Article 60 - Adjustment of Input Tax on Capital Assets

A. For the purpose of adjusting Input Tax on Capital Assets, the lifetime of Capital Assets is determined by the following periods:

1. A period of no less than five years for intangible assets and movable tangible assets.
2. A period of no less than ten years for immovable tangible assets.

B. The period during which a Taxable Person shall adjust Input Tax on Capital Assets is determined as follows:

1. Over five years for movable tangible Capital Assets and intangible Capital Assets starting from the Tax year during which those Capital Assets were first used with each subsequent year beginning after the end of the
preceding Tax year. 

2. Over ten years for immovable tangible assets starting from the Tax year during which those Capital Assets were first used with each subsequent year beginning after the end of the preceding Tax year.

C. The Taxable Person shall deduct Input Tax in accordance with the provisions of Articles 42, 43 and 45 of the Law in the first Tax year during which the Capital Assets are used for the first time, and shall record the deduction ratio expressed as a percentage.

D. The Taxable Person shall, at the end of each subsequent Tax year within the adjustment period, calculate the deduction ratio, expressed as a percentage, for the Capital Assets in accordance with the provisions of Articles 42 and 45 of the Law.

E. If there is a difference between the deduction ratio for the first year and the deduction ratio for a subsequent year, the Taxable Person shall make an adjustment with respect to this difference according to the following formula:

1. For intangible Capital Assets and movable tangible Capital Assets, the formula is as follows:
(Total Input Tax incurred on the asset x 20%) x (deduction ratio for the relevant subsequent year less deduction ratio for the first year)

2. For immovable tangible Capital Assets, the formula is as follows:
(Total Input Tax incurred on the asset x 10%) x (deduction ratio for the relevant subsequent year less deduction ratio for the first year)

F. The Taxable Person shall report the adjustment resulting from the application of the appropriate formula in accordance with Paragraph E of this Article in the last Tax Period for that subsequent Tax year or in the first Tax Period for the following Tax year.

G. Where, during the adjustment period, a Taxable Person surrenders a Capital Asset by way of sale, the adjustment shall be carried out as follows:

1. Where the surrender of the Capital Asset is taxable, the Taxable Person shall make a one-off adjustment according to the following:

A) For intangible Capital Assets and movable tangible Capital Assets, the formula is as follows:
(Remaining years in adjustment period / 5 x total Input Tax incurred on the asset) x (100% less deduction ratio for the first year)

B) For immovable tangible Capital Assets, the formula is as follows:
(Remaining years in adjustment period / 10 x total Input Tax incurred on the asset) x (100% less deduction ratio for the first year)

2. Where the surrender of the Capital Asset is exempt from Tax, the Taxable Person shall make a one-off adjustment according to the following:

A) For intangible Capital Assets and movable tangible Capital Assets, the formula is as follows:
(Remaining years in the adjustment period / 5 x total Input Tax incurred on the asset) x (0% less deduction ratio for the first year)

B) For immovable tangible Capital Assets, the formula is as follows:
(Remaining years in the adjustment period / 10 x total Input Tax incurred on the asset) x (0% less deduction ratio for the first year)

A Taxable Person shall report the adjustment resulting from the application of the appropriate formula in accordance with Paragraph G of this Article in the last Tax Period of the Tax year during which the Capital Asset was surrendered or in the first Tax Period of the following Tax year.

I. No adjustment is required if the Capital Asset is damaged or lost before the end of the adjustment period. The Taxable Person shall notify the Bureau when this occurs before the end of the Tax year during which such damage or loss occurred.

J. Where a Taxable Person transfers his Capital Assets as part of the surrender of his Economic Activity, the following shall apply:

1. The adjustment year end on the day preceding the date of the surrender and the Taxable Person shall make the necessary adjustment for that year in the Tax Period during which the surrender is made.

2. The subsequent adjustment year shall start on the day of the surrender and the adjustment for this year shall be made by the purchaser at the end of a twelve month period starting on the day of the surrender. The adjustment procedure shall continue for the remaining years in the adjustment period in the same manner.

K. Where a Taxable Person joins a Tax Group, the following shall apply in relation to his Capital Assets :

1. The adjustment year shall end on the day prior to the Taxable Person joining the Tax Group and he shall make the necessary adjustment for that year in the Tax Period during which he joined the Tax Group.

2. The subsequent adjustment year shall start on the day of the Taxable Person joining the Tax Group and the adjustment for that year shall be made by the Tax Group at the end of a twelve month period starting on the day of him joining the Tax Group. The adjustment procedure shall continue for the remaining years in the adjustment period in the same manner.

L. Where a Person ceases to be a member of a Tax Group and becomes a Taxable Person on an individual basis, the following shall apply with respect to his Capital Assets:

1. The adjustment year shall end on the day prior to him ceasing to be a member of the Tax Group and the Tax Group shall make the necessary adjustments for that year in the Tax Period during which he ceases to be a member.

2. The subsequent adjustment year shall start on the day where the Person ceases to be a member of the Tax Group and the adjustments for this year shall be made by that Person at the end of a twelve month period starting on the day of him ceasing his membership. The adjustment procedure shall continue for the remaining years in the adjustment period in the same manner.