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Practical Handbook VAT 2021

Deductions

The taxable persons of VAT may subtract from the VAT due on the transactions they carry out the VAT borne on their purchases of goods and services or on their imports, provided that certain requirements are met.This right to deduct input VAT is a fundamental element in the scheme of operation of the tax.

In this section, a number of essential points must be taken into account, such as the following:

  1. The requirements that must be met for VAT to be deductible.

  2. The right to deduct and the expiry of the right to deduct, i.e. when the deduction can be made and from which point onwards the VATcan no longer be deducted.

  3. The exercise of the right to deduct, i.e. how the deduction is made.

  4. How to deduct when the taxable person carries out activities in different sectors.

  5. The input VAT which is deductible when the pro-rata rule is applied.

  6. The regularisation of deductions for investment goods.Capital goods are used in different years and the input tax paid on their acquisition must be deducted according to the use of these goods over the years of their use.

  7. The requirements that must be met in order to be able to deduct the VAT borne on transactions preparatory to or prior to the supplies of goods or services that constitute the economic activity.

  8. The rectification of deductions already made.

Each of these points is discussed in more detail below:

  1. Requirements for the deduction
  2. When you can deduct
  3. How is the deduction carried out
  4. Deductions in separate sectors of the business or professional activit
  5. Pro rata rule
  6. Adjustment of deductions for capital goods
  7. Deduction of contributions borne or paid before commencing the usual course of deliveries of goods or provision of services
  8. Rectifying deductions