Article 49 - Input Tax Deduction

Subject to the specific provisions of this Article, a Taxable Person may deduct Input Tax charged on Goods and services supplied to that Taxable Person, to the extent these are received in the course of carrying on an Economic Activity and constitute:

1. Taxable Supplies including zero-rated Supplies,

2. Internal Supplies,

3. Supplies that would have been Taxable Supplies had they been made in the Kingdom.

A Taxable Person is entitled to deduct Input Tax incurred by that Person in respect of services supplied to that Person during the period of the 6 months before the effective date of registration, provided that:

1. the services are purchased to be used for the purposes described in the first Paragraph of this Article,

2. the services have not been supplied onwards, or used in full, by the Taxable Person prior to the registration date,

3. the services are not of a type which is restricted from deduction, as prescribed in Article 50 of these Regulations.

A Taxable Person is entitled to deduct Input Tax incurred by that Person in respect of Goods supplied to that Person or Goods imported by that Person before the effective date of registration, provided that:

1. the Goods are purchased or imported to be used for the purposes described in the first Paragraph of this Article, and where the Tax cannot be wholly attributed to such use, an apportionment is used,

2. in cases where the Goods are Capital Assets, these have a positive book value at the date of registration,

3. the Goods have not been supplied onwards by the Taxable Person, or used in full by the Taxable Person, prior to the registration date,

4. the Goods are not of a type which is restricted from deduction, as prescribed in Article 50 of these Regulations.

In cases where Capital Assets are held at the date of registration, the maximum deductible Input Tax permitted under the third Paragraph of this Article shall be calculated as if the net book value, determined in accordance with the accounting practice of the Taxable Person, were the Consideration for the Supply.

Goods acquired by a Taxable Person which are lost, damaged or stolen must be reported as such in the accounting records held by the Taxable Person in order to support deduction of Input Tax on those Goods. The Authority may require further evidence be provided in respect of such lost, damaged or stolen Goods including without limitation police reports and insurance claim documentation.

In cases where a Taxable Person deducts Tax on the Import of Goods into the Kingdom, and subsequently moves these goods to a final Destination State, and becomes liable to transfer Tax to that Member State in accordance with the Agreement, the Taxable Person must reduce the Input Tax deducted in the Tax Return for the Tax Period during which the removal occurred. A Taxable Person who intends to move Goods imported into the Kingdom to another Member State must not claim a deduction in respect of the importation of these Goods.

Input Tax may only be deducted where the Taxable Person holds evidence of the amount of Input Tax paid or payable in a form specified in Article 48 of the Agreement. In cases where a Taxable Person does not hold the documents specified in the Agreement, a deduction may be claimed where he is able to provide the following alternative evidence to the Authority:

1. a Simplified Tax Invoice which is correctly issued in accordance with these Regulations,

2. in the case of a Supply arising on the transfer of Goods to another Member State, a commercial or other document substantiating the value on which VAT is calculated at the transfer date,

3. other commercial documentation permitted at the discretion of the Authority, evidencing that the Taxable Person has received the Supply and correctly incurred the VAT in question.

A deduction of Input Tax may be made by a Taxable Person in a Tax Period subsequent to that Tax Period including the date of Supply, provided that the Taxable Person remains eligible to make such deduction under the other provisions of these Regulations. Input Tax may not be deducted in any period which falls more than 5 calendar years after the calendar year in which the Supply takes place.

Where a Taxable Person incurs Input Tax on the purchase, construction, modification, or renovation of real estate for the purpose of making a Taxable Supply, and such Supply has become exempt pursuant to Paragraph 1 of Article 30 of these Regulations, the Taxable Person may deduct such Input Tax subject to the provisions of Paragraph 7 of this Article and the following conditions:^[74]

1. The Supplies related to the purchase, construction, modification, or renovation of real estate were received before the date the exemption was enacted and entered into force.

2. The Input Tax on such Supplies -the subject of this Paragraph- is deducted through a filed Tax Return for any Tax Period prior to 31 December 2020 G.

3. That Input Tax is deducted proportionally if the Input Tax incurred is not fully attributable to the Supplied real estate or if the Input Tax incurred appears on a Tax Invoice for a continuous Supply executed in-part on or before the exemption's entry into force and in-part thereafter.