31. Input tax deduction allocation and disallowance rules
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(1) A taxable person shall not under section 37 deduct any amount of input tax paid or payable in respect of —
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(a) a taxable supply to, or import by, the person of a passenger vehicle, unless the person is in the business of dealing in, or hiring of, such vehicles, and the vehicle was acquired for the purposes of such business;
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(b) a taxable supply to, or import by, the person of goods or services acquired for the purposes of entertainment, unless —
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(i) the person is in the business of providing entertainment and the taxable supply or import relates to the provision of taxable supplies of entertainment in the ordinary course of that business, or
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(ii) the person is in the business of providing taxable supplies of transportation services and the entertainment is provided to passengers as part of the transportation service;
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(c) any fees or subscriptions paid by the person in respect of membership of any person in a club, association, or society of a sporting, social, or recreational nature; or
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(d) a taxable supply to, or import by, the person of goods or services acquired for the repair or maintenance of a passenger vehicle, unless the person is in the business of refurbishing for resale or of hiring of such vehicles, and the repair or maintenance was directly related to the provision of taxable supplies in the ordinary course of that refurbishing or hiring business.
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(2) Subject to subsections (3) and (4), where only a part of the supplies made by a taxable person during a tax period are taxable supplies, the amount of the input tax allowed as a deduction under section 30(1)(a) for that period is determined as follows —
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(a) in respect of a supply or import received which is directly allocable to the making of taxable supplies, the full amount of input tax payable in respect of the supply or import is to be allowed as a deduction;
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(b) in respect of a supply or import received which is directly allocable to the making of exempt supplies, no amount of input tax payable in respect of the supply or import is to be allowed as a deduction; or
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(c) in respect of a supply or import received which is used for the making of both taxable and exempt supplies, the amount calculated according to the following formula A X B/C where —
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(i) A is the total amount of input tax payable in respect of supplies and imports received during the tax period, less the sum of the input tax accounted for under paragraphs (a) and (b), and the input tax disallowed under subsection (1), (Substituted by Act 15 of 2013)
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(ii) B is the total amount of taxable supplies made by the taxable person during the period, and
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(iii) C is the total amount of all supplies made by the taxable person during the period.
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(3) Where the fraction B/C in subsection (2)(c) is more than zero point nine zero, the taxable person may deduct the total amount of input tax on supplies and imports described in that paragraph.
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(4) In the case of a bank or other financial institution making both exempt and taxable supplies for a tax period, subsection (2) does not apply and the amount of the input tax allowed as a deduction under section 30(1)(a) for that period is the amount of input tax payable in respect of supplies or imports received which are directly allocable to the making of taxable supplies.
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(5) Notwithstanding subsection (2), where a taxable person makes both taxable and exempt supplies during a tax period, the Comptroller may determine the amount of input tax allowed for the tax period on such other basis as the Comptroller considers reasonable.
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(6) A taxable person dissatisfied with a decision of the Comptroller under subsection (5) may challenge the decision under Part 9 of this Act.
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(7) In this section —
“entertainment” means the provision of food, beverages, tobacco products, accommodation, amusement, recreation, or other hospitality by a taxable person whether directly or indirectly to any person;
“passenger vehicles” include motorcars and other motor vehicles principally designed for the transportation of people including station wagons and sport utility vehicles but excluding pickup trucks exclusively used for commercial purposes.