Input Tax Recovery
Mobile Phones, Airtime, and Data Packages Made
Available to Employees for Business Use
In this article we will discuss the recovery of input tax for the businesses on the mobile phones (“Phones”), airtime (“Airtime”) (i.e. call minutes) and data packages (“Packages”), available to their employees to perform their roles outside office hours or at locations away from the office.
Due to the potential private use of Phones, Airtime, and Packages, there has been uncertainty 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.
Input Tax Recovery Requirements:
A business is entitled to recover input tax in respect of Phones, Airtime, and Packages acquired if the costs are incurred to make taxable supplies and the following requirements are met:
- The business is registered for VAT and acquired Phones, Airtime, and Packages in its name, e.g. the business’ details are reflected on the tax invoices and contract with the service provider;
- The business has a documented policy in place which clearly states that the Phones, Airtime, and Packages may only be used for business purposes, and the consequences of any personal use;
- The business regularly monitors the use of Airtime and Packages and retains justification for the variances;
- The business takes action against employees using Phones, Airtime, and Packages for personal use per the documented policy; and
- The business retains valid tax invoices regarding the Phones, Airtime, and Packages acquired.
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.
Note that only documented policies that were already in place when the Phones, Airtime, and Packages were made available to the employee will be considered.