MOF Ruling: Late Payment Interest Not Sales Amount for VAT Purposes

• MOF ruling confirms that qualified late payment interest is not considered as sales revenue for VAT purposes
• Buyers are still required to fulfill withholding and/or reporting obligations for the payment of interest
• Previously, late payment interest was considered a “sales amount” for VAT purposes
• Sellers were liable to 5% VAT on late payment interest
• The ruling clarifies that sales amount for VAT purposes does not include qualified late payment interest
• Withholders are now required to withhold income tax from qualified late payment interest
• Business entities may consider amending VAT returns to claim overpaid VAT due to qualified late payment interest
• The ruling does not apply to transactions subject to non-value added tax (GST) or cases involving tax avoidance.

Source: taxathand.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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