VALUE ADDED TAX (VAT) EXERCISE

Digital Encyclopedic Tech Ltd

VAT Formula Reminder

VAT = Taxable Value × 18%

VAT Inclusive Price = Taxable Value + VAT

VAT Payable = Output VAT − Input VAT

Exercise 1: VAT Theory

ABC Ltd is a VAT registered company operating in Rwanda. The company sells electronic equipment and issues EBM invoices.

Required:

  1. Define VAT.
  2. State the current VAT rate in Rwanda.
  3. Explain the difference between Output VAT and Input VAT.
  4. Mention four persons required to register for VAT.
  5. State the importance of EBM in VAT administration.

Exercise 2: VAT Calculation

Digital Encyclopedic Tech Ltd recorded the following transactions during April:

Required:

  1. Calculate Output VAT.
  2. Calculate Input VAT.
  3. Calculate VAT Payable to Rwanda Revenue Authority (RRA).
  4. State whether the company has VAT Payable or VAT Credit.

Exercise 3: Question

A trader purchased a refrigerator for RWF 354,000, VAT inclusive.

Question:

What was the purchase price of the refrigerator excluding VAT?

How much VAT was included in the purchase price?

If the trader wants to make a profit of RWF 30,000, at what price should the refrigerator be sold excluding VAT?

What should be the selling price including VAT?

How much VAT will the trader pay to the Rwanda Revenue Authority (RRA)?

Exercise 4: Interview Question

You are attending a Taxation Teacher interview.

Question:

How would you explain VAT to a student who has never studied taxation before?

Provide a practical example using a business transaction.

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