in the distribution and
consumption cycle.
2) The rates of VAT
There are two types of VAT ratesapplied in Cameroon: the standard rate of 19.25% and the zero rate of 0%. The standard
rate carries 17.5% as main rate and 10% of the main rate as additional council rate (10% of 17.5% = 1.75%). That is:
Components of standard rate
rate
Main rate:
17.5%
Additional council rate (10% of 17.5%):
1.75%
Applicable standard rate
19.25%
The zero rate is applied on exports while the standard rate is applied on all locally made taxable transactions.
3) Transactions liable to VAT
Transactions liable to VAT are known as taxable transactions. For a transaction to be taxable to VAT, the
following conditions should be respected:
 Be a profitable and valuable delivery of goods or provision of services, carrying a financial compensation from the
beneficiary.
 Be undertaken by a taxable person.
 It should be part of an economic activity.
 It should not appear on the list of transactions exempt from VAT as provided by the finance law.
4) Taxable persons for VAT
A taxable person is one who is registered for VAT, because this person carries out taxable transactions. VAT
registered means entered into an official VAT payers’ register of a country. Persons and legal entities that are
VAT registered are obliged to calculate VAT on the goods and services that they supply and pay VAT into a
particular state budget.
5) Transactions and items exempt from VAT
These are items and transactions which are outside the scope of VAT (VAT should not be applied on their prices). This
can either be because of their nature, or by a special provision of the law, or again because of the person carrying out these
transactions. Examples include:
 Medical and paramedical activities;
 Classical activities carried out by the state and local councils such as the collection of fees and the sales of stamps;
 Household consumption of electricity below 110 kw and water below 10 m3;
 Pharmaceutical products as well as inputs, equipment and materials of pharmaceutical industries;
 Products of basic necessity like domestic gas, sugar, flour, salt, rice, etc;
 Transactions of social nature realised by non-profit making organisations with philanthropic features.
 Transactions related to the production, importation and sale of newspapers.
 Life and health insurance contracts;
 Equipment used for the fight against HIV/AIDS under conditions fixed by the law;
 Equipment and materials to be used for the exploitation of solar energy; and
 Any other transaction and item exempted by the law.
6) The base of application of VAT
The base of VAT is the value of the item or transaction after all commercial and financial reductions have been made.
This is known as the financial net value.

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7) Terms used for VAT
The following terms are used in the calculation and recording of VAT:
i) The VAT Inclusive amount:
Also known as the amount after VAT, this term describes a given value that already carries VAT. In most cases, it is
abbreviated as “Incl. VAT”.
ii) The VAT Exclusive amount:
Also known as the amount before VAT, this term describes a given value that does not carry VAT and as such VAT has
to be included on it. It is most often abbreviated as “Excl. VAT”.
iii) The VAT Invoiced:
This is the VAT that is imposed on the value of goods and services by the supplier and collected from customers.
Depending on the type of operations carried out by the supplier registered for VAT, the VAT invoiced is described as
VAT invoiced on sales, VAT invoiced on services rendered, VAT invoiced on works or contracts, VAT invoiced on self -
constructed assets, VAT on documents to be established.
iv) VAT Recoverable:
This term describes the VAT paid to suppliers on which the taxpayer has the right to impute or charge on the VAT
invoiced for the period. Depending on the category of the purchase or acquisition made, the VAT recoverable is described
as VAT Recoverable on fixed assets, VAT Recoverable on purchases, VAT Recoverable on transport, VAT Recoverable
on external services and other expenses, VAT Recoverable on Awaited Documents.
v) The Accrued VAT or VAT Payable:
The accrued VAT or the VAT due for a given period corresponds to the amount of the VAT that has to be paid to the state
on the difference of the VATs that have been invoiced to customers and the VATs that have been paid to suppliers. That
is: VAT Payable for the period = Total of VAT Invoiced – Total of VAT Recoverable
vi) VAT Credit
A VAT credit exists when the total of the VAT invoiced for a period cannot absorb the total of the VAT to be recovered
for that given VAT period. That is when Total of VAT Invoiced – Total of VAT Recoverable = negative
8) Accounts used in the recording of VAT
The accounts to be used shall depend on whether the registered person is receiving revenues, making payments, or
declaring and paying VAT.
i) When sales are realised, services and contracts are rendered: The following accounts are used to record the
VAT invoiced on these aspects:
 443 – State, VAT invoiced. The main account of the VAT Invoiced account is subdivided following the type of
activity on which the revenue will be received as follows:
 4431 – State, VAT Invoiced on sales
 4432 – State, VAT Invoiced on services rendered
 4433 – State, VAT Invoiced on contracts or works
 4434 – State, VAT Invoiced on self-constructed assets
 4435 – State, VAT on documents to be established.
ii) When purchases and acquisitions are made, services are received and other expenses are incurred: The
following accounts are used to record the VAT to be recovered on these aspects:
 445 – State, VAT Recoverable. The main account of the VAT Recoverable account is subdivided as follows:
 4451 – State, VAT Recoverable on Fixed Assets
 4452 – State, VAT Recoverable on Purchases
 4453 – State, VAT Recoverable on transport
 4454 – State, VAT Recoverable on External Services and other Expenses
 4455 – State, VAT Recoverable on Invoices Receivable
 4456 – State, VAT Transferred by other enterprises

