How to correct commission based sales in the book that is recorded as turnover to reduce VAT liability? see details below.

Question

As an Accountant, how do you treat this situation to protect your company from paying what is not to be paid as tax to the government?H

A company is buying commodity locally on behalf of another company that gives advance based on the current price market with a slight addition as commission/profit for the company buying locally directly (the reason for this is that the company that is buying is having facilities(manpower, storage and plant) in the region where the commodity is being procured, while the company that is giving advance is new in the business and does not have the facility to be able to buy the commodities directly from that region where the commodity is available) but the company buying locally records in their book the entry as turnover where as the funds comes from another company out there and they make less than9% as profit or in form of commission on the transaction. Here comes the issue, the government tax auditor will consider this as turnover as presented by the buying company's book of account, although agric commodities export is zero VAT but when sold locally, it is VATable with5% VAT. Now how will the company buying on behalf of the other deal with this (present its book) so as to avoid paying VAT of5% on transaction that he got little profit from?

Durgesh Pandey · Answer

Sale the product. Others country. Trade revenues generate. Payout recved as commtion..bank boo size grow.

Gayani Jayasekera · Answer

For Commission base sales , company is entitle only certain percentage of commission. Whole sales proceeds would be entitled to the company which sent you the stocks for sales. Therefore company under review no need to pay VAT on commission base sales. Company has to pay VAT only on your company sales excluding commission base sales.

Arindom Borah · Answer

Obviously, the commission is calculated on the gross amount. Vat has nothing to do with the employee or agent whose account is supposed to be credited with the commission. Because of accounting heads, the difference can be shown as a special allowance etc. in the books.

Ibrahim Adewale Ige · Answer

Illustration Data: Company X is buying commodity worth of $70,000 on behalf of company Y, the money paid to company X is the market price with slight addition(+/-9%) to serve as profit/commission to company X, so the total amount given by company Y to company X for the supply is $76,300. but the issue is this, company X shows in its book, the transaction as purchase and sales, that is, company X represent the entry in its book as normal buying and selling transaction, whereas, the tax authority in the country will charge5% VAT on the local sales of commodity but the export of that same commodity is zero VATed. Now if the company X is to pay VAT,5% of76,300. the loss will result in its book.

Deleted user · Answer

agreed with all ..................................

حسين محمد ياسين · Answer

Agree with Answers >>>>>>>>>>>>>>>>>>>>

Salah Othman Yousef Alshambaati · Answer

Agreed with the answers Mr. Ayman Mohammed Atef

ايمن محمد عاطف محمد · Answer

Please clarify the question specifically in order to clarify the answer according to data

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How to correct commission based sales in the book that is recorded as turnover to reduce VAT liability? see details below.

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