Many businesses enter into agreements with telecommunication service providers to make mobile phones (“Phones”), airtime (“Airtime”) (i.e. call minutes) and data packages (“Packages”) there has been uncertainty among the all business community as to whether a business is entitled to recover the related input tax and, if so, what the requirements are to be entitled to input tax recovery.
This Public Clarification (VATP028) provides guidance on the application of the VAT legislation in respect of the recovery of input tax incurred on Phones, Airtime, and Packages acquired for business use.
Article 53(1) (c) of the Executive Regulations prohibits the recovery of input tax incurred on goods or services purchased to be used by an employee for their personal benefit without any charge to the employee, unless there is a legal or contractual obligation on the employer to provide such service in order for the employee to perform their role, or it is a deemed supply.
In the clarification, FTA has set out certain requirements to be met in order to recover the Input Tax which is mentioned below.
The Public Clarification explains that where costs are incurred to make taxable supplies, the taxable person is permitted to recover input VAT incurred on mobile phones, airtime and data packages that are available to be used by employees for business purposes, only if all of the following conditions are met.
If all of the above requirements are not met, the recovery of input tax incurred in respect of Phones, Airtime, and Packages will be blocked in accordance with Article 53(1)(c) of the Executive Regulation.