Measure

A registered person cannot deduct input tax for passenger vehicles, entertainment, or petroleum products unless these are used for specific business purposes. If only some supplies and imports are taxable, input tax deductions must be proportional to the taxable supplies compared to all supplies and imports made.

19.

(2) No amount may be deducted under section 18(1) by a registered person for input tax paid in respect of -

(a) a taxable supply to, or import by, the registered person of a passenger vehicle, unless -

(i) such person is in the business of -

(aa) dealing in, or hiring of, passenger vehicles; or

(bb) a tour operator, and that vehicle was acquired for the purposes of such business;

(b) a taxable supply to, or import by, the registered person of goods or services acquired for the purposes of entertainment or providing entertainment, unless -

(i) the registered person is in the business of a tour operator or of providing entertainment and the taxable supply or import relates to the provision of taxable supplies of entertainment in the ordinary course of such business;

(c) a taxable supply to, or import by, the registered person of petroleum products, unless those products are wholly for use in the business of such person;

(3) Subject to subsection (4), where only a part of the supplies made by a registered person during a tax period are taxable supplies, the amount of the input tax to be allowed as a deduction under section 18(1)(a)(i) and (ii) for the tax period shall be determined as follows, namely -

(a) in respect of a supply or import received which is directly connected with the making of taxable supplies, the full amount of input tax payable in respect of the supply or import shall be allowed as a deduction; or

(b) in respect of a supply or import received which is directly connected with the making of exempt supplies, no amount of input tax payable in respect of the supply or import shall be allowed as a deduction; or

(c) in respect of a supply or import received which is used both for the making of taxable and exempt supplies, the amount calculated in accordance with the following formula -

A x B/C,

in which formula -

“A” is the total amount of input tax payable in respect of supplies and imports received during the tax period in respect of which a deduction is allowed under section 18(1); and

“B” is the total amount of taxable supplies made by the registered person, in the case where such person is registered for income tax during the preceding year of assessment for income tax or, in any other case, during the preceding financial year of the registered person; and

“C” is the total amount of all supplies made by the registered person, in the case where such person is registered for income tax, during the preceding year of assessment for income tax or, in any other case, during the preceding financial year of the registered person: Provided that where the registered person is a financial institution, a supply with regard to interest shall be the net interest earned by such institution.

(4) Where the fraction “B/C” in paragraph (c) of subsection (3) is more than 0.90, the registered person may deduct the total amount of input tax on supplies and imports referred to in that paragraph.