Input Tax - What if the due consideration not paid to supplier

    one year ago

Input Tax - What if the due consideration not paid to supplier

If the customer failed to pay full or partial after a period of 12 months from the date of supply, the customer required to deduct the input tax credit already claimed for the consideration not paid.

As the amount of the deductible Input Tax is directly linked to the amount of payable output tax, the Customer of the supply is not entitled to deduct the Input Tax to that supply in cases of non-payment.

Article 46:

any Taxable Person who has deducted Input Tax in respect of supply received, but has failed to make payment in full after a period of twelve months from the date of supply, must reduce the Input Tax deduction by the amount of tax calculated on the consideration not paid at that date.”

This includes cases where the consideration is not yet due for payment to the supplier (for example, if extended payment terms are offered). When the Customer does make payment against the supply, the Input Tax deduction may again be claimed in the period where payment is made.

Similarly supplier also eligible to reduce the output tax under certain condition, the 12 months rule not applicable here.

In certain cases where a Taxable Person does not receive all or part of the consideration for a Taxable Supply, the Taxable Person acting as supplier is - under certain conditions - allowed to reduce the output tax for the tax amount calculated on the supply. This is also referred to as bad debt relief. The adjustment to Input Tax deduction is not linked to the supplier’s eligibility to bad debt relief.


Saudi vat law

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