28 Dec Input Tax Recovery- “Mobile Phones, Airtime, and Data Packages made available to Employees for Business Use
Input Tax Recovery- “Mobile Phones, Airtime, and Data Packages made available to Employees for Business Use
The Federal Tax Authority has released a public clarification (VATPO28) on the recovery of input tax relating to “Mobile Phones, Airtime, and Data Packages made available to Employees for Business Use.” Clarification provides guidance on the application of VAT legislation in respect of the recovery of input tax incurred on Phones, Airtime, and Packages acquired for business use.
Where an employer acquires Phones, Airtime, and Packages for use by its employees solely for business purposes and has a strict policy in place to restrict the use of such Phones, Airtime, and Packages to business purposes, the right to use the Phones, Airtime, and Packages would not constitute a personal benefit for the employee, provided the value of the Airtime and Packages was determined based on actual historical business usage.
Conditions for recovery of Input Tax relating to Mobile Phones, Airtime, and Data Packages made available to Employees for Business Use
1. The business is registered for VAT and acquired Phones, Airtime, and Packages in its own name, e.g. the business’ details are reflected on the tax invoices and contract with the service provider;
2. 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;
3. The business regularly monitors the use of Airtime and Packages and retains justification for the variances;
4. The business takes action against employees using Phones, Airtime, and Packages for personal use in accordance with the documented policy.
5. The business retains valid tax invoices in respect of the Phones, Airtime, and Packages acquired.
As part of the process of monitoring the usage, the taxable person will be expected to consider the variance between the actual usage and the expected average usage for the role. Any excess usage identified from this monitoring is regarded as non-business use, and input tax recovery will not be allowed unless the additional use is recharged to the employee with output tax, or there is robust additional monitoring in place to substantiate the actual use.
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