Input VAT and blocked items for input VAT

When preparing a VAT Return, a taxable person must consider both input and output VAT. Output VAT is calculated on sales of goods and services. Input VAT is added to the price paid for goods and services which are subject to VAT. Input VAT may be claimed to offset the output VAT due.

Notwithstanding this fact, when considering offsetting input VAT, it must be noted that not all input Vat on purchases can be claimed back. Careful consideration must be applied to supplies purchased during the course of an economic activity of the taxable person, when supplies are the following:

  • Tobacco or tobacco products, unless purchased for resale.
  • Alcoholic beverages, unless purchased for resale.
  • Works of art and antiques, i.e., paintings, drawings and pastels executed by hand, other than hand-painted or hand-decorated manufactured articles; original engravings, prints and lithographs; original sculptures and statuary, in any material; antiques of an age exceeding one hundred years; collections and collectors' pieces of zoological, botanical, mineralogical, anatomical, historical, archaeological, palaeontological, and ethnographic interest, unless purchased for resale.
  • Motor vehicles, vessels, or aircraft, excluding vessels and aircraft acquired for the purpose of being provided under a charter or hire agreement, unless purchased for resale or unless acquired and used for the purpose of the carriage of goods or passengers for a consideration.
  • Goods and services for the purpose of repairing, maintaining, and keeping motor vehicles, vessels or aircraft and fuel used therein.
  • Car leasing by a lessee, including VAT incurred on fuel.
  • The supply of any goods and services used in the provision of receptions, entertainment, or hospitality except where that supply is made in the normal course of an economic activity.
  • The supply of goods and services used in the provision by a person to his employees of transport or entertainment, except where the transport is provided on vehicles with a seating capacity of not less than seven.

One must also note that taxable persons who provide exempt without credit supplies (Ex: immovable property sales) or are classified as exempt persons (ex: public authorities) cannot claim back input VAT incurred on purchases relating to their business.

How can we help?

We would be happy to discuss any queries you may have relating such blocked items and can also assist in the preparation of quarterly VAT returns.

Through our specialised VAT team, we can handle the process of assessing all purchases and determine the nature whether they are claimable or not.

Get in touch with Karen Spiteri Bailey, Principal - Outsourcing and VAT Advisory ([email protected]) or Kenneth Cremona, Assistant Manager - VAT Advisory and Compliance ([email protected])