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PARTIAL ATTRIBUTION OF INPUT TAX

This article explains the principles and calculations involved in attributing input tax in accordance with the VAT Act. It covers the determination of deductible VAT, supplies with the right to deduct, definitive and provisional ratios, use of ratios in calculations, and alternative methods if the partial attribution method does not yield fair results.

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PARTIAL ATTRIBUTION OF INPUT TAX

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  1. PARTIAL ATTRIBUTIONOF INPUT TAX

  2. Principle Article 22(5) VAT Act Item 5(3) Tenth Schedule The proportion of deductible VAT is determined for all the tax periods ending during a calendar year according to a special calculation taking into account supplies opening right to deduct VAT and other supplies

  3. Principle and calculation Article 22(5) VAT Act Item 6(1)(a) Tenth Schedule Supplies with right to deduct “V22(4)” ----------------------------------------------------------------------------------X 100 Supplies with right to deduct “V22(4)” + other supplies = Vall

  4. Principle and calculation Article 22(5) VAT Act Item 6(2) Tenth Schedule The calculation does not include: • the value of any supply of capital goods used in the economic activity of the taxable person • the value of self-supplies • the value of any supply which is not made by a taxable person acting as such

  5. Definitive and provisional ratio Article 22(5) VAT Act Item 6(1)(b) Tenth Schedule The result obtained shall be: • The definitive ratio for the tax periods ending during this calendar year • The provisional ratio for the following year (= the next tax periods ending during the following calendar year)

  6. Use of provisional ratio Article 22(5) VAT Act Item 6(1)(c) Tenth Schedule The ratio calculated for the previous year shall be used as the provisional ratio for the tax periods ending during the following year Total input tax is multiplied by this provisional ratio

  7. Use of definitive ratio Article 22(5) VAT Act Item 6(1)(d) Tenth Schedule The total input tax credit for all the tax periods ending during the following calendar year shall be calculated definitively by multiplying the total input tax for those periods by the definitive ratio for that year

  8. Difference Article 22(5) VAT Act Item 6(1)(e) Tenth Schedule The difference between the input tax provisionally deducted and the definitive calculation shall represent: • Either a tax due • Or a deduction allowable • To be accounted for in the tax return for the first tax period that ends in the year following that for which the provisional calculation was made or in case of cancellation of registration in the last tax period

  9. Calculation of the definitive ratio and regularisation - Methodology • Classification in output and input operations • Classification in supplies with credit and other supplies + elimination of the amounts not taken into account • Eliminate the expenses not related to the economic activity (exclude VAT) or on which no VAT was due • Comparison and calculation of the ratio (fraction = percentage) • Application of the ratio to the amount of input tax • Comparison between the provisional ratio and the definitive ratio • Regularisation

  10. Alternative methods: real use and specific calculations of ratio Article 22(5) VAT Act Item 8 Tenth Schedule Where it appears to the Commissioner that the method of attributing input tax according to the partial attribution method does not give a fair and reasonable result, he may by notice in writing to a registered person direct that the said method shall not apply to the attribution of input tax to the supplies of that person and that person shall adopt such other method of partial attribution as the Commissioner may prescribe

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