VALUE ADDED TAX (ADJUSTMENTS RELATING TO INPUT TAX ON CAPITAL GOODS) REGULATIONS

VALUE ADDED TAX (ADJUSTMENTS

RELATING TO INPUT TAX ON CAPITAL GOODS)

SUBSIDIARY LEGISLATION 406.12

VALUE ADDED TAX (ADJUSTMENTS RELATING

TO INPUT TAX ON CAPITAL GOODS)

REGULATIONS

1st May, 2004

LEGAL NOTICE 318 of 2004, as amended by Legal Notices 426 of 2007

and 105 of 2008.

(1) The title of these regulations is the Value Added Tax

(Adjustments relating to Input Tax on Capital Goods) Regulations.

(2) These regulations shall be deemed to have come into force

on 1st May 2004, and shall apply only to input tax that was

chargeable on or after the 1st of May, 2004

Provided that where a balance of input tax was due as on

30th April, 2004 in terms of the limitation imposed by item 12 of

the Eleventh Schedule to the Value Added Tax Act, prior to its

amendment by Act X of 2003 which came into force on 1st May,

2004, such balance shall be refunded in four equal instalments and

the provisions of article 24(3) of the Act shall not apply. The first

payment may be claimed back in any tax return which ends

between the 31st May, 2004 and the 31st July, 2004. Subsequent

instalments may be claimed in each tax return as it falls due.

(1) For the purposes of these regulations, unless the

context otherwise requires -

"the Act" means the Value Added Tax Act;

"capital goods" means all tangible fixed assets, which can be

used on a long term basis as working tools or other means used for

the carrying on of a an economic acticvity. Small-equipment,

working tools and office furniture, where their price, or open

market value, is less than one thousand and one hundred and sixty

euro (€1,160), as well as packaging materials, even if they can be

used more than once, are not within the scope of these regulations;

" i m m o v a b l e p r o p e r t y " t h a t i s s u b j e c t t o r i g h t s i n re m i s

considered to be capital goods in the name of the holder of the right

in rem;

"input tax on capital goods" means input tax paid on operations

related to the realisation, the transformation or the improvement of

capital goods referred to above. The following is not considered as

input tax on capital goods

(a) input tax paid on the repair or the maintenance of

capital goods as well as the purchase, the intra-

Community acquisition or the importation of spare

parts used for such operations;

(b) input tax paid for the renting of capital goods, and

more generally input tax paid for the giving up or the

VALUE ADDED TAX (ADJUSTMENTS

RELATING TO INPUT TAX ON CAPITAL GOODS)

granting of the use of such goods;

"other tangible property" is considered to be capital goods in the

name of the person who lets them out or, more generally, the person

who gives up or grants their use;

"period of reference" means, in the case of capital goods

excluding immovable property, a period of five years, and in the

case of immovable property, a period of twenty years.

(2) For the purposes of these regulations, a contract of works

consisting of a construction contract shall be deemed to be a supply

of goods.

(3) Other terms and expressions in these regulations shall have

the meaning assigned to them in the Act.

The initial deduction shall be adjusted

(a) in respect of capital goods, excluding immovable

property, during a period of five years which shall start

to run from the first day of the month of the tax period

during which the right to deduct arises;

(b) in respect of immovable property, during a period of

twenty years which shall start to run from the first day

of the first month of the tax period during which the

right to deduct arises

Provided that, if the goods, both of a capital nature and

contracts of works, are not used during the tax period during which

the right to deduct arises, the starting date of the period of

adjustment will be the first day of the month of the tax period

during which the goods are first used.

The adjustment is made where, during the period of

reference as the case may be

(a) the capital good is used by the taxable person both for

private purposes or for the purposes of operations in

respect of which value added tax is not deductible or in

respect of which value added tax is deductible in a

proportion other than that of the initial deduction;

(b) there are changes in the elements used for the

calculation of the deducted input tax;

(c) the capital good is subject to a supply for which the

value added tax is deductible, insofar as the right to

deduct input tax on this good has been limited. In this

case, the additional amount of input tax which can be

deducted is limited to the amount obtained by applying

the taxable amount of the supply, the rate at which

input tax was calculated for which the right to deduct

is adjusted;

(d) the capital good ceases to exist within the framework

of the enterprise, unless it is proved that the capital

good was subject to a supply for which the value added

tax was deductible or that the capital good has been

destroyed or stolen;

VALUE ADDED TAX (ADJUSTMENTS

RELATING TO INPUT TAX ON CAPITAL GOODS)

(e) the taxable person becomes a non-taxable person or

only carries out operations for which the value added

tax is not deductible, unless it is proved that the capital

good was subject to a supply for which the value added

tax was deductible.

(1) The adjustment referred to in regulation 4(a) is made

with respect to one-fifth or one-twentieth of the input tax initially

deducted, as the case may be, for each year during which a change

in the use occurs. If the capital good is used totally for private

purposes or for operations for which the value added tax is not

deductible, the adjustment is made once for the whole period of

adjustment still to be covered, including the year during which the

change occurs.

(2) The adjustment referred to in regulation 4(b) is made each

year with respect to one-fifth or one-twentieth of the input tax

deducted, as the case may be, according to the conditions

established by article 23 of the Act and item 6 ot the Tenth

Schedule thereof.

(3) The adjusments referred to in regulation 4(c), (d) and (e)

are made once for the whole period of adjustment to be covered,

including the year in which the reason for which the adjustment

occurs, and up to one-fifth or one-twentieth for each year, as

follows

(a) in the cases referred to in regulation 4(c), for the

amount of input tax affected by the limitation of the

deduction for which this provision takes account;

(b) in the cases referred to in regulation 4(d) and (e), for

the amount of the input tax initially deducted.

When the deduction is subject to the adjustment of input

tax on capital goods, the time limit for the retention of records

referred to in article 48(4) of the Act shall start to run from the end

of the period of reference, as the case may be.

The taxable person must keep a list of the capital goods

subject to the adjustment on capital goods allowing the control of

all input tax deducted and adjustments made. This list must be

retained for the period referred in regulation 6 and shall form an

integral part of the records required to be kept under the Act.