Non-recoverable Input Tax – Article 53 – VAT Executive Regulations

Article 53 – Non-recoverable Input Tax

1. Input Tax shall be non-recoverable if it is incurred by a Person in respect of the following Taxable Supplies:

1. Where the Person is not a Government Entity as specified in a Cabinet Decision in accordance with Article 10 and 57 of the Decree-Law, and there is provision of entertainment services to anyone not employed by the Person, including customers, potential customers, officials, or shareholders or other owners or investors.
2. Where a motor vehicle was purchased, rented or leased for use in the Business and is available for personal use by any Person.
3. Where Goods or Services were purchased to be used by employees for no charge to them and for their personal benefit, including the provision of entertainment services, except in the following cases:

1. where it is a legal obligation to provide those Services or Goods to those employees under any applicable labour law in the State or Designated Zone.
2. it is a contractual obligation or documented policy to provide those services or goods to those employees in order that they may perform their role and it can be proven to be normal business practice in the course of employing those people.
3. where the provision of goods or services is a deemed supply under the provisions of the Decree-Law.

2. For the purposes of this Article:

1. The phrase “entertainment services” shall mean hospitality of any kind, including the provision of accommodation, food and drinks which are not provided in a normal course of a meeting, access to shows or events, or trips provided for the purposes of pleasure or entertainment.
2. The phrase “motor vehicle” shall mean a road vehicle which is designed or adapted for the conveyance of no more than 10 people, including the driver. A motor vehicle shall exclude a truck, forklift, hoist or other similar vehicle.

3. Provision of catering and accommodation services shall not be treated as entertainment services where it is provided by a transportation service operator, such as an airline, to passengers who have been delayed.

4. A motor vehicle shall not be treated as being available for private use if it is within any of the following categories:

1. a taxi licensed by the competent authority within the State;
2. a motor vehicle registered as, and used for purposes of an emergency vehicle, including by police, fire, ambulance, or similar emergency service;
3. a vehicle which is used in a vehicle rental business where it is rented to a customer.