By: Israel Abias I Consultant
VAT is a general tax on consumption, which in Angola has been in force since October 1, 2019, and was introduced based on a simple, local, intelligent and modern approach, given the need to associate a digital component following the best international practices with regard to the treatment of fraud and tax evasion.
Being a tax that imposes organization on the part of taxpayers, due to the fact that it does not sympathize with informalities, it is an issue that obviously impacts the Angolan business fabric, it is worthy of deserved analysis due to its implications. That is, with its implementation, companies have experienced certain management challenges. VAT, so to speak, is one of the taxes closest to the citizen, as it arises from the manifestation of a need for consumption or expenditure on the part of the latter.
At the level of companies, its implications may be transversal, but we need to focus here only on the financial operating indicators, specifically, on the Average Receipt Periods (PMR) and the Average Payment Periods (AMP).
The ratio method is the most used method of financial analysis, firstly because it allows relatively simple analyzes based on a set of selected indicators, but also because, being based on quantitative data, it allows for an analysis that can be relatively in-depth on the situation of the company at a given moment or about its evolution over time.
The ratios make it possible to obtain summarized information about the company, making it possible to make comparisons over time using standard units.
Operating financial indicators, also called operating or activity ratios, are used to analyze decisions associated with a company’s operating cycle, showing the efficiency of those decisions. They are targeted ratios to explain the normal functioning of the company. These indicators are intended to measure the degree of efficiency in the use of resources made available to the company, that is, they assess the company’s management capacity.
When resorting to balance sheet values, it is advisable to use the average values of the items in question to avoid unusual values or aspects such as seasonality. Average values are used because balance sheet accounts are subject to large changes in value over a short period of time. This value is calculated by adding the value of the account at the end of the previous period (n-1) with the value at the end of the current period (n + 1) and dividing the result by 2. year instead of average values of the current assets and liabilities accounts due to lack of information for consecutive years or due to stability of balances.
Companies carry out a series of activities in their day-to-day activities, which are characterized by the sale of goods and provision of services to their customers and the acquisition of goods and services from their suppliers. Regarding the first aspect, sales and provision of services can be carried out without the respective receipt occurring simultaneously, which may give rise to credits.
These credits cannot be extended too much so as not to compromise the company’s liquidity capacity, however, it is necessary to understand that given the activity sector, some companies sell more in cash or in cash, as is the case with supermarkets, and others in installments , as is the case in the real estate or automobile sector. Therefore, the average time that the company takes to receive from its customers is called the Average Customer Period (PMR), which from the treasury point of view is always satisfactory for any company to receive as soon as possible. The PMR should be as low as possible to ensure the company’s liquidity and treasury health.
The inclusion of VAT in the denominator is related to the fact that the numerator balances come from the balance sheet and, as such, include the value of that tax.
At the same time, the acquisition of goods and services, these can be paid at the time of their occurrence or not, but what is true and normal is the occurrence of:
PMR = Sales (VAT included) + Services rendered (VAT included) X 365
PMR = Sales (with VAT) + Services rendered (with VAT)
X365 Clients
average customer balance
Acquisitions whose payment takes place (advances) before or after. The latter gives rise to supplier credit. Suppliers should be considered as those who supply the company: fixed assets, merchandise and other goods (consumables) and services (normally third-party services are considered). But for good management they must be separated due to the type of goods and services provided by the company, and what their relationship is with the company’s activity.
Therefore, the average time that the company takes to pay its suppliers is called the Average Payment Period (AMP), which from the treasury point of view is always satisfactory for any company to pay suppliers as late as possible. Or The evolution of these ratios can therefore be justified with the company’s efficiency in managing to collect its debts or with its ability to pay later. The company’s negotiating capacity with customers and suppliers greatly influences these ratios.
7/19 of April 24, the law that approves the CIVA, the tax must be delivered by the last day of the month following the month to which the operations relate. carried out in the previous month. This means that in Angola, the Average VAT Payment Period (PMP IVA) to the State is 2 months (60 days).
If the PMR is greater than 2 months, it means that the company receives the amount of the invoice including the VAT paid after the deadline for delivery to the State has expired, incurring a fine (n.º 1, article 70.º of Law n. 7/19 of 24 April and no. 4, article 155 of Law no. 21/20 of 9 July – amendment of the CGT). In this case, the lower the VAT PMR in relation to the VAT PMP, the better for the company. However, one must consider the functional dynamics of the sector where the company operates.
Healthy treasury.
There is a need for working capital for VAT. Bad The company’s weak negotiating capacity with customers. Equal to 2 months 2 months
Therefore, understanding the implications of the tax on these indicators is essential due to their relationship with the treasury. Companies should pay close attention to VAT engineering regarding the regime in which they are included, due to these issues of deadlines.