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iii) During the declaration and payment of VAT: The following accounts are used to record the declaration of
VAT:
 444 – State, Accrued VAT or VAT Credit: This main account is subdivided as follows:
 4441 – State, Accrued VAT
 4449 – State, VAT Credit to be carried forward
9) Principles on the recording of VAT
The recording of VAT is based on the principle whereby transactions and items are recorded tax exclusive as follows:
i) The Recording of Sales, Services and Contracts Rendered:
The entry for the VAT invoiced is as follows:
4_/5_
Third party or cash account(s)
Revenue account concerned
State, VAT invoiced on ….
Amt after VAT
7_
443
Amt before VAT
Amt of VAT
Illustration: The recording of VAT invoiced
New Life Enterprise Bamenda, a mixed – activity enterprise carried out the following transactions:
 15/06/20X9: Sales of goods, by invoice No. 18967 to ABC Enterprise: value of goods after VAT: 2,385,000 F;
carriage invoiced: 45,000 F (incl. VAT).
 26/08/20X9: Bill No. 7689 to ABC Enterprise for the construction of a warehouse: 4 500 000 F (incl. VAT).
Required: Journalise these transactions for New Life Enterprise.
Solution:
The VAT on the invoice is: 2 385 000/1.1925 x 0.1925 ═ 385 000 CFAF
Value of the goods before VAT: (2 385 000/1.1925) ═ 2 000 000 CFAF
The VAT on the transport: (45 000/1.1925) x 0.1925 = 7 264 CFAF.
The value of the transport before VAT: 45 000/1.1925 ═ 37 736 CFAF.
The VAT on the bill: (4 500 000/1.1925) x 0.1925 ═ 726 415 CFAF
The value of the construction before VAT: 4 500 000/1.1925 ═ 3 773 585 CFAF.
 The journal entries will be as follows:
4111
4111
7011
4431
7061
4432
7051
4433
15/06/20X9
Customers Sales of goods in the region
State, VAT invoiced on sales
Services sold in the region
State, VAT invoiced on services
Being invoice No. 18967 to ABC.
26/08/20X9
Customers
Works invoiced in the region
State, VAT invoiced on works
Being Bill No. 7689 to ABC
2 430 000
4 500 000
2 000 000
385 000
37 736
7 264
3 773 585
726 415
ii) The recording ofpurchases and acquisitions made, services received and other expenses incurred: The entry
is as follows:

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2_/6_
445
Expense account concerned
State, VAT recoverable on…
Third party or cash a/c(s)
Amt before
VAT
Amt of VAT
4_/5_
Amt after VAT
Illustration:The recording of VAT Recoverable
Same as in illustration above
Required: Journal entries for ABC Enterprise
Solution:
6011
4452
6015
4453
2313
4451
4011
4812
15/06/20X9
Purchases of goods in the region
State, VAT Recoverable on purchases
Purchase expenses
State, VAT Recoverable on transport
Suppliers
Being invoice No. 18967 from New Life.
26/08/20X9
Administrative and commercial buildings
State, VAT Recoverable on fixed assets
Suppliers of tangible fixed assets
Being Bill No. 7689 from New Life.
2 000 000
385 000
37 736
7 264
3 773 585
726 415
2 430 000
4 500 000
10) The declaration and payment of the accrued VAT
VAT is declared and paid using special forms known as Tax Returns. The form used in declaring and paying VAT is part
of the “Income and Turnover Taxes Return”. See sample of Return as appended.
During declaration one of two situations can arise:
a. The taxpayer owes the state:
Here we talk of VAT Due or Accrued VAT and the entry is as follows:
443
State, VAT invoiced
State, VAT recoverable
State, accrued VAT
Being VAT Return for.............
Bal. of 443 of the
month
445
4441
Bal. of 445 of the
month
Amt of VAT to
pay
After paying the VAT due for the period to the state, the entry will be as follows:
4441
State, accrued VAT
Cash account
Amt of VAT paid
5_ _
Amt of VAT paid
b. The state owes the taxpayer:
In this case, we talk of a VAT Credit to be carried forward and the entry is as follows:

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443
4449
State, VAT invoiced
State, VAT credit to be car. forward
State, VAT recoverable
Bal. of 443 of the
month
Amt of tax claim
Bal. of 445 of the
month
445
Illustration: The computation and recording of the VAT due payment
The following figures in CFAF are extracted from the books of a trading business registered for VAT for the first
semester of the 20X9 financial year.
Periods
Purchases
(excl. VAT)
Sales
(excl. VAT)
January 20X9
February 20X9
March 20X9
April 20X9
May 20X9
June 20X9
4 676 000
4 450 000
3 250 000
4 500 000
4 300 250
4 000 000
5 500 000
6 000 000
5 820 000
2 800 000
6 500 000
3 800 000
All the goods are taxable.
Required:
i. Using schedules compute the VAT due or VAT credit for each period and present the VAT declaration and payment.
ii. Journalise the declarations and payments given that VAT due are usually paid in cash on the last day of the liability
period.
Solution:
i) Computation of VAT Due or VAT Credit
The computation schedule will be as follows:
Months
VAT Invoiced
(19.25% of sales of
the month)
VAT Recoverable
(19.25% of purchases
of the month)
VAT Due/
(VAT Credit)
(VAT Inv. – VAT Rec.)
January 20X9
February 20X9
March 20X9
April 20X9
May 20X9
June 20X9
1 058 750
1 155 000
1 120 350
539 000
1 251 250
731 500
900 130
856 625
625 625
866 250
827 750
770 000
158 620
298 375
494 725
(327 250)
96 250(1)
(38 500)
(1)1 251 250 – 827 750 – 327 250 = 96 202
The declaration and payment schedule will be as follows:
Month for which
VAT is declared
Latest Date of
declaration and Payment
Amount to be paid/
(VAT Credit)
January 20X9
February 20X9
March 20X9
April 20X9
May 20X9
June 20X9
February 15th 20X9
March 15th 20X9
April 15th 20X9
May 15th 20X9
June 15th 20X9
July 15th 20X9
158 620
298 375
494 725
(VAT Credit)
96 250
(VAT Credit)