(1) This section applies where, in relation to a supply by a registered person —
(a) the supply is cancelled;
(b) the taxation of the supply changes because the nature of the supply is fundamentally varied or altered;
(c) the previously agreed consideration for the supply is altered, whether due to an offer of a discount or for any other reason; or
(d) the goods or services or part of the goods or services are returned to the supplier.
(2) Subsection (1) applies only where the registered person making the supply has —
(a) provided a tax invoice in relation to the supply and the amount shown on the invoice as the tax charged on the supply is incorrect as a result of the occurrence of one or more of the events described under subsection (1)(a) to (d); or
(b) filed a return for the tax period in which the supply occurred and has accounted for an incorrect amount of output tax on that supply as a result of the occurrence of one or more of the events described under subsection (1)(a) to (d).
(3) Where subsection (1) applies, the registered person making the supply is required to make an adjustment as specified under subsection (4) or (6).
(4) Where the output tax properly chargeable in respect of the supply exceeds the output tax actually accounted for by the registered person, the amount of the excess is deemed to be output tax charged by the supplier in relation to a taxable supply made in the tax period in which the event referred to in subsection (1) occurred.
(5) For the purposes of section 30, where a registered person issues a tax debit note to rectify the output tax charged to a registered recipient in the circumstances specified under subsection (4), the additional tax specified in the tax debit note is deemed to be input tax payable by the registered recipient in the tax period in which the tax debit note is received.
(6) Subject to subsection (8), where the output tax actually accounted for by the registered person exceeds the output tax properly chargeable in relation to the supply, the registered person is allowed an input tax deduction under section 30 for the amount of the excess in the tax period in which the event referred to in subsection (1) occurred.
(7) Where a supplier issues a tax credit note to rectify the output tax charged to a recipient who is a registered person in the circumstances specified under subsection (6), the additional tax specified in the tax credit note is treated as output tax payable by the recipient in respect of a taxable supply made by the recipient in the tax period in which the tax credit note is received.
(8) Where the supply has been made to a person who is not a registered person, a deduction under subsection (6) is not allowed, unless the amount of the excess tax has been repaid to the recipient of the supply, whether in cash or as a credit against an amount owing to the registered person by the recipient.
(9) Subject to subsection (13) a registered person is allowed an input tax deduction under section 30 for tax paid in respect of a taxable supply made by the registered person where the whole or part of the consideration for the supply is subsequently treated as a bad debt.
(10) The amount of the deduction allowed under subsection (9) is the amount of the tax paid in respect of the taxable supply which corresponds to the amount of the debt treated as bad.
(11) The deduction under subsection (9) arises on —
(a) the later of the period in which the debt is written off and the first tax period that ends at least one year after the consideration became due and payable to the registered person; and
(b) the registered person satisfies the Comptroller that reasonable efforts have been made to recover the amounts due and payable.
(Substituted by Act 10 of 2012)
(12) Where any amount in respect of which a deduction has been allowed in accordance with subsection (9) is at any time wholly or partly recovered by the registered person, the registered person is treated as having charged tax in respect of a taxable supply made during the tax period in which the bad debt is wholly or partly recovered, being an amount of tax calculated according to the following formula A x B/C where —
(a) A is the amount allowed as a deduction under subsection (9);
(b) B is the amount of the bad debt recovered; and
(c) C is the amount of the bad debt previously written off.
(13) A deduction is allowed under subsection (9) if —
(a) the taxable supply was made to a person other than a registered person; or
(b) the taxable supply was made to a registered person and the person claiming the deduction under subsection (9) issued a tax credit note to the registered purchaser listing the amount claimed under the formula in subsection (12).
(14) Notwithstanding subsection (11), where the person to whom a supply is made is declared bankrupt, the registered person may deduct from his payment of output tax for the later of the taxable period in which the bad debt is written off and the time at which the person is declared bankrupt in accordance with subsection (12). (Inserted by Act 10 of 2012)