Remerciez-le!

Remerciez @Admin pour avoir partagé cet document gratuitement, de la manière la plus simple, en partageant sur les réseaux sociaux.

VALUE-ADDED TAX A Guide to Apportionment of Input Tax October 2001 This documen

VALUE-ADDED TAX A Guide to Apportionment of Input Tax October 2001 This document is a guide to the legislation. It is not a legally binding instrument. Anyone in doubt about the application of the VAT rules should contact the appropriate Revenue office (see appendix) and/or seek independent advice. CONTENTS 1. INTRODUCTION .................................................................................... 2. THE BASIC RULES ON DEDUCTIBILITY ............................................. 3. DUAL-USE INPUTS ................................................................................ 4. THE PROPORTION OF TAX DEDUCTIBLE .................................... 5. THE PROPORTION OF TAX DEDUCTIBLE FOR A TAXABLE PERIOD 6. THE REVIEW ........................................................................................ 7. CORRECTION OF THE ADJUSTMENT ............................................ 8. TURNOVER METHOD ....................................................................... 9. A SECTORAL APPROACH .................................................................. 10. DATE OF INTRODUCTION: TRANSITIONAL ARRANGEMENTS 11. SPECIFIC AREAS: INTRODUCTION.................................................. 12. LEASING, HIRE-PURCHASE AND LOANS .................................... 13. NON-TAXABLE ACTIVITIES — GRANTS, SUBSIDIES AND DIVIDENDS 14. PRIVATE USE OF DUAL-USE INPUTS, SELF SUPPLIES AND APPORTIONMENT. .............................................……………….. 15. ENQUIRIES ...................................………………………………. 1. INTRODUCTION 1.1 The right of a taxable person to deduct VAT on his or her inputs is a central part of the Value Added Tax system. The right to deduction is provided for in section 12 of the Value Added Tax Act 1972 (as amended). A general outline of the rules is set out in paragraphs 6.6 to 6.12 of the Guide to Value Added Tax 1999. 1.2 This Guide deals with the apportionment of input tax. Apportionment arises when a taxable person is not entitled to deduct the full amount of VAT on his or her inputs. 1.3 Section 112 of Finance Act, 2000 substituted a new subsection (4) into section 12 of the VAT Act with effect from 23 March, 2000. This subsection provides the legislative basis for the apportionment of input tax. The Value Added Tax (Apportionment) Regulations, 2000 (S.I. No. 254 of 2000) (the “Apportionment Regulations”) were enacted by Revenue with effect from 1 September, 2000. These Regulations provide the procedural details to give full effect to the primary legislation. 1.4 There are two parts to this Guide. Chapter 2 to Chapter 10 gives an overview of the legislation, while Chapter 11 to Chapter 14 outlines the implications of the legislation for the most affected sectors, for example, Chapter 12 deals with the financial services sector. Chapter 2 sets out the basic rules on deductibility. Chapters 3 and 4 explain the concept of dual-use inputs and the proportion of tax deductible on the acquisition of dual-use inputs. Chapter 5 deals with the application of the apportionment rules for a taxable period while Chapter 6 explains the concept of the annual review and adjustment of the apportionment method. Chapter 7 sets out the circumstances when interest and penalties on any incorrect adjustments will be waived. Chapters 8 and 9 deal with the turnover method of apportionment and the sectoral approach to apportionment. Chapter 10 sets out the date of introduction and transitional issues. Chapters 11 to 14 deal with specific areas such as incidental property and incidental financial transactions, financial services such as leasing, hire purchase and stocking loans, and the effect of non-taxable receipts such as grants and dividends, and the interaction with private use. 2. THE BASIC RULES ON DEDUCTIBILITY 2.1 A taxable person is entitled (with some exceptions - see paragraph 2.3) to deduct VAT payable on his or her inputs when these inputs are attributable to the taxable supply of goods or services or qualifying activities (see paragraph 2.2). A taxable person is not entitled to deduct any VAT on his or her inputs if these inputs are not attributable to taxable supplies or qualifying activities. 2.2 Input tax is generally not deductible if it does not relate to taxable supplies. However, as an exception, input tax is deductible if it relates to certain non taxable supplies known as ‘qualifying activities’ and they are generally as follows: transport outside the State of passengers and their accompanying baggage; certain financial and insurance services supplied outside the EU or services directly in connection with the export of goods to a place outside the EU; supplies of goods and services outside the State which would be taxable supplies if made in the State apart from passenger motor vehicles for hiring out for utilisation within the State. 2.3 On the other hand, VAT is not deductible on the purchase or acquisition of the following goods and services, even when the goods and services in question are attributable to the taxable supply of goods or services or qualifying activities: expenses incurred on the provision of food or drink, or accommodation or other personal services, for the taxable person, his or her agents or employees, except to the extent, if any, that such provision constitutes a supply of services in respect of which he or she is accountable for VAT; expenditure incurred by a taxable person on food or drink, or accommodation or entertainment services, where such expenditure forms all or part of the cost of providing an advertising service in respect of which tax is due and payable by the taxable person; entertainment expenses incurred by a taxable person, his or her agents or employees; the acquisition (including hiring) of passenger motor vehicles otherwise than as stock-in-trade (that is, for resale) or for use in a vehicle hire or driving school business; the purchase of petrol otherwise than as stock-in-trade; contract work involving the handing over of goods when such goods are themselves not deductible. 2.4 Section 12(4) and the Apportionment Regulations set out the deductibility rules applicable where goods and services are not used solely for the purposes of taxable supplies or qualifying activities. 3. DUAL-USE INPUTS 3.1 Section 12(4) of the VAT Act defines a number of terms which are central to the rules on apportionment. The key term used is that of ‘dual-use inputs’. Dual-use inputs are goods and services that are not acquired solely for the purposes of ‘deductible supplies or activities’ or for the purposes of ‘non- deductible supplies or activities’. An example of dual-use inputs would be where a bank purchases a computer which is used to process both leasing transactions, which are subject to VAT, and personal loans, which are exempt from VAT. The computer is a dual-use input and the VAT payable on its purchase must be apportioned between the amount which is deductible and that which is not. 3.2 If a taxable person purchases, acquires or imports dual-use inputs then the VAT incurred must be apportioned in accordance with section 12(4) and the Apportionment Regulations. There are three broad types of dual-use inputs: consumables such as stationery which are used in making the supplies or carrying out the activity; general overheads such as electricity and audit fees; capital goods such as premises, computer systems, etc. 4. THE PROPORTION OF TAX DEDUCTIBLE 4.1 There is a basic rule governing the proportion of input tax deductible on dual- use inputs. The taxable person has an entitlement to deduct “...a proportion of tax deductible which correctly reflects the extent to which the dual-use inputs are used for the purposes of that person’s deductible supplies or activities and has due regard to the range of that person’s total supplies and activities” -section 12(4)(c). The entitlement to deduct input VAT is, of course, dependent on the input tax being attributable to some extent to a taxable supply or qualifying activity. To arrive at the correct result, there are many ways of calculating the deductible proportion, for example, the ratio of taxable turnover to total turnover, the ratio of taxable transactions to total transactions, an area based calculation, etc 4.2 The key point is that there are two specific conditions which must be met. The proportion must correctly reflect the use to which the inputs are put and also reflect the range of the taxable person’s activities. 4.3 Any method which meets these conditions may be used by a taxable person to calculate the proportion of tax deductible. The taxable person decides the method to be used and the result of this method must meet the two conditions. However, the taxable person must be able to, on request, demonstrate to the satisfaction of Revenue that the method used results in a correct proportion of deductible tax. 4.4 The following example illustrates that the proportion must correctly reflect the use to which the inputs are put. Example 4(a): A finance company engages in taxable leasing and exempt personal loans as follows: Number % Value % Leasing agreements entered into: 75 60 €750,000 42.9 Personal loans entered into: 50 40 €1,000,000 57.1 Total: 125 100 €1,750,000 100 In this case the number of leasing agreements entered into represents 60% of the total number of transactions but only 42.9% of the total value of the finance granted. In this example, the finance company can demonstrate that each transaction requires the same level of inputs regardless of its value. Therefore, it can demonstrate that the proportion of tax deductible should be calculated on the basis of the proportion of the taxable transactions in the total transactions rather than on a turnover basis and it can deduct 60% of the tax incurred uploads/Finance/ guide-app 1 .pdf